On October 12, I recommended purchase of GasFrac Energy Services Inc. (symbol GFS:CA or GFS.TO) when the stock was at $7.10 Canadian. At the moment, GasFrac is trading at 11.45 (a 52 week high and a gain of 62% in 3 months). On December 4, I also recommended Lighting Science Group (LSCG.OB) when it was selling for $3.25. At the moment, it last traded at $4.90 (a 52 week high and a gain of 51% in 5 weeks.) Given the great rise in these two stocks, I was asked if I think they should be sold.
My answer is that I think it is prudent to lighten up a bit on LSCG but to hols on with GasFrac. Lighting Science is a company which is not yet profitable. GasFrac on the other hand does have earnings. Lighting science is much more speculative than GasFrac (Although Gasfrac itself is quite a speculation.) GasFrac has moved on the expected increase in earnings that will come once its new capital equipment is placed into service, an event which will occur during the current quarter. Further, with the recent recovery in natural gas prices and the further increase in oil prices, the demand for GasFrac services should continue to outpace the company's ability to do the work, thus supporting its prices, revenues and profits. Lighting Science, on the other hand, may be soaring due to speculation following the unfortunate death of its chairman. Lighting Science may now be much more likely to be sold to a major competitor in the light bulb industry. There is also a lot of good news for the company, however. Just the other day, Lighting Science announced that it was increasing its work force by over 10%, a clear indication of the rapid growth of this entity.
These factors lead me to believe that GasFrac has further to run before it cools off. Lighting Science may also move up further, but that outcome is less clear. As a result, I would sell one quarter to one third of the holdings in Lighting Science to take some profits off the table. I would hold on with no sales in GasFrac, however. The next two quarters earnings reports for GasFrac should send this stock significantly higher still.
Caution, since these stocks remain speculative, investments in them should only be made with a small portion of your portfolio. Do not be the mortgage money on them. Also, it may be wise to have a stop no more than 10% below the high for the stock as well.
Disclosure: I hold significant investments in both companies. I sold one-quarter of my LSCG holdings as discussed.
2 comments:
Thanka Jeff. I was also going through same question whether to sell this stock which I entered @ $ 9.00 three weeks back and it rose quite good in short time.
As per your advise I will hold it for next two Qs. Meantime I will keep watching you blog if you post any further update on this stock.
Your are doing excellent work for small investors like me.
Keep it up.
Vajju.
Curious whether you thinking getting into GASFRAC now over $10 is a good play or wait until it dips back down. Thanks and I appreciate your blog.
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