Brazilian rebound creating major investment
opportunities: Cash in on the revival where prices are trading in a range
between US$50 and US$60, is a
dream come true for many oil compa-
nies. Revenues and profits have
moved sharply higher than expected.       Moreover, with exploration com-
panies still clamoring for drilling rig
usage, with the “day rate” (the
prices these companies pay the
drilling firm for the contract) contin-
uing to escalate along with waiting
times to actually access the rigs,
upward revisions to full-year earn-
ings can be expected. In fact,
Patterson’s earnings growth rate for
fiscal 2005 is projected to soar
almost 150%. While its P/E ratio of
30 might look high, the two figures
taken together mean the company is
ridiculously undervalued at a PEG
ratio of 0.27. “Black gold”: You’re
darn right! It’s tempting for me to spout the old cliché that Patterson is “drilling
deep for profits.” But that would be
wrong. Essentially, though, that’s
what’s happening.       The net profit margin sits at a
comfortable 13%, with operating
margins over 20%. Impressive return
on assets of 11.5% and return on equity of 15.2% testify to manage-
ment’s effective strategies in
capitalizing on the extended com-
modities bull market.       Patterson is a real cash cow, with
US$68.3 million in cash from the first
quarter, US$222.3 million in cash from
ongoing operations and US$30.7 mil-
lion in free cash flow. That allows it to
pay a small annual dividend of 16
cents per share (0.6% yield).       The company’s stock recently
crossed above its 50-day moving
average and is currently trading close
to its 52-week high of US$27.29—both
bullish signals. As Sara’s technical
analysis shows, that offers some
resistance, with the moving averages
providing enough support to push
PTEN through its high. Buy Patterson-UTI Energy Inc. (PTEN:NASDAQ) under US$27. PROFIT ALERT: 287%
gains on Southwestern
Energy (SWN:NYSE)       While we’re on the topic of energy,
get this for a fat gain: I first recommended South- western Energy (SWN:NYSE)—a Houston company focusing primarily on natural gas exploration—way
back on September 30, 2003.       Back then, shares traded for a
mere US$17.36. Since then, it’s
marched upwards relentlessly. On
August 18, 2004, I advised you to sell
half the position for a fat 101% gain
as the stock hit US$34.90.       And SWN wasn’t done there. On
Thursday, May 19, it closed at
US$67.20—a massive 287% gain on
the second half of the position, on
which you should have enjoyed a free
ride. But it was time to get out. I
issued a “sell” on the remainder of
the position to Taipan subscribers and 247profits e-Dispatch readers that day. Why?       The company recently announced
that the stock will split 2:1. Share-
holders of record on May 20, 2005,
are due to receive the additional
shares on June 3, 2005. However, I
feared that a big hike in its authorized
common shares from 75 million to
220 million could dilute shares and
hurt the stock price. So if you haven’t
cashed out already, do so now. Martin Denholm is Executive Editor of Taipan. He also writes
the daily “Desk of Denholm” column
in the 247profits e-Dispatch. ¦        Think you can’t make money in
emerging markets? Think again.        Emerging markets are back with
a vengeance—and poised to make
even more profits than in their mid
1990’s heyday. In fact, the Wall
Street Journal recently reported that
a whopping 75% of new inflows to
mutual funds has gone to interna-
tional funds this year. This comes
amid the dollar’s slippery slide
against the euro and the yen. Take Brazil, for example. From 1994 to 1998, the country saw
strong GDP growth. But in 1998, the
economic wheels fell off, and when
the real tanked in 1999, GDP growth
hit just 0.8%. From 2000 to 2003,
GDP grew by 4.4%, 1.5%, 1.9% and
0.5%, respectively. Positively
European!        But two years after hitting rock
bottom, Brazil’s economy is staging
a successful comeback, prudently
guided by President Luiz Inácio da
Silva (a.k.a. Lula). In 2004, GDP grew
by 5.2%, thanks to increased politi-
cal stability and economic confi- dence. Cheap natural resources
abound, and Brazilian exports
soared by 40%. The IMF recently
increased its 2005 GDP growth pro-
jection from 3.7% to 4%.        In September 2004, I recom-
mended buying shares of Companhia Siderurgica Nacional
(SID: NYSE), a Brazilian steel compa- ny with excellent fundamentals and
overwhelming worldwide demand.        Brazil is quickly becoming a
major player in the worldwide steel
industry. Endowed with vast
reserves of iron ore, Brazil also By Erin Beale G L O B A L   W E A L T H Next Page... 6