The info from the YAHOO board is consistent with earlier comments cited by Ausdauer. In my experience, the markets generally overreact to natural catastrophes, such as earthquakes, hurricanes, and floods. Toward the end of today's trading, I bought SNDK call options with October expiration and a striking price of 70. The cost was approx. $5 per share. Normally I invest only for the long term, but the price near the close seemed far too low. Even if you think a price of 90 is too high, and maybe 80 is where the stock should settle until we see the next earnings statement, we are now almost 20 percent below that conservative norm. That would indicate anticpated earnings of about five to ten percent above those for the preceding quarter, and correspondingly reduced sales growth. What we've been hearing suggests that sales will double at the very least.
This just seems to me like one of those rare buying opportunities that occur unexpectedly in response to a disaster. Even assuming that production is disrupted for a week, the loss would be hardly noticeable. Assuming that there were extended damages preventing production from resuming, the wholesale prices of CF would go up, allowing the manufacturers to recover at least partially. Finally, because SNDK gets royalties on so many CF and related products, even a total stop in production won't stop royalties coming from other manufacturers.
Note, however, that part of the drop must be attributed to the whole market selloff toward the end of the day. That is a different question altogether, and it suggests that full recovery, even if SNDK had little damage, is going to be more difficult.
Art Bechhoefer |
