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TranceAddict Investors Club @ Marketocracy (pg. 10)
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| Krypton |
Vaalco Energy (EGY) - $4.64
52week low/high: 4.51 - 8.91
The price is very close to the 52 week low signalling a contrarian position. Additionally, the price chart indicates the stock has reached a support level.
Furthermore, based on revenue from the past 5 years, my target price is $6.43. At the current price of $4.64, the company is undervalued by more than 30% in my opinion.
Supporting the target price are the above average fundamentals of this small-cap oil exploration stock. This spreadsheet compares the company averages in 7 different catagories of valuation to its industry and a benchmark index (S&P500).
This stock is riskier because they are small. The stock is considered a penny stock because the price is below $5. Their main operations are in Angola and Gabon which have just emerged from a period of violent civil war. But recently these countries have stabilized allowing foreign investment such as EGY to help in the economic recovery. Besides these issues, oil prices are expected to continue rising long-term, currently residing close to $80 a barrel which increases revenue for oil companies. As my fundamental analysis shows, their balance sheet is above average. I've put down $400 of my real money in this stock, and I have total faith that my pick is not speculation. |
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| Capitalizt |
| quote: | Originally posted by Krypton
Their main operations are in Angola and Gabon which have just emerged from a period of violent civil war. But recently these countries have stabilized allowing foreign investment such as EGY to help in the economic recovery. |
I dunno man...Seems like a volatile situation to me. The company definately looks g-r-e-a-t with an 8(ish) p/e, 2X book value, and working with oil which is in high demand worldwide. If EGY was in Canada or America, it would probably be $20+/share right now, but it sounds there is major risk in that area of the world. A government could rise or fall overnight in those tiny countries (where are they on the map?..lol)...that's probably why the stock is trading near the year low.
The company could go to $10-12 if things remain stable or it could be nationalized and go to $0.00 --just look what Chavez has done to the oil and gold companies in Venezuela. You might not be speculating on the fundamentals of the company...but you are definitely speculating on the political future of two tiny countries.
Good news for those countries (democracy...peace..foreign trade, etc) = BIG rally. Any uncertainty or outbreaks of violence = BIG plummet.
From my experience, these kind of stocks trade more on politics than they do on earnings. Your $400 could eventually become $4000, or it could become $4.00 depending on world events. ;)
But there is risk in everything and you've taken a good risk/reward stand in my opinion. Worst case, you lose $400. Best case, you gain several times that.
No guts no glory! |
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| Krypton |
I'm taking a serious beating. I had almost a $100 dollar gain in the middle of July. My stop loss is 20%, and both these oil drillers/explorers are close or at their 52 week low. The stock market is having a sale people, take advantage, especially with my own two little picks.
Angola and Gabon have recently settled down out of their civil war, so the countries are relatively stable today. Their in recovery, so I wouldn't say they were civil war risky, like Nigeria. Nigeria is having all those kidnapping problems. Screw that, angola, and gabon don't have that problem, they want the oil companies their because it helps in their economic recovery.
But when the market is bearish, small guys like these usually fall the fastest, but as value investing stipulates, the market is inefficient. These guys are worth way more than they are now. Even though they are falling 5-7% today, I'm going to hold, because, they are commodities producers, and their exposure is mostly in foreign countries.
Both EGY and TGA have operations in Canada Capitalizt, actually, both are based in Canada. Natural gas though, has hurt some companies though, and that is the main commodity being drilled by these companies in Canada. Operations in the Middle East though have offset these costs. BJS is one company I bought 6 months ago, which was hurt by low natural gas prices, and I sold it, because the fundamentals changed to the downside. I never own companies whose fundamentals are graded below a C on my fundamentals model. |
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| atbell |
Angola and Gabon seem to be rather risky areas to invest in. Civil wars always have a loosing side who knows what it will take to spark things up again.
A google search of the news shows Angola talking with Zimbabwa's military, this is a bad sign. Zimbabwa is the one that recently kicked out all thier white business and ceded land to native Africans, esentially de-colonizing.
The search for Gabon showed a much more disturbing story, a local newspaper editor was jailed recently. That reeks of an authoritarian bent, the type that causes political unrest.
