It seems like every day there is a new “hot stock” being pushed by financial pundits and brokerage houses alike. Seadrill Limited (ticker symbol, SDRL) was once one of these hot stocks, but it has since fallen from grace, with wide reports that it will be declaring chapter 11 bankruptcy by early next week. SDRL’s stock was known for its generous quarterly dividend, and, to the detriment of retiree investment portfolios, benefited from excessive promotions it received from those within the brokerage and investment industry.
SDRL is an offshore deep-water drilling contractor in the oil and gas sector. It was founded in 2005 by John Fredriksen, a Norwegian-born billionaire, who was well-known for his triumphs in the oil and shipping industry during the 1980s. The company grew quickly by way of aggressive management and acquisitions, and its stock price in September of 2013 surged to its high of over $47 per share. However, SDRL has since spectacularly nosedived, falling by more than 99% in value to its current trading price of $0.23 per share.
As early as February 2012, Mad Money’s Jim Cramer was bullish on SDRL. But so were big name brokerage firms like Morgan Stanley, which issued a research report in November 2013 that confidently touted SDRL as an overweight value stock. In a subsequent research report from March 2014, Wells Fargo Securities named Seadrill’s subsidiary, Seadrill Partners, LLC (ticker symbol, SDLP), its “top Marine MLP Pick” and predicted “solid distribution growth” through 2015. Notably, SDLP’s investment performance took a similar trajectory to its parent SDRL, at one-point trading over $34 per share in August of 2014, but now sitting barely above $3 per share today.