Noble Corp (NE)

Part of doing your homework involves listening to a company's conference call. I find the questions, mostly from analysts employed by the major investment houses, to be the most important portion. They are a great indicator of perceived concerns and values. This morning I dredged out of bed early to listen to the Noble Corp (NE) conference call. Last night earnings were released and I expected somewhat of a sell off. Sure enough, NE opened lower, down about 2.4%. However, mid way through the call, the stock turned around. An hour before closing, it's up about 4%. What accounts for the spectacular turn around in an oil driller with exposure in the GOM?

Simple: the analyst asked several key questions and liked the company's responses. First, they asked how much would it cost to bring rigs up to the anticipated new regulations by our government. Answer: less than $10 million each-and probably in the several million range. Next, an analyst asked about their safety record. The response was exactly what Mr. Market needed to hear: their employees have the authority to stop any perceived unsafe practice regardless of the customer's order.

I always try to relate investing to woodworking and today is no different. Can you imagine NOT shutting off a woodworking tool when your hand could be exposed to amputation? Of course not! Here is a company telling its employees to take the same immediate action that you and I would take in our own shops. Now that is good common sense.

But the real common sense is found deeply buried in a comment by one of their executives:

"...the more you chew, the bigger it gets...."

Hasn't that happen to all of us. We start our project with what looks like a good plan. Suddenly, the deeper we get into it, the more complex it becomes. Our understanding of basic geometry is inadequate. We have to, heaven forbid, recall some trigonometry. The more we do the worse the project becomes. We finally admit we just bit off so much more than we can chew we give up.

"...the more I chew, the bigger it gets..." yep, that's it for today.

****I currently hold a long position in NE. Nothing I say should every be relied upon. Period. Make your own calls, do your own research and good luck!