Here's Graeme Newing's take on it (C&P from www.newingonstocks.com by way of reference):
Phoslock (PET, $1.32 down 9¢, $743m)
The shares fell 6% today. Here are the weekly, daily and hourly charts. The stock has tumbled out of its narrow trading range into its broad trading range.
The fall was probably triggered by an interview by James Marley at Livewire of a couple of institutional portfolio managers. In a discussion of the merits of a few high performing stocks, both of them labelled PET as a sell. Here is the relevant part of the transcript. Needless to say my view is the opposite and I am not sure how well informed they are about the stock. I would make the following points:
- The insitutional investor that picked up the lion’s share of the recent selling by directors obviously likes the stock.
- The market valuation is certainly “scary” if you want to value the shares on last year’s earnings (“a PE of over a thousand times”). But for me and I’m sure for most investors, last year’s earnings and even this year’s earnings are irrelevant.
- “It’s a conceptual business, so you’re investing on a concept rather than an underlying core business at the moment.” Where do they get this stuff from?
- A negative for them was insider selling. Admitedly that is always a hard one to counter but as far as I am concerned it is not an issue in this case. The directors and especially Robert Schuitema should be permitted to take some money off the table after all these years and not be maligned for it. They still hold the bulk of their shares.
- “They’ve got links with the Chinese State-owned enterprises”. Oh dear, sell them immediately! Really?
- I presume they refer to Zhigang Zhang when raising the issue of “key man risk”? Quite frankly, their point escapes me.
- The only point I would agree on is that “business visibility” – or as I would characterise it, the company’s “disclosure” – is poor. It has deteriorated recently. To be fair, that is partly because they are dealing with government entities and dealing with Chinese government entities, in particular, does not help in that regard. Nevertheless, there is room for improvement.
A final point, one which I have made before, is that my projections, and therefore my valuation, are speculative. There is a whole range of possibilities.
(20min delay)