If Schlumberger did its work in clean rooms in Silicon Valley, everyone would understand that this is a world class technology company and would price the shares accordingly. Fortunately for us, most investors don’t get it so in 2008 you could buy Schlumberger at 28 times trailing 12-month earnings (certainly not cheap) at a time when Intel (INTC) was selling for 27 times earnings. But look at what you got (and get) for your cash: Intel then earned a 14% return on its invested capital while Schlumberger earns a huge 28%. That return is a result of years of company investment in cutting edge seismic technology that enables it to find oil before an oil company drills and then best-in-the-world technology for managing oil field development and production. (Full disclosure: I own shares of Schylumberger in my personal portfolio.)
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