aatkinson, it is pretty easy to explain why the stock has sold off from $65 per share to the current $20. At $65 per share Zoltek was clearly over-valued. Anybody buying at those levels was a crazy momentum investor or a Cabot lemming (I guess that's somewhat redundant). People buying at that level had to be looking at one of two things and not necessarily the big picture. First, they could have been looking solely at year over year earnings increasing significantly. Obviously, a great deal of that increase came from the one time purchase of Magyar Viscosa and the changes brought on that operation by the purchase. Two things happened there leading unsophisticated investors to believe Zoltek was in a huge growth mode. First, the increase in sales arising out of the purchase. And second, the increase in earnings soon thereafter due to Zoltek cleaning up the operations. Both one time events not to be repeated soon.
Another possible reason this ran up to $65 is that there are some out there who believed that $5/# CF was right around the corner and that new applications were imminent. Well the Zoltek 2000 plan calls for that to happen down the road a bit. Can they do it? I don't know for sure. If we did, the stock would be trading at a much higher level if we knew they could and a much lower level if we knew they couldn't. That's the $64,000 question.
And now, many months later, the Cabot lemmings are out along with those who were overly optimistic. At $20 per share it may be a bit oversold, especially if there is any movement on the price of CF or if they sign on any new customers.
I normally don't concern myself with short term swings in price other than to lighten up my position if it appears to be a bit overvalued or to add to it if it looks a bit low. I wrote some $45 calls a few months ago when this was trading a bit north of $40. They expired worthless and I pocketed the money. Quite a few months before that I wrote some $45 calls on it's way up to $65. Obviously those were called and I sold some shares at $45. I was able to buy most of those back at $28 on it's way down after that.
At these levels I'm thinking about writing some $20 August puts. Those are going for just under $2.00. I'll pocket that money and be forced to buy Zolt at $20 per share if it drops below $20 between now and August. Looks like a pretty good bet to me, but I have yet to pull the trigger.
Dave |
