Molycorp: Hot, Trending, Speculative Play
Written by: Jim Van Meerten
Tickers in this article: BHP VALE MCP RIO
NEW YORK ( TheStreet) -- A stock getting a lot of press Monday is Molycorp (MCP) . Not only is the stock trending on all the online bulletin boards but insiders are filing Form 4s showing an accumulation of the stock. The company produces rare-earth oxides that are an essential commodity in many of the clean energy industries. When there is a stock getting press I like to look at the numbers to see if there is value. Only recently has the market taken notice of the stock but interest is building, as shown in this hourly trading chart provided by Barchart of the price momentum during the last month:
The stock has a 40% Barchart short-term buy signal and a Trend Spotter hold signal. It is above its 20- and 50-day moving averages but still below its 100-day moving average. The price hit six new monthly highs and was up 33.73% in the last month with a Relative Strength Index 62.83. It recently traded at $10.12 with a 50-day moving average of $9.52. Fundamental factors: Four Wall Street brokerage firms have assigned six analysts to monitor the numbers. They predict revenue to be up 54.20% this year and another 54.90% next year. Earnings are estimated to up 850% next year and increase by an annual rate of 20% over the next five years. The P/E ratio is 23.76. Although the financial strength is B+, TheStreet only rates this a D stock. Investor interest: The Wall Street analysts have released two buy, three hold and an underperform recommendation to their clients. The 495 individual investors voicing their opinion on Motley Fool give the stock a 78% chance to beat the market. Short interest has risen from about 17 million shares mid year to 33 million share recently. Other mining stocks: In the past six months Molycorp has been down 49% even including its recent upward momentum. BHP Billiton (BHP) was up 17%, Rio Tinto (RIO) was up 14% and Vale (VALE) was down 7% for the same period. Analysts' annual earnings projections for the next five years are mixed with estimates for BHP to be up 6% annually, RIO up 16.80% and VALE down 19.60% Conclusion: At this point Molycorp is not a long investment prospect but might be a niche speculative play. Although the stock has good projections for growth in both revenue and earnings I think the real issue is the recent insider accumulation of stock. I look for another temporary pop if the upward momentum continues that will force the short interest to cover their positions. If you decide to place a bet, watch the moving averages and turtle channels carefully to decide when to bail:
At the time of publication the author had no position in any of the stocks mentioned.