Your first loss might be your best loss

Dec 9th, 2009 – Comment

From my evaluation a thin trading stock with declining revenues and perhaps a split focus for mangement suggests that perhaps your first loss might be your best loss.


About the Author

Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality – and a true believer in the happiness-inspiring powers of capitalism.


Read the author's full profile.


Further Research

Read more about Energy.


green

 

Hello and good day to you Lou,

I would appreciate your comments on Greencastle Resources. This company is a rarity on the venture as it actually has revenue.They are involved in oil, gas and gold and coal. Only draw back is that management is very secretive and hard to contact. They are now drilling in the Bakken, I’m in at .19, should I stay or bail now??

Thank you for your time,

John

 

Hi John,

Greencastle Resources Ltd ( VGN TSXV) is junior exploration company with royalty interest in some producing oil and natural gas fields in Saskatchewan and gold properties in Nevada. You are right they do generate income from their energy holdings but those revenues are down substantially.

 

VGN reported its Q3 results on November 23rd and revenue was down to $422,193 down from $1,041,963 a year ago as the price of heavy oil and natural gas has retreated. Weaker prices don’t help a junior exploration company that is also dependent on raising additional financing to drive their agenda.

The company also has interests in some gold properties in Nevada. Management is currently investigating ways to potentially unlock shareholder value from those assets. The company has no debt and $4.36M in cash.

vgn

The three year chart gives us a good view of the spiky nature of the trading in VGN which suggests that the company hasn’t been able to grow its agenda on a sustained basis. You can  also see investor reaction when you look at the volume of shares trading. Average daily volume over the last 3 months is only 90,783 shares which for a $0.15 stock represents $13,617.45 in trading value. You would have to agree that investor reaction in terms of buying is muted at best.

 

 

 

 

vgn2

The three month chart gives us a better look at the recent spike and the pull back. You mentioned getting in at $0.19. Regardless of whether you got in on the up slope or the down slope its clear you had to be fleet of foot to capture a gain or cut your losses.

Its possible that you can catch a bounce off of $0.15 but you have to ask yourself why you bought into this story and if those reasons still hold true.

From my evaluation a thin trading stock with declining revenues and perhaps a split focus for mangement suggests that perhaps your first loss might be your best loss.

Happy Capitalism!

Categories: Energy
Content © Relentless Economics - Charts courtesy Stockcharts.com - Employees Entrance - Optimization Media