Offshore drilling giant
) is set to make an entry in the S&P 500 list on Mon, Oct 28,
after the market closes. The company will replace the computer
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Dell's exit from the index is an effect of its privatization
move. Shareholders of the company voted in favor of the $24.9
billion privatization bid by Michael Dell, founder of the
company, and Silver Lake Management at a special meeting held
Switzerland-based Transocean will be included in the oil and gas
drilling sub-industry of S&P 500 Global Industry
Classification Standard (GICS), under the energy sector.
The company's addition to the index should prove beneficial, at
least in the short term. It is because when stocks enter this
largely monitored index, these are noticed by fund houses and
other institutional investors. These investors make take up
position on these newly added stocks, thus enhancing the stock
On Oct 21, the stock settled at $46.57, up 1.5% from the previous
close. In after hours trading, the share price rose further to
$48.44, representing an increaser of 4%.
Transocean is the world's largest offshore drilling contractor
and the leading provider of drilling management services
worldwide. However, the introduction of new and more stringent
regulations due to the oil spill has made deepwater drilling
activity prohibitively expensive for exploration and production
companies, making many projects marginal. Moreover, Transocean's
international exposure also increases its risk quotient.
Transocean currently holds a Zacks Rank #4 (Sell), implying that
it is expected to underperform the broader U.S. equity market
over the next one to three months.
Meanwhile, one can consider other oil and gas drilling service
Ocean Rig UDW Inc.
Pioneer Energy Services Corp.
) that offer value. Both these stocks sport a Zacks Rank #1