TPS Position Update – April 12, 2016

We are going to take some money off the table, capture some profits, and cut our losses with two trades this week.

. . . . Kingold Jewelry Inc. (NASD: KGJI) – Sell

We recommended the stock in June 2015 at $1.04.  Today, it closed at $1.35.  Take a 30% profit in 10 months and celebrate all the way to the bank.

Kingold has been one of those problem child penny stocks that hasn’t let us get a good night’s sleep.  Granted, most penny stocks aren’t conducive to sound sleep, but Kingold has been a particular annoyance.

Right after we recommended the stock at $1.04, it promptly swooned, plunging to $0.66 in six weeks.  Then, the stock bottomed out at $0.51 in early January.

We held on for dear life, and we’re glad we did.  Today, it’s a good time to sell Kingold and take some modest profits.  We don’t see the turbulence of the Chinese markets calming down and we don’t see much more of a massive run up in gold prices.

Will we miss a strong run?  Is this penny stock poised to take off?  Perhaps.  We still like Kingold.  But we also like to get a good night’s sleep, and with the volatility of the markets, there are plenty of other issues to keep us up at night.

. . . . U.S. Geothermal Inc (NYSE: HTM) – Sell

We recommended the stock in April 2014 at $0.78.  Today, it closed at $0.71.   

We are selling because the company is struggling and we don’t see a path to profitability.

Late last month, the alternative energy company admitted that it has tried – and has failed – to find a buyer.  The company has put on a brave face and says it will try and make a go of it.

Unfortunately, the prospects are dim.

There are a lot of irons in the fire.  The firm is planning to increase production at both its US sites and in Guatemala.

But the bills will be high and the wait for revenue from these alternative power sources will be long and uncertain.

There’s little comfort on the balance sheet, with $89.9 million in long-term debt.

Income has plunged almost 90%, from $11.6 million in 2014 to $1.8 million in 2015.

This is a good time to sell $HTM.  Too many questions surround the economics and the politics of renewable energy.

From the competitive impact of fracking and natural gas prices to broader, global energy pricing and supply uncertainties, alternative energy is not the best of businesses to be in.

Much of the enthusiasm that surrounded the industry in the days before the collapse in oil and natural gas prices has evaporated, and with it, the valuation of companies like U.S. Geothermal Inc.

Action To Take:

• Sell Kingold Jewelry Inc. (NASD: KGJI)
• Sell U.S. Geothermal Inc. (NYSE: HTM)

Category: TPS Update