By LM Lupo, CKO 3.13.2007

Halliburton Analysis Brief

Halliburton moves to the Middle East in the modern sequel to Ali Baba and the 40 thieves.  No doubt, the move provided ample fodder for the politicians, but from the investor's perspective what does it really mean?

Historically, the multinational corporation was always considered borderless and country-less, so from a purely operational viewpoint the move means little.

For the historically challenged, multinationals were viewed with suspicion by some of the founding fathers as 'traitors in waiting'.  However, from a strategic standpoint, it is clear that big oil and oil services have more friends in the oil producing nations than in the U.S., where the momentum to go green is now inexorable and the most significant economic construct of the decade.

Readers know that we have been bearish the crude complex and several large cap oil stocks based (in part)  on this underlying trend.  Halliburton's move is risky from the public relations perspective, but from a business vantage, the company needs to position itself in a growth market, which is one of the  ostensible reasons for the move. 

Given the risks to Halliburton shareholders with respect to igniting a public relations outcry, potentially undermining investor confidence, and provoking tardy government oversight, one can only conclude that the fundamental picture is not bright for Halliburton--despite the numbers.   

Concluding the fundamentals, from our enterprise business model analysis, we find a significant breach in Halliburton's corporate transparency and policy.

Halliburton Technical Analysis:

The Halliburton technical picture contains some clues for the company's action.  The chart below reveals the weakness in the stock over the past ten months while the indexes and other oil related stocks were printing fresh 52 week highs.  The share price has been pinned between $34 and $28 over the past 8 months signaling waning investor interest, and a likely breakdown to new 52 weeks lows. 

Misfeasance and malfeasance are not the words that investors want to hear when their stock investments are discussed in public and this looming cloud has obviously darkened the share prices as well.

Conclusion:  We find Halliburton's enterprise business model flawed and mired in a contracting industry, thus we rate the shares a sell with a 12 month target of $22.50.

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