Smith International Stock Tops Big Board Winners
Despite its Chapter 11 bankruptcy filing and an uncertain future for the oil-services industry, Smith International Inc.’s common stock gained 25% Tuesday in trading on the New York Stock Exchange to top the list of the Big Board’s winners for the day.
On volume of 776,000 shares traded, Smith, which last Friday filed for protection under Chapter 11 of the U.S. Bankruptcy Code, closed Tuesday at $2.50 a share, up 50 cents for the day, and up $1.25 from its all-time low of $1.25 a share on Friday.
Kevin Simpson, an oil industry analyst with the New York brokerage house of Drexel Burnham Lambert Inc., attributed the increase in Smith shares to its already-depressed price and the overall strong performance of oil-related issues Tuesday.
Other oil-services issues posting gains for the day included Schlumberger Ltd., which increased $2.125 a share to close at $31.50, and Halliburton Co., up $1 for the day to close at $23.50 a share. Hughes Tool Co., which last month won a $204.6-million patent infringement judgment against Smith, gained 75 cents to close at $10.875 a share.
Analysts said that in addition to yesterday’s overall good news for the oil industry, Smith is perceived by some investors as a particularly good buy.
Philip Meyer, an analyst with Eberstadt Flemming Inc. in New York, said he believes that Smith is a strong acquisition candidate for a diversified oil-services company.
Meyer, who had recommended buying Smith shares when they were trading at $8 last year, said the stock is “an absolute steal” at its current trading price. He said he calculates the company’s value, even after taking into account the Hughes settlement, at $12 per share.
James Carroll, an analyst with Paine Webber Mitchell Hutchins in New York said he, too, believes Smith will emerge from its current problems with a strong business potential. Carroll calculates the company’s worth at between $8.50 and $13 a share, depending on how the Hughes settlement is accounted for.
With Smith stock selling at a fraction of its former prices, most investors still holding shares of the troubled company have little incentive to sell these days. One such investor is Torray Clark & Co. Inc., a Bethesda, Md., pension fund management firm, whose 18.5% stake in Smith has diminished in value by nearly 70% since November.
Though disappointed with the recent performance of Smith shares, Charles Brooks, Torray Clark vice president, said: “We certainly are sticking it out. We would never sell at these prices.”
Brooks, who believes that oil-service issues will one day again be the darlings of Wall Street, said: “We own most anything in the oil services group, including shares of Baker International and Hughes Tool. When all the euphoria over low oil prices settles down, the country will realize that we need these companies.”
