Poseidon Concepts Corp in high growth mode

Apr 25th, 2012 – Comment

I think this is a case of go with the dividend and the growth.


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Lou,
I was wondering about your thoughts on PSN. They broke out of the gate strongly, but of late they have reversed their share price. The earnings are there and the dividends are great but the stock price is in reverse. What’s your take on this one.

Regards,

Marcel

 

 

Hey Marcel,

Thanks for the assignment. This will be the first time I examine the case for Poseidon Concepts Corp. (PSN TSX) as an independent entity. I first became aware of the company on July 29, 2011 when it was an operating unit within Open Range Energy Corp.(ONR TSX). Joe had asked me to run the charts for ONR and it was noted that their fracturing fluid handling systems were growing revenue faster than their exploration and production activities.

In November of 2011 ONR spun out PSN to existing shareholders and it proved quite  bountiful for shareholders. However as we all know trees don’t grow to the sky and there has been as you have noted a pull back in the stock.

A review of the chart will provide new evidence to help you with your investment.

 

The six- month chart outlines the market reaction since the shares started trading. There was an initial pullback as investors who were in early took profits. The shares caught a bounce off the 52 week low of $10.05 in late November of 2011 than marched their way to $16.90 in February of 2012.

What we can observe in February is that the RSI indicated that the shares were overbought and the MACD signalled a shift in momentum towards a retreat. On a fundamental basis the announcement on February 02, 2012 of a bought deal of 6.3 million shares priced at $13.00 would also have contributed to the selling pressure.

The stock caught a bounce off of $12.25 in April where the RSI indicated it was oversold and has recovered back towards $14.00 where it is meeting resistance. The advance since April 9, 2012 has been on thin volume. On five of the fourteen trading days the volume has been below average.

Here’s what I like about PSN. They offer an 8.26% dividend yield. They offer their clients a better solution to fluid handling problems. They are expanding rapidly to leverage their first mover advantage. They expect to have 400 systems working by June 30 up from 240 on January 1, 2012.

What I don’t like is the downtrend, the resistance at $14.00 and the thin trading volume. However we need to keep in mind that the shares have only been trading for six months and we don’t have access to long term pricing information. I think this is a case of go with the dividend and the growth.

Make it a profitable day and happy capitalism!

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