I also looked up both countries on the map. Being on the west side of Africa the oil companies are probably looking for oil related to the stores off the coast of Nigeria. I think Angola might be heavily covered in jungle, like the Congo. Come to think of it, proximity to the Congo is a risk too. There are many armed groups running around in the West of the Congo, including Hutu's left over from the Rawandan genocide.
You might want to look at the CIA fact book about these countries to get an even more detailed outline of each. |
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| atbell |
My thoughts on current holdings are that you should look at companies with solid long term viability over ones that have good balance sheets.
I've also avoided exposure to US stocks, companies / funds I felt were heavily dependant on a strong US$ for profits, and companies / funds that have a solid global footing. The reason for this is that I see global fundementals as being solid but US fundementals being highly risky. |
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| Capitalizt |
Well this market is officially schizophrenic.
The volatility is just insane...We've had mega crashes and mega rallies...going from uncertainty to panic selling to optimism to euphoria....all in less than a week.
Check out today's DOW. Up 160, down to negative territory, then soaring back up to +150..
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| Shakka |
| quote: | Originally posted by Capitalizt
Well this market is officially schizophrenic.
The volatility is just insane...We've had mega crashes and mega rallies...going from uncertainty to panic selling to optimism to euphoria....all in less than a week.
Check out today's DOW. Up 160, down to negative territory, then soaring back up to +150..
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I believe it's called a bear market rally. They are sharp, short and violent. Exacerbated by rumormongering, trade unwinding and talking heads who don't know what they're talking about. |
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| Krypton |
| Both EGY and TGA are really close or at their 52 week high. What great support levels to buy at. TGA is in the process of a stock buyback!! What small caps do that!? |
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| Capitalizt |
meh, I prefer to buy stocks that don't operate in 3rd world countries...No matter how good a company may look, I've learned that you can never trust politicians...especially in tiny, volatile countries.
I'd hate to tell you to sell now krypt, since those two stocks have fallen over the past few days...but I do recommend you stick to your own advice from a few pages back and go with index funds for the long term. I pulled up a chart, and the fact that those companies were going down while the market was going up over the past 3 days is not a good sign..
If you believe the energy sector will do well, go to ishares.com and look at their choices.
IYE, IEO, IEZ, IXC
IEO looks to be in the same business as the two companies you listed...oil exploration and production. The fund owns mostly big, well-established names but also has some smaller and riskier stocks. Since it owns dozens of companies, your risk is more evenly spread. You may not hit the same "home run" you would with a single stock, but you won't lose everything either. |
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| Krypton |
If either stock hits my 20% stop loss, I will sell, no matter how much I like them. Until then, I can't rely on short-term movements of prices, because if I trade on that, I'll get scalped everytime.
It looks like I might have stopped my downward spiral in my main mutual fund. My turnover rate is more than 100% for the past three months. I totally made it over taking out my speculative picks, and adding in my most researched picks and also allocated 20% to bond etf's. |
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| Krypton |
Vaalco has fallen 19% below the price I paid for it. I might have to sell it if it reaches 20%. Besides that fact, Vaalco remains a very good company. They have 72 million dollars in cash ready to be spent on ventures, operations, exploration, etc. The sell-off that has occured is PANIC SELLING!! I'm listening to the conference call right now, and my anxiety has been alleviated. This company has so many prospects for profit, it's ridiculous. They just signed a deal in the UK North Sea, and are quickly developing the Angola and Gabon rigs. They are also opening a new office in Rwanda. Besides the fact these countries have just come out of a civil war, I'm betting these countries have found some stability, enough to do business. I'm very confident that by the end of 2008, EGY will break out. This view is also shares by Vaalco Management. They have said in their conference call that 2008 will be the breakout year for Vaalco, and so be patient. The sell-off in stock is not warranted to the true value of this company. Their balance sheet is solid.
Stock buybacks - The stock is cheap! But the management only said they would consider it.
If any of you are looking for more risky plays in the international arena, Vaalco (EGY) is a sure bet, a more safer bet (balance sheet). The stock is cheaper than ever. Buy this Lexus for the price of a junker. |
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| Shakka |
| If you think we have a free market, you need look no further than the last 2 days for evidence to the contrary. The Fed is actively pumping liquidity into the system in the last 2 days to support the markets. While there is an adage that says "Don't fight the Fed," I believe they are only delaying the inevitable. Market manipulation is illegal unless you're the government. Hell, the Fed actually bought mortgage debt today, something I'm not sure if they've ever even done before! |
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