Fortress Paper Ltd. due for a pullback

Sep 1st, 2010 – 1 Comment

It would seem that all the good news has been baked into this story.


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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.


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Hi Lou,

I’ve taken a small position in FTP recently and the return has been exceptional to say the least. Is this stock ahead of itself relative to share price or is the target price of $40 on the horizon ? Thanks Lou !

Mario

 

Hi Mario,

The Fortress Paper Ltd. (FTP TSX) story is driven by the efforts of founder Chad Wasilenkoff , age 38. Wasilenkoff has led the stock price higher by looking for undervalued assets and developing  new potential. The  jump in the price of FTP in March of 2010 was triggered by the purchase of a bankrupt paper mill in Thurso, Quebec for $1.2M and then getting a low interest loan from the provincial government  for $102M.

 The capital will fund the retrofit of the  the facility so it can produce dissolving pulp used in the production of rayon. The stock was taken public in 2007 with the issue of five million shares priced at $8.00.  The charts will give us some idea if this small cap has more in store.

 

ftp

The three year chart illustrates the huge wealth created by FTP after it recovered from the March 2009 lows. When you look at the RSI it indicates that at today’s levels the stock is overbought which comes as no surprise given the amount of interest the Thurso project has generated. But keep in mind that the actual production of dissolving pulp is still a year away.

It would seem that all the good news has been baked into this story. That doesn’t mean that it will collapse and shred value but keep in mind that trees don’t grow to the sky.

 

 

 

ftp2

The six month chart provides a number of metrics to watch. The RSI as mentioned is signaling an overbought situation while the MACD looks to be making a move to the downside. Back in July they both generated buy signals that saw FTP move from a low of $20 to its $30 close on August 31. Sweet! If the stock starts to pullback look of support at $26.00 then $23.00 and below that at $20.

To your question of FTP making it to the target price of $40. Yes its possible but it might have to go through $26.0 to get there!

Happy Capitalism!

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