(B)(N) MDR McDermott International Incorporated

Drama. McDermott International is a $1.8 billion (down from $6 billion two years ago) “engineering, procurement, construction, and installation” (EPCI) company with active operations in the Atlantic ocean, the Middle East, and the Asia Pacific, theatres of operation made popular by “Raiders of the Lost Ark” in 1981.

Courtesy: McDermott International
Arthit field, Gulf of Thailand

The company is now being hauled into Court for alleged violations of Rule 10b-5 of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 which seeks to abridge “Selective Disclosure and Insider Trading” based on the company, allegedly, failing to disclose, or advertise, difficulties at some of its project sites (PRNewswire, August 28, 2013, McDermott International, Inc. Sued by Investor).

Moreover, the complaint – which is being promoted by a half-dozen or so Lawyers Without Portfolio (LWPs) as a “Class Action” – is not about the drop in the stock price from $25 to $12 in less than a year in 2011 (please see Exhibit 1 below), but about the period between November 6, 2012 and August 5, 2013, during which the stock price traded between $12 and the current $8, to close at $7.50 yesterday, and is somehow allegedly “inflated” according to the LWPs who don’t claim to own any of it because, after all, it would make them look “stupid” and too much like “victims”, if they did.

Hockey Gear
NHL Aspirant

We, of course, have no opinion on the facts, the action, or its likely outcome, but we do ask – as investors – that if we buy “hockey gear” for our children but they don’t make it into the NHL, who should we sue?

And the verdict of the risk price is quite clear. We only buy or hold the stock if the stock price, summarized as the Red line Stock Price (SP) is above our best estimate of the price of risk, the Black line Risk Price (SF), and for no other reason. Our game is not about the company – we rely on it to do the best that it can and what it does is not really our business – but about what 10’s of thousands of investors are willing to buy and sell it for, regardless of what it does.

For more on what risk averse investing has done for us this year, please see our recent Posts on The S&P TSX “Hangdog” Market or The Wall Street Put or specialty markets such as The Dow Transports & Utilities or for the real class action, La Dolce Vita – Let’s Do Prada!

Exhibit 1: (B)(N) MDR McDermott International Incorporated – Risk Price Chart

(B)(N) MDR McDermott International Incorporated

McDermott International Incorporated is an engineering, procurement, construction and Installation Company engaged on designing and executing complex offshore oil and gas projects.

(Please Click on the Chart to make it larger if required.)

From the Company: McDermott International Incorporated operates as an engineering, procurement, construction, and installation (EPCI) company worldwide. The company operates in three segments: Asia Pacific, Atlantic, and the Middle East. It focuses on designing and executing complex offshore oil and gas projects. The company offers EPCI services for offshore oil and gas field developments; and delivers fixed and floating production facilities, pipelines, and subsea systems from concept to commissioning. It engages in the fabrication and installation of fixed and floating structures; installation of pipelines and subsea systems; and provision of shallow water and deepwater construction services. The company’s customers include national, integrated, and other oil and gas companies. McDermott International, Incorporated was founded in 1923, has 14,000 employees, and is based in Houston, Texas.

Postscript

We are The RiskWerk Company and care not a jot for mutual funds, hedge funds, “alternative investments”, the “risk/reward equation” and every other unprovable artifact of investment lore. We have just one product

The Perpetual Bond™“
Alpha-smart with 100% Capital Safety and 100% Liquidity”
Guaranteed
With No Fees and No Loads on Capital

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Disclaimer

Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”. Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability. We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are, now. The author retains all copyrights to his works in this blog and on this website. The Perpetual Bond®™ is a registered trademark and patented technology of The RiskWerk Company and RiskWerk Limited (“Company”) . The Canada Pension Bond®™ and The Medina Bond®™ are registered trademarks or trademarks of the Company as are the words and phrases “Alpha-smart”, “100% Capital Safety”, “100% Liquidity”, ”price of risk”, “risk price”, and the symbols “(B)”, “(N)” and N*.