Carl Icahn has cut a deal with the largest oilfield service company in the world. The legendary investor has gotten Transocean to agree to a $3 per share dividend and to cut the size of its board down to 11 from 14 members. Two of those seats are going to people on Icahn's payroll.
As well, fillings with the Security and Exchange Commission show Icahn has increased his stake from 5.61% to 5.96% since January. The company's market cap is now $19.82 billion and its shares are up 23% year-to-date.
With Icahn getting what he wants as he buys more shares in Transocean, should other investors follow suit?
"It's not a good strategy to get in now," says John Stephenson, portfolio manager at First Asset Investment Management. "It's been a great trade so far for Carl but it won't be a great trade for you and me."
"All of these drilling companies are under a lot of pressure for costs," says Stephenson. "They're trying to reduce their costs because there's far too much oversupply, particularly of the rigs that operate in shallow water. The big driver for this type of stock is oil and right now, the fundamentals for oil look really weak."
"This is a great example of knowing the stocks that you trade," says Talking Numbers contributor Richard Ross, Global Technical Strategist at Auerbach Grayson. "This is a boom-and-bust type company [with] extraordinary volatility."
But is it a buy based on the technicals or is there too much risk?
To see the rest of Ross and Stephenson's analyses on Transocean, watch the video above.
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