TPS Position Update – March 26, 2014

| March 26, 2014

March 26, 2014

. . . . Global Geophysical Services (NYSE: GGS) – Hold

Ack!  One of the risks of microcap stocks is these types of companies may not always have optimal internal controls.  This rarely may lead to poor accounting practices.

Unfortunately, we had one of these rare circumstances occur in our portfolio with GGS. Basically, the company said roughly the last five years of financial reports can’t be relied upon “because of accounting errors resulting from material weaknesses in the company’s internal controls.”

Make no mistake, this is bad.  Five years worth of bad data?  Really?

First off, there was no way to see this coming.  None whatsoever.  That’s why the stock plunged 60% on the news… it surprised everyone.  Basically, accounting errors are about as bad as it gets for a company.

That being said, we’re not going to sell at these levels.  Now why the heck aren’t we selling here?  Instead, we’re going to hold GGS for the simple reason that the bad news has already occurred and the worst-case scenario is already built into the stock price.

There’s no reason to take a 70% loss when there should be little to no downside left.  As the company works through its accounting issues, the stock price should begin to recover. When it gets to an acceptable level, we’ll sell out.

However, we’re clearly not marking GGS as a buy any longer.  For those who own GGS, continue holding until we can exit at a better price.

. . . . Asanko Gold (AMEX: AKG) – Hold

Asanko has been a nice trade for us so far.  The position is up 30% currently and has been as high as a 52% winner.  Not bad for just two months!

The shares have pulled back a bit with the price of gold, however there’s reason to believe the share price is set to move higher.  The stock held firm at its 50-day moving average around $2.00.  That support level should continue to hold.

The next stop higher for the shares is about $2.25, where the 200-day moving average sits.  There’s some additional resistance at $2.40, but then nothing but air above.  If the price closes above $2.40, it could be set for a significant run higher.

Let’s continue holding AKG for bigger gains ahead.

. . . . Capstone Turbine (NASDAQ: CPST) – Sell

Capstone is one of the longest held companies in our portfolio.  And, it’s been a great one. The position is currently up 141% for us, and was recently as high as a 168% gainer.

The company has done exactly what we expected of it when it we recommended it for our portfolio in February of 2013.  Capstone’s microturbine products have become increasingly popular in the oil and gas industry, and new orders have been flowing in.

However, the stock now seems to have attracted a bit too many buyers.  With the shares trading at 234x future earnings, the stock is too rich for my blood.  Basically, this level of share price performance can’t be sustained.

We’re going to take advantage of this recent surge to capture profits.  Sell out your CPST now – and congrats on a great trade!

Please Note:

We don’t necessarily review every open position in each Position Update.  We focus on the positions experiencing significant news, notable price movement, or a change in recommendation.  Please refer to the Performance page on our website for our current buy, sell, or hold recommendation for any positions not mentioned in the Update.

Action To Take

  • Sell Capstone Turbine (NASDAQ: CPST)

Category: TPS Update

About the Author ()

Comments are closed.