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CARBO Ceramics Inc. Message Board

  • eyesandears51 eyesandears51 Feb 1, 2013 4:09 PM Flag

    What Goes Up Can Go Down: Beware 26% Short Float

    Yellow caution sign. Fact stock has appreciated 9.24% today, but....Shorts have an exceedingly high 26.3% of float. Put in context 10% is considered by many as the threshold for high, and is rivaled by battleground stocks such as Herbal Life @ 36.5%. Combine this with equally high forward PE of 2.85%, again well above the 2% flashing red light danger zone for a non high tech or bio tech exponentially growing company, and a modest 1.4% dividend.

    This relatively low beta stock that has trailed the performance of the S&P for the past 1 year, 3 months and YTD. For 1 day it has high beta performance. Many expect the market to pullback by 5-10% sometime between now and the replay of the Washington DC thriller horror movie " Sequestration " at the end of February. A low beta stock could expect to experience a ratable retrenchment, higher beta issues have exaggerated movements up in good times and down during pullbacks.

    Conclusion, CRR is a quality company providing an important ingredient for fracking, and absent regulatory curtailment will grow with the expansion of oil/gas production, however at current price levels the 30-60 day risk/return is disproportionately negative. Pricing closer to the 20 and 50 day SMA of $ 79-$ 80.50 offers a better return with lower risk.

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    • Remote possibility ,Dc , fruit cakes , media all will squall. The rest of the world will be just hunky dory.

      Sentiment: Buy

      • 1 Reply to sterne99
      • Sterne99

        None of us can predict the future until it is history. While you could be right that the very public upcoming fiscal fight later this month over sequestration will not impact the market or CRR, please consider the following. The previous round of brinksmanship resulted in a drop of CRR stock from a high of $ 79.75 on November 6, to a low of $ 70.59 on November 13. The stock did not exceed the November 6th level until December 11, attaining a decisive upward breakout only today, and arguably buoyed by an overall market rally. Witness that today's aftermarket, CRR pulled back by 3.6%, over 40% of the 8.85% gain in the regular session.

        This is the basis of my conclusion that $ 79-$ 80.50 is a better risk/reward adjusted price to add to my position, until the market passes to the other side of an overdue pullback. The cause of the drop may result from either technical market dynamics, or the avoidable pain inflicted by our elected leaders.

        I welcome having a better understanding of the fact, or precedent based data that caused you to reach a different conclusion.

    • Very good summary of near term q-1 risk/reward. Price targets are reasonable, unless the broader market avoid a pullback. This is unlikely for technical reasons, and as EYES and EARS has pointed out the looming replay of " Sequestration ".

11.94-0.73(-5.76%)4:02 PMEDT