Halliburton (HAL) - When the Second Shoe Drops

Halliburton (NYSE: HAL) said Tuesday it would cut its workforce in an unrelated action separate from its acquisition of Baker Hughes (NYSE: BHI). It is the natural result of the sudden sharp drop in oil prices. HAL shares fell 2.1% on the news, and BHI dropped 1.3%. But the iPath S&P GSCI Crude Oil ETN (NYSE: OIL) fell by 5% on the day, so investors in HAL may be missing something. The shares of HAL have bounced off the bottom with oil prices and other oil services firms, but they may be missing the fact that a second shoe will drop, the impact of these events on earnings this year. That’s why I think investors should prepare to hedge back their investments in the leading edge of the energy complex and look to the commodity itself, and take some risk off stocks like Halliburton ahead of potential earnings pre-announcements in Q1. See my report on Halliburton here.

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