Why Halliburton Rallied Today | Nasdaq

Key Points

• Halliburton is a leveraged bet on higher oil prices.

• Oil prices were rising after NATO threatened more decisive actions against Russia’s recent incursion into NATO airspace.

• Russia also hinted at further export restrictions as Ukraine continues to strike oil and gas storage assets inside Russia.

• 10 stocks we like better than Halliburton ›

Shares of Halliburton (NYSE: HAL) had rallied 9.6% on Tuesday at 1:00 p.m. ET.

Halliburton and other oil-and-gas-related stocks took off today as oil and gas prices rose due to increasing and worrying tensions between NATO countries and Russia.

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NATO looks to pressure Russian exports

After last week’s incursion of Russian drones into NATO airspace, NATO leaders declared today that there would be a “robust” response to the recent incursion. That likely means further sanctions, which could further limit Russian supply to global markets, with Russia accounting for about 10% of total global oil supply.

Meanwhile, President Donald Trump called on European countries to stop purchasing Russian gas, which they currently plan to continue doing through 2027 per the latest sanctions. It was also reported that Russia may continue certain diesel export restrictions to satisfy domestic needs amid continuing Ukrainian strikes on Russia oil and gas storage assets.

As a result, oil prices rose over 2% on the day, with Brent Crude rising above $67 per barrel and West Texas Intermediate prices rising above $63 per barrel. Oil and gas stocks rallied in response.

As a service provider leveraged to new drilling activity, Halliburton is highly leveraged to oil and gas prices. Moreover, Halliburton is leveraged itself, with $8.5 billion in gross debt and $6.5 billion in net debt. So it’s no surprise to see Halliburton having an outsize move to oil prices.

Image source: Getty Images.

Halliburton can be a productive hedge in your portfolio

Oil and gas stocks, while not fashionable these days, can provide value as part of a diversified portfolio in two big ways. First, they act as a hedge against geopolitical turmoil, which can lead to price spikes in oil and other commodities. Second, many oil and gas stocks pay substantial dividends, with Halliburton having a current dividend yield of 3%.

Getting paid dividends to hedge one’s portfolio is attractive, making Halliburton a strong candidate for inclusion, especially given its low valuation at 11.5 times earnings.

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Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.