|Written by GSCR Staff|
|Wednesday, 01 April 2015 05:59|
Happy April Fool’s Day 2015! While the origins of this ‘holiday’ are disputed, there is no doubt this can be a really fun prank filled day on those who forgot.
No doubt we have all been the fooler and the fooled.
In Monday’s Goldman Guide we set our sights on volatility and specifically, buying on the dips as a trading strategy. The chart below illustrates the epitome of what we were talking about in one of our small cap sector regulars, technology.
SCON 6-Month Chart
Superconductor Technologies, Inc. (NASDAQ – SCON - $1.41) has been nearly cut in half over the last six weeks and we believe trading opportunity exists here. On February 17th, the Company announced a registered direct offering of stock and warrants totaling 3.1 million shares and 1.6 million warrants. This increased the shares outstanding by 24% (excluding the warrants) from year-end 2014, and was a huge catalyst in the stock’s tumble as it prompted dilution.
The Company develops and commercializes high temperature superconductor (HTS) materials and related technologies, including HTS materials and cryogenics to produce HTS Conductus wire for applications in the electrical grid and equipment platforms that use electrical circuits.One of Superconductor’s high tech products is its Sapphire Cryocooler. The cryocooler is currently used to cool high temperature superconducting (HTS) materials in the Company’s SuperLink® product - a high performance receiver used in the telecommunications industry.
There are some positive signs that have us believing there could be some future money flow into SCON over the next several months. First, the forward P/E of 3 on consensus estimates of top line growth an order of magnitude higher in 2015 over 2014 is a normal check mark for us. Additionally, a short float under 4% indicates not many selling out there. Along those lines institutional ownership is relatively low at 22%. This can be seen as a plus for downside protection as large scale sell-offs could be less impactful. Finally, zero debt as of December 31, 2014 indicates the Company has a decent balance sheet and could possibly take advantage of a capital structure change taking on some debt for growth ventures if necessary.
We think the dip for SCON is here. Look for a pop back to $2.00 over the next two to three months.
Have a great day!
Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.
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