Opinions
Eric Nuttall
U. S. Silica Holdings
SLCA-N
TOP PICK
Jul 19, 2017
Stock price when the opinion was issued
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A big supplier of sand that fracers use for drilling. This is what he would put on the “too hard to understand” pile, because sand has a relatively low average selling price, which means it is very sensitive to what freight costs are for moving it. If you were to get involved, it should be relatively short-term.
Trading in the middle of 5-year range. Fracing in the US requires a lot of silicone sand. Trading at about 11X earnings. He was really interested when he saw a big move from one side of the boat to the other side of the boat by the street. It’s coming up as a Top Pick in a lot of reports. As long as they maintain their pricing power and as long as activity stays high in rig counts in the US, it is supported. Dividend yield of 0.7%. (Analysts' price target is $43.)
(A Top Pick June 19, 2017. Down 19%). The bull thesis on fracking sand has played out. There has been a chronic worry about too much regional supply. There are very few active analysts for this category, so the stock prices whip around unnecessarily. Sentiment is horrific. He would rather own pumpers, which are also severely undervalued but without the fear of oversupply.
The frac sand market is 75 million tons this year, growing to 110 million tons next year, growing to 140 million tons in 2019, equalling 65 million tons of demand growth. Supply growth will be anywhere from 30 million to 40 million. The price insensitivity of producers to an increase in frac sand price means that pricing will go up month after month, quarter after quarter for the next couple of years. This is the best positioned frac sand company. Dividend yield of 0.8%. (Analysts’ price target is $54.25.)