Molycorp: Hot, Trending, Speculative Play
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.