Oil services company Weatherford International is a ripe takeover target, according to Alexander Roepers, founder and chief investment officer at Atlantic Investment, who said the stock is set to soar. Roepers, who has previously made a string of accurate bets predicting successful mergers and acquisitions, believes that Weatherford will soon be acquired by a company such as Schlumberger or Halliburton . It comes after a tricky few years for Texas-headquartered Weatherford. The company struggled with over-leveraging due to massive acquisitions and nearly went bankrupt in 2020. However, under new management, Weatherford has successfully restructured its balance sheet and is now on a promising trajectory, according to Roepers. He expects the stock to rise about 60% to $195 over the next 12 to 18 months. WFRD 5Y line The stock picker , who runs a concentrated fund with only a handful of stocks, explained that Weatherford’s adjusted profit margin is now near Schlumberger ‘s, an industry leader. Yet, the company’s shares were trading at “a significant discount”. This undervaluation helps to make it a ripe takeover target, according to Roepers. Atlantic Investment bought into the stock when it was priced at $58 a share last year. The stock has risen around 110% since. “I’m sort of gutsy enough to recommend to buy it here,” Roepers told an audience of professional investors at the London Value Investor Conference on May 15. The Cambrian Fund at Atlantic Investment is up by about 40% over the past one year. Perfect track record Roepers, who has run Atlantic’s funds for 36 years, has form when identifying M & A targets. Two years ago, he recommended three stocks at the Value Investor Conference, one of which was Rheinmetall , which proved to be a “complete home run.” The German defense company’s stock has rallied by 188% since May 19, 2022, following Russia’s invasion of Ukraine. The other two, Univar Solutions and West Rock, were acquired by private equity giant Apollo and Smurfit Kappa , respectively, resulting in significant gains for Atlantic Investment. More recently, Atlantic had a win investing in DS Smith , a British company. The firm initially invested in DS Smith when the stock traded at 280 British pence ($3.54) per share. When Mondi , a competitor, made a bid that drove the price up to 370 pence, Roepers believed the stock was still undervalued and decided to hold his position. The hedge fund manager was rewarded when International Paper , another U.S.-listed competitor, entered the bidding arena, causing the stock price to surge above 400 pence per share. SMDS-GB 1Y line Atlantic Investment ultimately sold its position, as they believed the company’s value was between 450 and 500 pence. When asked about his approach to selling stocks, Roepers emphasized the importance of discipline. “We’re always a little early buying in, and I’m always a little early selling out. And that’s the discipline that you got to maintain. You can’t just buy and hold,” he said. “Because bulls make money, bears make money, and pigs get slaughtered.”
Source Agencies
