First, congratulations on well over 50% in bookable gains from our December 20th, 2018 report on (NASDAQ: CTXR) Tuesday hitting a high of $1.79 from our call at $1.04. We will continue to monitor this one for pipeline updates.
Good day everyone,
We don’t believe there is a recession looming in the near term, and 2019 will be a good year for small cap growth equities. We believe there are no sectors experiencing a “bubble” in their valuations and we expect good news, for the most part, in the upcoming earnings season. Investors may flock to stocks that are bargains right now.
We wanted to start this year with a great company to alert to you. We found three and had a meeting to decide which one to present. After some back and forth among our staff, we decided to add all three to our first watch list of 2019.
So here they are; three stocks that we believe have the fundamentals we all like. They are profitable with strong revenues, have a good chart setup, and have a significant potential upside. They all have indications of being significantly undervalued and oversold.
We are initiating coverage of these three equities and plan to revisit them periodically.
Ferroglobe PLC (NASDAQ: GSM) operates in the silicon and specialty metals industry, offering silicon chemicals used in a range of applications.
Current price $1.93
Book value $5.74 per share
Revenue (ttm) $2.14 billion
Market cap $323 million
52-week range $1.47 to $ 17.40
GSM is the world’s leading producer of silicon metal, and a leading silicon- and manganese-based specialty alloys producer.
Ferroglobe decided to suspend production at its Niagara Falls, NY facility on December 30, and stated; “The shutdown of this facility follows our recent announcement regarding the evaluation of various production adjustments to optimize utilization rates and logistics to customers, and to maximize economic efficiency across our global platform,” Chief Executive Pedro Larrea said in a statement. The move “is an example of the operational flexibility that is critical to quickly addressing changes in the markets we serve,” he said.
The company shares took a hit on the news of the facility closure, but now investors are beginning to see that the news may indicate better fortune for the company in 2019.
GSM shares are trading at 67% below their book value.
GSM shares are trading at 89% below their 52-week high.
The company shares are trading at only .15 of annual revenues. Given a value standard of 1.0X for a Price to Sales ratio, these shares could be trading at $12.44 per share.
The P/E ratio (ttm) is 3.03. GSM shares could support a P/E ratio of 17.0 reflecting a potential share price of $10.66.
GSM shares just crossed their 20 DMA and the current RSI (14) is only 39.09. We believe GSM shares could show significant gains in the near term.
Nobilis Health Corp. (NYSE: HLTH) owns and manages ambulatory surgical centers (ASCs), and acute-care and surgical hospitals.
Current price $.54 per share
Book value $1.91 per share
Revenue (ttm) $282 million
Market cap $38 million
52-week range $.17 to $1.70
On December 27, 2018 the Company announced James Springfield its new Chief Executive Officer. Mr. Springfield began serving as the Company’s Chief Executive Officer on January 1, 2019. Mr. Springfield, age 55, brings to the chief executive officer role substantial leadership experience with several of the country’s largest healthcare providers and payors.
Effective January 1st, HLTH has entered into an in-network contract (Payor Agreement) at Plano Surgical Hospital with one of the nation’s largest commercial payors. New CEO James Springfield said “Nobilis has worked to move our facilities in network on a revenue neutral basis. The added benefits to our shareholders of moving in network will be the increased predictability and speed of collections as well as opening up a new market of “in network only” surgeons that we can attract to our facilities.
HLTH shares fell to a low of $.22 per share at the end of last year. Law firms immediately sought to file suit over the declining shares. Too bad for them because the shares have gained over 100% in January and they could likely go much higher.
Nobilis is operating in the growing healthcare sector as evidenced by their continuing growth in revenues.
HLTH shares have crossed their 20 DMA and their 50 DMA in recent weeks.
HLTH shares are trading at 75% below their book value.
HLTH shares are trading at 72% of their 52-week high.
The company is profitable, and revenues are increasing YOY.
The company has a Price to Sales ratio of only .14 which is very low. Using a value standard of 1.0X these shares could trade at $3.60 per share.
Even though HLTH shares have produced nice gains already this year, we believe the valuation metrics could propel them even higher.
(NYSE: HK) Wild Card Pick, Large Short Interest, Possible Earnings Surprise, Possible Squeeze, Potential Bounce Off Extreme Lows
Halcon Resources Corporation (NYSE: HK), an energy company, engaged in the acquisition, production, exploration, and development of onshore oil and natural gas assets in the United States, particularly in the Texas, Delaware Basin region.
Current price $1.86
Book value $6.62 per share
Revenue (ttm) $191 million
52-week range $1.43 to $9.07
A few weeks ago, the company sold its water infrastructure assets for $200 million. Upon closing of this sale, Halcón’s senior secured revolving borrowing base was increased to $275 million. As of September 30, 2018, pro forma for the $200 million in sale proceeds and undrawn revolver capacity, the Company had liquidity of $418 million. That’s a lot of potential for capital spending and operating through 2019.
In November, the company offered guidance for Q4 2018. Halcón expects fourth quarter 2018 net production to average between 18,000 and 20,000 Boe/d (63-67% oil). The Company expects fourth quarter drilling and completion capital spending to total $75 to $95 million in addition to infrastructure spend of approximately $20 to $30 million. Halcón plans to provide 2019 guidance in early 2019.
The Permian’s Delaware Basin, the less drilled part of the giant oil field, holds more than 2x the amount of crude as its Midland Basin sister field, according to new data from the U.S. Geological Service.
The Delaware’s Wolfcamp Shale and Bone Spring rock formations hold an estimated 46.3B barrels, the assessment says, and holds 281T cf of natural gas, ~18x the amount in the Midland Basin.
The Midland and Delaware estimates are the USGS’s “largest continuous oil and gas assessments ever released,” says director Dr. Jim Reilly, and consists of “undiscovered, technically recoverable resources.”
The company has topped consensus revenue estimates three times over the last four quarters.
HK shares are trading at 80% below their 52-week high.
HK shares are trading at 70% below their book value.
Analyst’s consensus calls for increased revenue and narrower net loss reflected in the earnings report due in about six weeks.
After hitting a low point in late December, HK shares have gained some traction. The current RSI (14) is only 39.78. We believe the valuation metrics for HK shares could indicate the potential for significant near-term gains.
We will have periodic updates on this watch list throughout 2019. Keep an eye out for our next long term growth feature report coming soon.
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