CRR will go UP
$57.00 on 10/29/08
$32.20 (-32.00% from time of market call)
I love triple top breakouts. I'm sure everyone else does here to, unless you like to short. Triple top breakouts are generally a good indicator a stock will raise going forward as long as certain conditions maintain. First thing with respect to this trend is to make sure the stock that does this is in a favorable sector that has strong growth characteristics. Another important aspect is a company that is a leader in their technology or even better has a basic monopoly. Lastly, a long term, favorable chart that may indicate a multiyear movement is icing on the cake.
CRR is a company that has all of these things. Carbo Ceramics Incorporated is in the profitable oil and gas industry. They provide ceramic proppants and technology for fracture optimization. The fracturing technology is very important with respect to getting to huge oil and gas reserves with respect to shale. Shale is very important to current energy needs as there is a vast abundance within areas of the United States but use to be inaccessible with respect to older drilling techniques. It is estimated that the Bakken Shale in Canada, Montana, and North Dakota that there are reserves in excess of that found in Saudi Arabia and all we have to do is figure out how to get to them. Now that many companies are drilling with more capabilities they are buying more of CRR's products.
The first quarter is a sign of things to come. Although next quarter will be slow, it generally is in Canada due to the weather, the year's outlook looks awfully conservative. This is because the United States has become a majority player with respect to revenues for this company. The likes of XTO and CHK have grown greatly using this technology. They just reported $.58 per share as opposed to consensus of $.55. I believe this to be the start of a great year to come. Even though they saw a 7% increase in profit, the story remains the sale of proppant. Revenue was up 21% as volume of proppant sales increased by 24%. This increased revenue by 50% year over year. Even more exciting is the bullish chart with respect to natural gas that will give companies much more money to spend.
What to remember is that this company should not sell like oil and gas company, the reason is that it is more of a technology firm and should be selling at a PE of between 25 and 30. They now have the technology to offer Stillwater drilling techniques which have been accepted well in Texas and Oklahoma.
For those of you out there that are technicians, take a look at the chart fundamentals. They tell us this stock is headed for a major breakout, and at this point they are already on the cusp. A recent upgrade on no debt and increased operating cash flow and this could push the stock above the current resistance level of $51.71 on October 11th of 2007. If this level is breached the stock looks to be headed for $65. When the stock fell last time, it was will little reason, and if you compare the stocks chart it seems to be tracking close to that of CHK who does a lot of this type of drilling. A major breakout this year seems imminent and more importantly, with natural gas selling at all time highs, there could be consolidation in this space. If the chart is superimposed over itself we also see that the stock on its current pattern looks to hit $65 within the next three months.