Oil-patch giants such as Schlumberger, Halliburton, and Rowan have attracted interest lately, which has pushed up their stock. But a small rival, Lone Star Technologies (LSST), has been in a slump. Shares fell from 9 1/4 to 7 5/8 in two weeks, after hitting 10 1/4 in September. Smart investors aren't turned off. They're buying in.
One big buyer is Texas financier Robert Bass, whose group raised its Lone Star stake from 22% in March to 27% as of Nov. 1--purchasing shares at prices ranging from 7 to more than 9. Lone Star makes oil-field and industrial gear. What's Bass up to? So far, it's not quite clear: In its Securities & Exchange Commission filing, the group said it would be a "passive" investor. But a Lone Star spokesperson says there is no standstill agreement between Bass and the company. "Our relationship with the Basses is very cordial," she says. Another big buyer of Lone Star says of Bass: "He makes mistakes--but not in oil or in his own backyard."
What's so enticing about Lone Star? Even at the depths of the oil-and-gas-drilling cycle, "Lone Star managed to stage what appears to be a turnaround, and it has started to make money this year," says a New York money manager who invests not only in energy but also in industrial-diamond producers. He notes that demand for diamonds among oil operators--for drill bits--has perked up, meaning that an oil revival may be imminent.
One analyst expects Lone Star earnings of 40 cents to 50 cents a share this year and 60 cents to 70 cents next year, compared with a 19 cents loss in 1994.