August wrap up

As expected, the market has turned down since my post. Once again, any "excessive bullishness" quickly dissipates and turns to pessimism on just a minor dip.  Last week, NAAIM sentiment, AAII sentiment and mutual fund flow activity all displayed a level of pessimism on par to what was seen at the June low. While that doesn't guarantee we've hit the low, it shows to me that any further downside would be limited.
One important holdout to mark a bottom  is the put/call ratio which hasn't risen nearly as much as it did at the June low.

My 2 holdings reported q2 earnings in August and both were quite good, especially Greenstar. High Arctic reported lower y-o-y earnings, however if you dig into the numbers a bit, you'll see the decline was soley due to a tax asset that wasn't booked this year vs last year. Revenues, operating income and EBITDA all showed significant increase vs last year. Pretty much every CDN service company reported terrible y-o-y results while hwo has once again beaten the shit out of at least 90% of its peers. The stock has been acting well and perhaps maybe the market will finally see what I have been seeing for quite some time now, i.e. that the company doesn't deserve to trade at below average sector valuations when for over 2 years it has delivered far better results than average.  While the company still expects flat EBITDA for the year, with the $30 M in cash they have in the bank, they are in a great position to make an acquisition. They have been wanted to do so for at least a year I reckon. Longer term the company is very well positioned to expand in PNG where its main customer OSL is going to have an explosion in revenues once the PNG LNG plant comes online around mid 2014. PNG has a huge bounty of resources which is still very much untapped and OSL holds most of the exploration licenses there.

Greenstar reported an impeccable quarter. Revenues and Net income were up 25% and 27% respectively vs last year. As I've said some time ago, significant growth in GRE is pretty much baked in the cake for this year and next if the acquisition they have planed closes in September.  At the end of June their cash position is a huge $14M (real time $18M) and so they are in position to make even more acquisitions to expand growth. Strong earnings along with the gain in the RMB vs the loonie has resulted in a surging book value to $1.58/share (diluted). So, here we have a company with fantastic growth, a squeaky clean balance sheet and a mountain of cash to fund organic growth and yet it trades at 3 times earnings and 73% of book value. This is completely asinine and makes a mockery of the theory that markets are efficient in pricing stocks....there is no bigger crock of shit than that theory let me tell you. I for one am very grateful the market can be woefully inefficient in pricing stocks otherwise I couldn't make a living doing this. GRE only trades this cheap because of the "China syndrome"thanks to the likes of Sino Forrest and a few other bad apples. Slowly but surely however, people are realizing that GRE is indeed a legit company and it's just a matter of time before their fundamentals will be given the proper respect.