War for Halliburton?
Iraq
| December 22, 2005
| Tim
I keep hearing, from the left, quotes like "Halliburton's making a lot of money from this war." Really? Then why on earth does their Yahoo stock quote history look like this:
See that huge hollowed-out hole, near the right side of the graph? That's 9/11, and the Iraq war, folks. Note how the stock value plummets, stays low, and only begins to recover very recently. (And notice that the "recovery" area is no-where near as large as that huge gaping hole behind it. Averaged over the war, that's a net loss in investor value, folks.)
Now contrast: See that huge ramp-up in the 1990's? That was the Halliburton's fate when Bill Clinton was commander-in-chief, and Halliburton's stock value quadrupled, going from about $15/share to about $60/share. See that huge spike near the end of the 1990's? That was Kosovo, the non-UN-approved war that Democrats loved. As you can see with your own eyes, that war was actually very good for Halliburton (much better than this one), but we sure didn't hear much it then, did we?
Now, for a reality check, compare Halliburton's history to this company:
Now there's a stock which has improved during the Iraq war! Know what that is? It's A-class stock from Bershire/Hathaway, the holding company for the assets of antiwar lefty Warren Buffet! Compare the same time period where Halliburton takes a nose dive: Buttet's stock is on a general steady increase!
And, just for good measure, here's the profit history of another favorite watering hole for antiwar protestors -- Seattle-based Starbucks coffee:
Again, note the steady increase: during the Iraq war, the graph itself triples in value. Combined with two stock splits, that's about a twelve-fold increase in stockholder value!
Looking at the ticker quotes, one would be a lot more tempted to conclude this was "War for Geico!" or "War for Latte!" than for Halliburton. But annoying little things like facts apparently aren't something the self-proclaimed "Reality-Based Community" concerns itself with much.
Tim,
You are incorrect in your interpretation of the SBUX chart. Those graphs already show the split-adjusted prices. If you look at historical prices on Yahoo! it will confirm this. Starbucks was not ~$17 per share in January of 2004 when I bought my shares; it was $34. The chart has already adjusted the price. SBUX is up 3-fold, not 12-fold, for the interval you are showing.
As far as BRK.A and HAL compare during the last three years, that graph shows me that BRK.A has gained approximately 50% while HAL has increased 200%. You can certainly cherry-pick different dates, but I still see a much bigger gain from Halliburton from 2003 onward.
In the grand scheme of things, however, I do agree with you. Making a general statement like "Haliiburton is making a lot of money on this war" is meaningless without context. I don't know what their profit margins are on war-related goods and services. Maybe those parts of their business are not extremely profitable. I don't know.
As an aside, Berkshire Hathaway is ridiculousy cheap on a book value per share basis. Every $88,700 share is backed by $30,500 of cold, hard cash. If and when the company ever decides to declare a dividend, the stock price will rise meteorically.
You are incorrect in your interpretation of the SBUX chart. Those graphs already show the split-adjusted prices...
Whoops! I stand corrected! Thank you, Jeff.
Aside: I really appreciate being corrected on something like this, and am glad to have reader with such integrity. Thank you.
As far as BRK.A and HAL compare during the last three years, that graph shows me that BRK.A has gained approximately 50% while HAL has increased 200%. You can certainly cherry-pick different dates, but I still see a much bigger gain from Halliburton from 2003 onward.
Yes, but recall that the whole theory was that Bush took office to improve Halliburton's standings. So the comparison should really be done since the begining of the Bush administration, or at least since 9/11. If you look at the gains over Bush's first term -- the only term he and his "cronies" could have been sure of controlling -- you'll see no net gain at all. In fact, the Iraq thing has been so unprofitable that Halliburton was thinking of selling that business off to cut costs.
I'm not trying to "cherry pick" these dates -- rather, I'm just matching the timespan to the timetable laid out in leftist conspiracy theories which say the Bush junta was designed to increase Halliburton's profits.
I've not heard a version of the theory which said that Bush was elected to first decrease Halliburton profits until his second term, then, somehow, guarantee a second election, and only then finally get some traction going with Halliburton stock values, getting them back up to their peak values under Clinton.
Indeed, who would buy such a theory? Too many variables. Implausable plot line.
So I trace stock values against the theory offered. Trying to peg the value against the lowest price available 2003 (when the first shot was fired) seems to be cherry-picking, since the theory itself originated in 2001 and 2002, as war preparations were ramping up.
In the grand scheme of things, however, I do agree with you. Making a general statement like "Haliiburton is making a lot of money on this war" is meaningless without context. I don't know what their profit margins are on war-related goods and services. Maybe those parts of their business are not extremely profitable. I don't know.
The link above suggests it's not been very profitable at all. Probably would have done better had Iraq torched more of it's oil wells -- KBR specializes in controlling and extinguishing those fires, and makes good money at that.
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Tim,
You are incorrect in your interpretation of the SBUX chart. Those graphs already show the split-adjusted prices. If you look at historical prices on Yahoo! it will confirm this. Starbucks was not ~$17 per share in January of 2004 when I bought my shares; it was $34. The chart has already adjusted the price. SBUX is up 3-fold, not 12-fold, for the interval you are showing.
As far as BRK.A and HAL compare during the last three years, that graph shows me that BRK.A has gained approximately 50% while HAL has increased 200%. You can certainly cherry-pick different dates, but I still see a much bigger gain from Halliburton from 2003 onward.
In the grand scheme of things, however, I do agree with you. Making a general statement like "Haliiburton is making a lot of money on this war" is meaningless without context. I don't know what their profit margins are on war-related goods and services. Maybe those parts of their business are not extremely profitable. I don't know.
As an aside, Berkshire Hathaway is ridiculousy cheap on a book value per share basis. Every $88,700 share is backed by $30,500 of cold, hard cash. If and when the company ever decides to declare a dividend, the stock price will rise meteorically.
Posted by: Jeff on December 22, 2005 11:03 AM