Editor’s note: This is the first of what we hope to be a regular feature on Stockhouse, in which we find smart readers on our bullboards and ask them to explain why they’re taking a position on a stock they own.
Our first horse out of the gate is Super1nvestor, who is holding a long position in Zodiac Exploration (TSX:V.ZEX, Stock Forum).
We chose Super1nvestor to lead things off because he’s a studied contributor to the boards and expressed an interesting take on a stock that some are very into, and others have bailed on. Volume in Zodiac (which is, full disclosure, a Stockhouse Publishing client) is heavy nearly every day, with lots of buyers and lots of sellers seemingly at complete odds. As an example of this, today over 4 million Zodiac shares changed hands and the share price didn't budge.
What’s interesting about Zodiac right now is what has happened to the stock over the last few weeks; shareholders have been waiting for a big land auction to be completed, expecting the ‘trading at cash on hand value’ stock to suddenly super-inflate. So when the stock was trade-halted for three days last week, investors thought the big one was coming.
Not exactly – the company was working on a side deal that, it feared, was beginning to leak. So it asked for a halt while it readied the news release regarding acquisition of more land.
This was not what many day traders were waiting to hear, and a sell-off began.
Right now, the market take on Zodiac is conflicted. Long players are loving the chance to gobble up cheap stock, while short term players are selling rather than tie their money up waiting for an auction that may not end before Christmas.
So here’s Super1nvestor’s position on Zodiac, and if you have a stock that you’d like to write about, drop a note to chris.parry@stockhouse.com with your pitch and your Bullboard name, and we’ll see if you’re ready for the shining light of the front page.
ZEX APPEAL - THIS STOCK HAS IT!
Hello everyone,
If you've been following Zodiac Exploration Inc. for any length of time, whether you're invested in the junior oil company or have just been watching from the side lines, you most likely know that Zodiac is a small company that has a presence amongst the "big dogs" of more well-known oil and gas companies that are situated around the 72,000 acres of land that Zodiac owns in California's Monterey land zone in the San Joaquin basin.
As many already know, Zodiac just recently
acquired Muskwa Resources, which in turn, directly adds another 54,240 net acres of land to Zodiac's owned land package, with an additional potential 9,000 acres from Jackfish and 15,000 acres from Tanglewood.
The acquisition of Muskwa has now diversified and expanded Zodiac's holdings since they now own a nice-sized piece of land in Alberta's highly coveted Duvernay zone, as well as two other land pieces in Montana - and the big one in California, surrounded by big-producing players.
As an investor in Zodiac, I'd like to introduce myself. I go by the screen name "Super1nvestor" right here on StockHouse.com and I've been interested in Zodiac ever since reading an article about them four or five months ago.
Since reading that first article, I've done as much due diligence on them as possible. The more DD I did and watched from the sidelines, the more compelled I felt to invest in the company.
I initially bought into Zodiac @ 9cents per share and took a small position. Since then, I've gone on to buy more shares during times when the share price has dipped down (it traded at $0.06 today), and now I hold a fairly decent sized position in the company - just under 250,000 shares.
The reason I've continued to buy additional shares on price dips is two-fold. One, to lower my average share price position, and two, because I like the direction in which the company is going, which (from my experience) means management of the company is making moves I consider solid. And I like putting money into companies that have a strong management team and do smart things with the company.
When that happens, more likely than not, shareholder value is obviously increased over time.
It seems many Zodiac investors have been selling their shares of late, especially after the recent trading halt and subsequent resumption of trading on the note that Zodiac acquired Muskwa for more strategic land and diversification of their assets.
As an investor, I understand the wanting of Zodiac to just simply be bought out by a major or super major player in the oil business, as it would be great to have a buy-out happen where the share price is valued at $2 or $3 per share, for example, and we can then all walk away a little richer. But that doesn't always happen right away.. actually, it usually doesn't, to be honest.
A corporate take-over can take time, but when it comes to Zodiac, though daytraders and short term players are getting off the train, I believe the fact that a buy-out hasn't happened yet is a blessing in disguise for everyone (at least, everyone who has the patience to wait!).
In my opinion, ZEX is a great long term investment that will reward those who are patient, and as the daytraders bail and the share price drops, there’s a real value opportunity there.
If one looks at the "big picture", all of the assets that Zodiac has (and is obtaining) show this is a smart junior company that has $19 million on-hand in the bank, no debt and has incredible land stakes in two highly profiled regions of North America. In my opinion, they have stakes in two of THE MOST prolific land regions for oil production.
That means, it is just a matter of time before a deal is reached on one of their land packages.
[Editor’s note: Our own Danny Deadlock points out that Zodiac’s cash in hand equates to $0.05 a share, and it has tax pools of $0.04 per share – interesting indeed based on a $0.06 current share price with a land auction on the way]
According to reports, Zodiac is in talks with majors in regards to auctioning their California land assets, and who knows what kind of deals their most recent acquisition of Muskwa will bring in the future.
The fact that Zodiac was able to buy Muskwa's land acreage for around $115 per acre, when recent land transactions in the Duvernay area have gone for around $3,000 to $8,000 per acre, is fantastic, even if it does represent around 25% dilution to Zodiac's pot.
Any dilution here will be more than made up for in the future, I feel.
Again, you have to think long term with Zodiac and look at their assets, their management team, and the fact that Zodiac is doing what most juniors cannot, because most juniors don't have millions in the bank, are hurting for capital, and are having to find financing via private placements, etc, which only dilutes the company anyways.
ZEX is putting a BIG target on their back. They are a small company, have large strategic land assets in locations that are already surrounded by majors and super majors, no debt, millions in cash in the bank, have a smart and strong management team, and are continuously moving in the right direction of increasing their assets and company value through strategic moves.
When one looks at all of this and then looks at the current share price, it doesn't take a brain surgeon to realize that
Zodiac is WAY undervalued and I think they will only be trading within the 6.5-10cent range for only so long before either a major deal is struck from the talks they've been having with the bigger players and/or the larger investors finally get wind of this undervalued junior oil play and begin buying it up like there's no tomorrow.
Once this happens, it's all over and share prices will climb, there is no doubt in my mind.
ZEX has
nowhere to go but up from here in the coming months. It's just a matter of time.
For those investors who can see this and choose to buy in now while the share prices are ridiculously cheap, we will be sitting pretty well when lift-off time finally does come.
For those who are day traders or short-term investors expecting major upside right away, you may want to reconsider your hopes or reconsider the type of company that ZEX really is, what they've done so far, what their goals are, and what you see coming from their company value as time goes on.
Regardless, and even more importantly, something I always tell others is to "do your due diligence BEFORE investing in a company, and also have an entry strategy and an exit strategy for each investment you partake in".
For the record, I am long on ZEX and won't sell a single share until one of two things happens:
1) A major deal is struck and the share price reflects the worth of the deal
2) A big change in management happens and the positive direction of the company begins to go off route in a way that I do not personally like.
Other than that, it's time to sit back, buy on the dips (if need be) and let time run its course while being patient and keeping an eye on new developments.
At this point, I see nothing but positives to come. Share prices will go up and down, as all stocks do, even large cap stocks, so there really is no reason to panic, speculate or over-read things when it dips a penny or two here and there. Realize that for every share sold, someone is buying it up just as fast!
In my opinion, and from my homework, I feel ZEX is a company that contains far more upside potential than downside. Zodiac just has too many good things going for them, and too much "ZEX APPEAL" as they continue to de-risk their assets more and more as time goes on.
In my opinion, all who have invested in ZEX have much to look forward to in the coming months!
GLTA & Best Regards,
Super1nvestor