STEPHEN LEEB
PRESIDENT
LEEB CAPITAL MANAGEMENT

COMPANY: Schlumberger
TICKER: SLB (NYSE)
PRICE: $70.77 (as of 4 p.m. yesterday)
52-WEEK RANGE: $32.31-$73.46
MARKET CAPITALIZATION: $83.5 billion

Stephen Leeb is also the editor of The Complete Imvestor and the author of six books – the most recent, “The Coming Economic Collapse,” which discusses oil and the need to find more alternative energy solutions. Mr. Leeb is a regular guest on CNNfn, Bloomberg TV, and Bloomberg Radio. He spoke with Katharine Herrup of The New York Sun about why Schlumberger is not as risky a stock as you might think.

Where is company located?

It has a headquarters in the United States, but opened up offices in Paris in 1920. They’re actually incorporated in the Netherlands Antilles.

What does the company do?

It’s the leading oil service company in the world, so they provide all sorts of drilling and well-management services to oil companies. They are the technological leader for all oil service equipment. They tell where you can drill, how to manage your well, how much oil your well can produce and how much oil is left.

Why do you like the stock?

This is a world in which new oil finds are becoming scarcer and scarcer. If companies are going to maintain their production levels they are going to need the absolute latest and best technologies. Schlumberger is clearly the technological leader in this field and in the world of ever scarcer oil, Schlumberger’s products and services are going to become ever more in demand. Moreover, this demand is going to come from all over the world from Asia to the U.S. to the Mideast. It’s likely that any oil exploration project will include Schlumberger.

What is your company’s share of the stock?

Schlumberger represents 3% of our clients’ portfolios. We have about 200 clients.

How do you expect the stock to continue to perform?

I think it will continue to dramatically outperform the stock market. It will increase in price even if the overall market is flat.

How do you expect the company/industry to perform going forward?

For any major drilling project, Schlumberger will have a major role in it, if not the major role.

What’s driving growth forward?

Schlumberger has the best technology for discovering and developing what’s left of oil.

Is it a good time to buy?

I think it would be because earnings are going to continue to grow in the vicinity of 25% per year for at least the next 3-5 years. The stock could easily rise another 20% over the next 12 months or so, which would take it to the mid-$80s in price.

What are the risks?

It’s a high multiple stock, which means if there are any disappointments in the oil market and oil prices fell sharply, Schlumberger could definitely come down in the short term. There are short-term risks obviously, but for the longer term, the risks are pretty muted because long-term demand for oil is going to continue to rise and the demand for oil will continue to be strained and the demand for Schlumberger products will continue to rise rapidly, even though there might be near-term dips.