Since June 2017, oil prices have rocketed from a low of $42.05 to a high of $62.21.
That’s the highest crude oil prices have been since May 2015 thanks in part to OPEC production cuts, which will run through 2018. We’re also seeing strong demand growth in China, too.
One of the many stocks that have benefited from higher oil prices has been Fairmont Santrol Holdings (FMSA), a leading provider of high-performance sand and sand-based product solutions used by oil and gas exploration and production companies to enhance the productivity of their wells. The Company also provides high-quality products, strong technical leadership and applications knowledge to end users in the foundry, building products, water filtration, glass, and sports and recreation markets.
Recommended in the September 2017 issue of The Cheap Investor at $2.57, the stock just hit a high of $6.03 – a 135% win in less than five months.
When oil sank to a low of $42 in June 2017, we started looking for unfairly beaten down stocks that could move the moment oil began to pivot higher. One of those stocks just happened to be FMSA, which fell from $13 in February 2017 to just $2.57.
At the time, FMSA had $178.5 million (80 cents per share) in cash and a book value of $1.09 a share. Institutions bought 300,000 more shares than they sold, for the quarter ended June 30, 2017. And despite heavy debt of $796.1 million, we liked what we found.
Revenue ballooned to $233.2 million from $114.2 million year over year. Net income skyrocketed from a loss of $87.88 million to a gain of $10.48 million, as net loss per share improved from negative 54 cents to a five-cent per share gain.
As we noted in the September 2017 issue, “If it continues to grow its revenues and earnings, the stock has the potential to move at least 50% to 100% over the next couple of years.”
We didn’t have to wait anywhere near that long.
As crude oil rebounded to $62.21, FMSA rocketed right along with it. It just proves that taking advantage of low-priced opportunities in oil and stocks can lead to incredible returns.
Growth doesn’t seem to be a problem for FMSA either.
In its third quarter, the company posted revenue of $280.1 million, a sizable jump over the $134.8 million posted in the third quarter of 2016. EBITDA improved from a loss of $6.7 million to a gain of $70 million year over year. EPS soared from a loss of 11 cents to 15 cents year over year.
Fairmont Santrol Holdings proves that low-priced stocks should not be ignored, especially those with excellent fundamentals. We just featured even more potential big winners in the January 2018 issue, which can be found right now at TheCheapInvestor.com.