Dear Mr. Berko: Which deepwater oil drilling company would you own? All of them are down significantly from their highs, but I just can't seem to make up my mind. One broker recommended Pride International Inc., another recommended Noble Corp. and Diamond Offshore Drilling Inc., but none appeal to me. I have $14,000 to invest, proceeds from the sale of Yahoo!, and I want aggressive growth. I should have listened to you earlier this year when Microsoft made a $33-per-share offer for Yahoo! and sold the stock then. But I got stubborn and lost nearly $14,000 on that junk. How did you know to sell the stock? — G.T., Joliet, Ill.

Dear G.T.: If you knew Jerry Yang or any of the members of the Yahoo! board of directors, you would never have owned the stock. I'm surprised that angry shareholders have yet to sue Yang and his toady board members as the stock tumbles to $11.25 a share.

I also like Diamond Offshore Drilling Inc., Noble Corp. and Pride International Inc. But I'd like you to peek at a company called Transocean Ltd. (RIG-$45.98), the planet's largest offshore drilling contractor. RIG works all major offshore regions in the world, including West Africa, Norway, the North Sea, the Gulf of Mexico, United Kingdom, Brazil, the Middle East, Canada, etc. RIG is one of the few contractors with the capability and technology to pursue deepwater/harsh-environment drilling projects — huge waves, heavy winds and freezing temperatures.

Transocean has 143 oil rigs rented to major energy firms all over the globe, and rents them at prices between $350,000 and $650,000 per day. Yep, that's per day, which is less than a modestly talented football player makes per game and about what Yoko Ono pays in annual maintenance for her fancy Fifth Avenue apartment in the Big Apple.

RIG has a $43 billion backlog of signed deals, which represents about three years of revenues. Recent declines in oil prices haven't affected contract rates because virtually every one of its 143 rigs is profitable at $58 a barrel. Importantly, most of RIG's clientele are major oil firms, so most contracts represent development of known reserves rather than exploration.

Meanwhile, barriers to entry in this very costly business are extremely high because all available rigs are in use and it takes about four years to build a new one. Demand for deepwater rigs continues to exceed supply, and demand for rigs capable of ultra-deepwater/harsh-environment performance is increasing almost geometrically. While oil prices have fallen below $40 a barrel, most observers know those prices are temporary because of America's natural profligacy.

RIG revenues in 2008 were $12 billion and are expected to come in at $15 billion in 2009. Argus, a highly respected investment research firm, expects 2008 earnings to come in at $14.50 and believes 2009 earnings will be $15.38 a share. Value Line puts 2008 earnings at $14.35 and thinks RIG can post earnings of $16.50 in 2009. Standard & Poor's is looking for 2008 earnings of $14.58 and 2009 earnings of $16.18. Reuters believes RIG will earn $14.10 in 2008 and $15.92 in 2009, and the average estimate of nine firms on Wall Street places 2008 earnings at $14.40 and 2009 earnings at $15.38.

Those are darn good numbers. So good, in fact, that Morning Star has a three-year share price target between $135 and $188. Argus believes RIG could be $102 in the next 18 to 24 months. Credit Suisse has an 18 month target price of $118. Citigroup, however, is a little less sanguine and suggests a $110 share price in the coming 18 to 24 months.

RIG expects to have a $44-per-share cash flow in 2009, enjoys a 37 percent net profit margin, a 26 percent return on equity, trades at well under five times earnings and at an attractive 1.5 times cash flow. Many investors purchased RIG shares in June 2008 when the stock was trading in the $160s. I couldn't recommend RIG when it was trading above $100. But because market volatility has knocked more than 90 points off its high price, I'm comfortable recommending 200 shares in the aggressive growth portion of your portfolio.

Considering RIGs impressive cash flow and solid earnings, I would not be surprised if the company initiated a good dividend and/or a share buyback program.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, FL 33429 or e-mail him at [email protected]. To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.

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