Company Highlight

    Smith International produces drill bits; markets pipes, valves and fittings; supplies drilling-fluid systems, solids control and rig instrumentation equipment and waste management services; and provides equipment and services for well drilling, work over and completion.  The company has grown profits at a 20% pace over the last 10 years, earning a return on equity as low a 5% and as high as 25%.   The global economic slowdown took its toll on Smith; however, earnings will recover in 2010 and should continue to advance as a result of:

(1) its SWACO division should continue to win deep water contracts at a robust clip,

(2) the company maintains a very successful product development effort making it a leader in technological innovation and provides pricing leverage,

(3) SII has an aggressive cost cutting program including reducing personnel, improving supply chain management as well as manufacturing processes.

SII is rated B++ by Value Line, has a 25% debt to equity ratio and its stock yields about 1.7%.
  Statistical Summary

                 Stock      Dividend         Payout      # Increases   
              Yield      Growth Rate     Ratio       Since 2000
 
SII             1.7%          8%               41%              4*
Ind Ave      .5               4                 29                NA  

                Debt/                    EPS Down       Net        Value Line
              Equity         ROE      Since 2000      Margin       Rating

SII            25%           10%            2                 6%            B++
Ind Ave     25              12             NA              12             NA

*SII has only paid a dividend for 5 years,

Chart

Note: SII stock made slow progress off its March 2009 low ultimately successfully penetrating the down trend off the July 2008 high (red line).  However, it hasn’t  penetrated the November 2008 trading high (green line).  At one point, the stock broke the up trend off the March low,; and while it regained the trend line after a considerable time lapse, that period was so long that I consider the stock to be in a trading range.  The straight blue line at the top of the page is the lower boundary of an up trend dating from 1986.  The wiggly blue line is on balance volume.





 

http://finance.yahoo.com/q?s=SSI
2/10


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