My thesis...I don’t much care about the short term stock price of NFG. I just had a pretty long conversation with GGG wherein I explained why I barely pay attention to the stock price these days. He suggested my thoughts might be worth sharing so I’ll do that now. Remember, I’m just a dope who has made magnificent investing mistakes, so take this for what little it may be worth.
I don’t care about the short term price of NFG because:
- The fundamentals picture has become clearer for the better over the past couple of months.
- At its current market cap, I understand that fast money trader types might look for other opportunities where price might move faster, but that’s not who I am, and it’s now why I’m invested here.
- Based on the price action over the past few weeks, I suspect that we might all be shocked at what percentage of the float is actually trading. I suspect that a truly huge percentage of the shares are not trading at all because they are in strong hands (like mine) who aren’t concerned whether the price of the stock is $6 now, or next month.
- The low volume as the price drops to the lower part of the existing trading range bears this out. Sellers are precious few when the price drops below $6 US.
- The reasons one might typically be worried about a huge sell off from here, don’t apply to NFG. NFG has investors eager to fund the company further if/when necessary. A capital raise down the road, if necessary, is not a problem.
- For this reason, the biggest shareholders have no reason to concern themselves with the price of the stock. I suspect Sprott, Palisades, and even Crescat are complacent right now. If the stock is still $6 if/when the company needs to raise money, they’ll actually benefit because they’ll get more shares for their new capital injection.
- Management has no reason to worry about propping up the price of this stock. There is no benefit to management to make special efforts to move the price of this stock from $6 US to $10 US. Their eyes are on the end game, not the trading price of this stock over the next quarter or two.
In short, I think the vast majority of NFG shares are held by people like me. They understand the value proposition and aren’t selling unless the fundamentals change. Those who are trading have created a swing trading market in the current price range. Presumably, some long term investors are also adding shares as well, but I suspect very few long term longs are losing patience, selling and moving on.
If I’m right, it’s only a matter of time before the market psychology around the current swing trading range wears out and the stock has to increase somewhat in order to sustain a new trading pattern. When that happens, I suspect many here will quickly become unhappy with the new trading range and start clamoring and complaining for more appreciation. But the same dynamics will continue to apple. For most of the money in this company, it’s all about the endgame.
One day, those who are worried about the stock price will get fulfillment, if they’re still here. It may come on a spike in the gold price. It may come on a confirmed rumor of a major minor sniffing around. It may come magnificent drill results. It could be some combination of all these things. Some day later, the end game will play out and we’ll find out what it is, and what its worth.
That’s how I see it. And that’s why I don’t care what the price of NFG is today or next month.