Q. I'm uncertain about the energy business and concerned about my shares of Schlumberger Ltd. Please give your opinion. - VK, via the Internet

A. The world's largest oilfield-services company, with more than 100,000 employees in 80 countries, is counting on its advanced technology and research to drive profits forward.

It operates in a cyclical business subject to energy price swings, political uncertainties around the globe and stock volatility. It is, for example, the industry leader in the lucrative Russian oil services market that has tremendous growth potential but carries risk as well.

The company benefits from an extensive portfolio of services - ranging from seismic surveys to software to artificial lifting - that are employed by major oil companies, exploration firms and production operations. It is able to offer a full-service option to enormous state-owned oil companies around the world.

Its $11 billion acquisition of Smith International, which makes drilling bits and other tools for oil and gas production, was completed recently. Expected cost savings from the deal is $320 million by 2012. While that addition increases the firm's diversification, its stock was punished because investors questioned making such a significant deal in the current market.

Shares of Schlumberger are down 17 percent this year following a 56 percent increase last year and a 56 percent decline in 2008. The firm's second-quarter earnings were up 32 percent despite the drilling ban in the Gulf of Mexico.

Schlumberger will not resume drilling activity in the deepwater Gulf this year. However, tighter regulation in the wake of the oil spill there means more money will likely be spent on service and maintenance in the future, which could prove beneficial to the company's long-term profits.

Due to its lower current stock price, the consensus Wall Street analyst rating of Schlumberger stock is "buy", according to Thomson Reuters, consisting of 10 "strong buys", 17 "buys" and six "holds".

Chairman and CEO Andrew Gould has strengthened the firm's image and direction while making its finances more transparent. Schlumberger is strong financially with modest debt and plenty of cash because it avoided enormous debt-driven acquisitions. That frees up money to buy companies less expensively during market downturns.

Earnings are expected to be relatively flat this year vs. a 10 percent decline in the oil services industry.

Next year's projected 36 percent rise compares to 23 percent expected for its peers. The five-year annualised growth rate forecast is 15 percent versus 13 percent industry-wide.

Q. Is the Clipper Fund a good investment? I've heard a lot about it but it hasn't done so well. - PL, via the Internet

A. While this well-known fund has been a disappointment since current managers took over in 2006, it did perk up last year.

Because it is concentrated in only about 25 stock names, its ups and down are more pronounced.

It also made some unfortunate bets in 2008, such as buying shares of Merrill Lynch when that investment firm was trying to remain independent prior to being acquired by Bank of America.

The $1.1 billion Clipper Fund is up 13 percent over the past 12 months to rank in the top 10 percent of large growth and value funds. Its three-year annualised decline of 11 percent puts it in the lowest 10 percent of its peers.

"Chris Davis and Ken Feinberg are still solid managers and plenty of studies have shown that every manager goes through periods of slumps," explained Dan Culloton, analyst with Morningstar Inc. in Chicago. "It's more important that managers stay true to principles that built their long-term record, and that is the case here."

Mr. Davis, whose family owns Davis Select Advisors that manages the fund, has been at the firm since 1991, while Mr. Feinberg began as a stock analyst there in 1994. They aim to buy good companies whose shares are temporarily depressed based on their reckoning of the true value.

A good sign: The Davis family has more than $40 million of its own money invested in the Clipper fund.

"This fund is a supporting player on the edge of your portfolio that complements what you already own," explained Mr. Culloton. "A core fund is the bread and butter, while this is the jelly."

Nearly half of the fund is in financial services stocks, with other concentrations in consumer goods, consumer services and energy. Top holdings are Costco Wholesale Corp., Berkshire Hathaway Inc. "A", American Express Co., Canadian Natural Resources Ltd., Procter & Gamble Co., Harley-Davidson Inc., Bank of New York Mellon Corp., Oaktree Capital Group, Loews Corp. and RHJ International.

This "no-load" (no sales charge) fund requires a $2,500 minimum initial investment and has a low annual expense ratio of 0.8 percent.

Q. Please explain when mutual fund prices are set. What I've heard doesn't totally add up. - JM, via the Internet

A. It differs from trading individual stocks.

An open-end mutual fund's net asset value, or price per share, is set once a day after the major US markets close.

The closing price of all the securities it holds in its portfolio are added up and divided by the number of shares in the fund to come up with the per-share price.

Investors used to trading stocks can understandably get confused when dealing with these funds:

They must get in their order to buy or sell before the market's close in order to get that day's net asset value. If they get their order in after the markets close that day, they will get the price as of the next day's closing.

This differs from exchange-traded funds (ETFs) that trade like stocks throughout the day and have become increasingly popular in part because of that. The price paid for shares is the value when the trade is actually being made.

Open-end mutual funds are redeemable securities, while ETFs are tradable securities.

Andrew Leckey answers questions only through the column. Address inquiries to Andrew Leckey, 555 N Central Ave., Suite 302, Phoenix, Ariz. 85004-1248, or by e-mail at andrewinv@aol.com

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