Core Laboratories Stock Tumbles as Billionaire Shares Bear Case

By Motley Fool Staff Markets Fool.com

Motley Fool analyst Matt Argersinger recently returned from the 2017 Sohn Investment Conference in New York City, where he heard some of Wall Street's top investors and fund managers take the stage to share their views on various companies.

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In this segment fromMarket Foolery, Matt turns his attention to the bears, in this case, David Einhorn who is down onCore Labs (NYSE: CLB).

A full transcript follows the video.

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This video was recorded on May 10, 2017.

Mac Greer: Let's move on to the short position, Core Labs. Greenlight's David Einhorn. A lot of people may know David Einhorn, back in 2007 he shorted Lehman Brothers, which subsequently went bankrupt, so that worked out well. In recent years, he's also shorted a little company called Amazon.com. Not so good.

Matt Argersinger: Yeah. He's known mostly for being a short seller. He's had some bad bets. I think he was also short Chipotleat some point, I think he made the claim that Taco Bell was going to eat Chipotle's lunch at some point. But he's also been a longtime investor in Apple, which has worked out really well. So he's kind of all over the place. But he brought to the table Core Labs, which is an oil field services company that specializes in seismic and high data analysis of wells. It's used by drillers and explorers as a way of trying to maximize their yield on a given exploration. His point was a good one, though. If you look at Core Labs' exposure, they're exposed mainly to these complex international, mostly deepwater exploration projects. That part of the oil business has just been terrible. They don't have a lot of exposure to the only place that's really working, which is North American shale. At the same time, investors seem to have rewarded Core Labs this elevated multiple because they think it's a secular growth story. The idea that, everyone is going to be using high data analysis now to do intricate, complex explorations. But, actually, that's not true. He thinks it's a bit of a false narrative that this is a secular growth story. He thinks, this is just a cyclical oil services company like Halliburtonor any other, and it shouldn't be awarded these higher multiples. He thinks their earnings are about to drop off a cliff starting later this year, and once that happens, investors are going to award a much lower multiple to the business, and he thinks the stock is going to drop 30% to 40%.

Mac Greer owns shares of Apple and Chipotle Mexican Grill. Matthew Argersinger owns shares of Amazon, Apple, and Chipotle Mexican Grill. Matthew Argersinger has the following options: short December 2017 $800 puts on Amazon. The Motley Fool owns shares of and recommends Amazon, Apple, Chipotle Mexican Grill, and Core Laboratories. The Motley Fool has a disclosure policy.