I Eat Bear

Abraxas petroleum may be offering it. Symbol AXAS on the stock exchange.

Ok, a natural gas producer, and driller, and the sector is getting SLAUGHTERED right now.

That can be a good thing for YOU!

I bet I looked at about 100 stocks tonight, and it was one of a few, a very few, selling at below book value. How much below? The stock sold for $.73 a share today. It's book value on a share is $1.20. So, the share price is well below the value of the company assets. And, better yet, it's 2009 earnings estimate is a 140% gain, against an industry projected to drop by 13%.

Now, if it goes broke, you will not see ANY of that value that is the difference between share price and book value, as an investor in common stock. Then again, chances it will go broke are pretty slim. It is a split out subsidiary, so it does not have the most profitable history. But, it has a very low debt, and it is projected for double digit production growth in 2009.

By my calculation, if you buy it today, with plans to hold it at least two years, you pay $.73 for a stock with asset value of $1.20. You make $.50 a share the day you buy it. It has had share prices over $4.00 within the past year, so the potential for stock price gain is great. It could easily be an aquisition target, and that could make a 50% stock price appreciation much sooner than the two year hold period I minimally recommend here.

This is NO GUARANTEE, but it has all the signals to be free money. Ordinarily, I would be VERY skeptical to recommend ANY penny stock. It has become one, but is struggling hard not to be one in the future.

Use your own judgement. Other stocks will offer more earnings per share, but they are also oversold compared to book value. Then again, GM, FORD, and some others, are under book value too. They will fail, with or without a bailout.

I have some faith here. Don't bet the farm, but several thousand shares would not hurt you,,,, if you can afford the risk. It does have RISK. It could have a reward, very soon!

Comments: View Comments |  Tuesday December 23, 2008