Flotek At Buy Point

Flotek (FTK) provides oilfield chemicals, logistics, and downhole drilling and production equipment to the oil and gas industry. The key growth driver is their technology, primarily chemicals and equipment, for removing oil and gas from shale rock. The company ran into financial trouble in 2009, but they have since turned around, ramping up sales and earnings and paying down debt. In their recent quarter, the company reported earnings of $0.20 per share (vs. a loss in 2010), beating estimates by $0.05; revenues rose 57.7% year/year to $74.9 mln vs. the $76.34 mln consensus. In strong demand by institutional money, the number of mutual funds owning the stock has increased dramatically over the past year: Mar-2011 — 66, Jun-2011 — 112, Sep-2011 — 127, Dec-11 — 156. The stock appears inexpensive with a forward P/E under 15 and year over year earnings growth forecast at 59%, giving it a PEG of 0.25.

Today the stock is clearing resistance in an 8-week consolidation on strong volume, a good place to add shares.

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About jstradingnotes

I spend a lot of time analyzing the economy and securities. The effort has enabled me to generate multi-thousand percent returns on my trading capital over the past twelve years. The next few years offer an incredible opportunity to take outsized gains from the markets. Large structural imbalances in the major western economies will result in enormous market volatility as the imbalances get resolved, offering generational money-making opportunities. The major imbalances are excessive sovereign debt, crazy risk concentration in major banks, and enormous derivative exposure in the financial sector. A systemic shock can easily create a default cascade through the financial system where one failure precipitates another and another and so on. Central banks are very aware of the risks, and they are filling the financial system with liquidity by printing new money, risking massive inflation in a few short years for the United States and Europe. China has 2-3 trillion in dollar exposure, and they would like to have far less for fear of continued currency devaluation (they've lost billions holding dollars as the value erodes). As the size of their holdings prevent them from rapidly liquidating their dollar assets (which includes U.S. treasuries), they are instead spending their dollars on resources (copper mines, rare earth metal mines, oil wells, etc.). Lately they have been accumulating gold assets, perhaps with a view to making the Renminbi convertible into gold and displacing the U.S. dollar as the international reserve currency. Their gold buying is enormous and presents an easy investment thesis: ride the Chinese horse and buy gold and gold stocks. In this blog, I'd like to share some of my trading ideas and insights on the markets as these exciting times unfold.
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