Monday, June 06, 2011

Total Divestiture Of TDW

When I went long TDW over a year ao, I thought the stock was winner.  It seemed to have everything going for it, at least according to the Buffett-derived value investing criteria I use to select equities.  It had good ROE and cash flow, and management seemed to know how to add value.  All of that has changed as of this June.

TDW's earnings have fallen 79% in the most recent quarter.  Its EPS growth is now negative, along with its operating cash flow (with little hope of a turnaround).  This is very disappointing in an environment when petroleum prices are at a premium.  Long term debt has exploded from $275mm in 2010 to $700mm now.  That is a huge disappointment and a major burden to carry.  Imagine one of Tidewater's ships dragging several giant anchors through the Gulf of Mexico while underway.  That's the kind of drag on the company this new debt represents. 

Goodbye, TDW.  I've sold off my entire long holding in this stock (at a decent profit, I must admit) and unwound my covered call position.  I only wish I had sold off this stock when it was over $60.  I had considered initiating formal research coverage of TDW until I realized that its recent financial results leave too much to be desired.  I don't think I'll come back to this stock, as there are undoubtedly healthier plays in the energy and offshore services sector.

Full disclosure:  No more positions in TDW; all long equities and short calls unwound today prior to publishing this post.