Nabors Addded To Goldman's Conviction Buy List (NBR)

Goldman Sachs added Nabors Industries Ltd. (NYSE: NBR) to its Conviction Buy List with a $22 price target, as it believes Nabors has unlocked value.

In the research note, Goldman writes, "We add Buy rated Nabors to the CL Buy list after significant underperformance (21% since mid June in sympathy with “gassy” stocks) and see 24% upside to our $22 6-month price target. This is a tactical upgrade; in our view, Nabors is a hidden oil stock that has underperformed with natural gas and has catalysts to drive a reversion to the mean. Although investors typically consider Nabors “gassy”; however, we expect more than 70% of its 2010/11E EBIT will come from oil activity. This is a material change from 34% in 2005/06 and is partly being driven by the shift toward oil and liquids rich drilling in the US."

Goldman goes on to say, "We would also note that the relative performance of “gassy” stocks (including Nabors) versus “oily” stocks is at an extreme, suggesting that there is a potential catch-up trade for “gassy” stocks in general even if the market does not re-rate Nabors for its oil exposure."

Shares of NBR are up 54 cents in pre-market trading, a gain of 3% to $18.24.

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