A couple of days ago we made the case for energy stocks, and noted that in a down market oil services companies might be a great place to be, especially considering the valuations afforded the stocks in the group. In keeping with that theme, we have unearthed TGC Industries Inc. (NYSE – TGE - $4.74), another play that might be even more attractive than Enservco (NASDAQ – ENSV), the stock profiled earlier this week.
In my view, TGC Industries offers an outstanding opportunity to have exposure to the oil and gas industry by buying a small-cap stock that has a lower valuation and bigger upside than its larger brethren. The company is a key service provider and supplier to exploration and discovery firms offering geophysical services to companies in the United States and Canada. TGC conducts three-dimensional surveys; sells gravity data; and provides seismic data acquisition services primarily to onshore oil and natural gas exploration and development companies for use in the onshore drilling and production of oil and natural gas, as well as to potash mining industry.
Although the stock has been nearly cut in half over the last year, due in large part to a one-third reduction in EPS estimates for the year, the current valuation remains compelling. The Street projects EPS of $0.29 for this year compared with a $0.48 loss per share in 2013. Revenue is estimated to arrive at the $163 million mark, a 21% rise from last year. Moreover, next year’s EPS estimate is forecast to be substantially higher than those in 2014. Analysts project EPS of $0.53, which is nearly double the 2014 estimate.
The continued solid growth of the natural gas exploration industry combined with the steady environment for oil creates a strong reason to invest or trade in the sector. TCG Industries is scheduled to announce 2Q14 financial results on July 28. Look for good news to serve as a catalyst for a solid rest of the year.
At current levels, the stock trades at a reasonable 16x the 2014 EPS estimate, but under 10x next year’s forecast. As we approach the end of the year, stocks’ P/E multiples tend to be measured based upon the following year’s prospects. With that in mind, I expect TGC Industries to trade well north of the $6 mark later this year, and I would not be surprised to see it trade near $8 a year from now.
In December 2013, I profiled Net Element Inc. (NASDAQ – NETE - $2.45) at a price of $2.23 a share and the stock doubled within three weeks. Since that meteoric rise, the stock has languished, reaching a nadir of $0.88 a share less than a week ago. (Boy, what a trade that would have been.) Anyway, with the stock essentially back where it was in December, I thought it would be an opportune time to revisit the story and take its temperature to see if it is worthy of another favorable missive. The answer is: Yes.
For the uninitiated, Net Element is in a hot space (mobile payments) and is generating strong results via an acquisition that closed in 2013. Net Element owns and operates a global mobile payments and transaction processing provider, TOT Group. TOT Group companies include the recently acquired Unified Payments, recognized by Inc. magazine as the No. 1 Fastest Growing Private Company in America in 2012. Tot Group also owns Aptito, a next-generation cloud-based point-of-sale payments platform. Tot Group also owns TOT Money, which holds a leading position in Russia and has been ranked as the No. 1 SMS content provider by Beeline, Russia's second-largest telecommunications operator. Together with its subsidiaries, Net Element enables e-commerce and adds value to mobile commerce environments. Its global development centers and high-level business relationships in the United States, Russia and Commonwealth of Independent States strategically position the company for continued growth. The company has U.S. headquarters in Miami and international headquarters in Moscow.
A few weeks ago, we touted energy and especially the oil and gas segment as a likely outperformer in July. We could not have been more wrong as the price of oil and most related stocks have stunk up the joint during the past three weeks. Amazingly, oil services company Enservco Corporation (NASDAQ – ENSV - $3.40) has mysteriously bucked this trend in recent days and looks like a great stock to own in this conflicted market, regardless of industry affiliation.
According to its website, Enservco is one of the energy service industry's leading providers of hot oiling, acidizing, frac-water heating and fluid management services. The company owns and operates a fleet of more than 230 specialized trucks, trailers, frac tanks and related well-site equipment. ENSERVCO serves customers in seven major domestic oil and gas fields, and operates in Colorado, Kansas, Montana, New Mexico, North Dakota, Oklahoma, Pennsylvania, Ohio, Texas, Wyoming and West Virginia.
After the big sell-off on Thursday, the bears were out in force proclaiming that the bubble had finally burst.
Frankly, it has been stated so often of late that these prognosticators are being mistaken for Chicken Little and The Boy Who Cried Wolf. Still, only an eternal optimist or one wearing rose-colored glasses would deny that the correction storm is building off of Wall Street’s coast. It just hasn’t yet hit that dreaded Category I hurricane status.
I have talked quite a bit on what do and how to prepare for the inevitable. In today’s blog post, it is time to discuss what to do during the correction itself. After all, I should hope you won’t do your best Nero impression and play the fiddle while Rome burns.
As someone that has capital at risk via investments in the equities market, I must admit that I am very concerned, and you should be too.
Stocks, particularly in NASDAQ and over-the-counter, are not trading properly due to fear and lack of conviction by market makers and investors alike. Moreover, the mainstream press has used essentially the same fear-mongering headline for what seems like five days in a row, exacerbating the trading issues even more. I think it would be wise to lighten up on your stock holdings until the issues outlined below are reversed.