XTOG oversold
Hello everyone
I am a newbie to ihub and to the OTC penny stock world. I have always made it a rule to never buy a stock trading at penny prices ….until XTOG.
I am an avid reader of message boards but, do not post. (If you look at my ihub history you will see a recent membership and no other posts) I am writing this rare post for two reasons: to let you know why I broke my investing rule to buy XTOG and the second; I will save for another post.
I recently sold out of QCOR after holding since the end September with a nice profit and I am looking for new places for my investment dollars.
My M.O. for researching stocks is to do the following:
1. Screen for all stocks with a RSI < 30 (trading in the oversold range)
2. Further screen RSI<30 stocks priced below their book value, which shortens the list to a handful
3. I Read:
a. the SEC filings for facts and figures
b. all and any news / analyst reports to ascertain the reason for selling pressure
c. the stock message board to get a feel for shareholder sentiment
My screening and web surfing travels brought me to XTOG….. This stock so ridiculously undervalued I concluded it was a definite “never a penny stock” rule breaker.
Here are a few things I see based on the 2012 Q3
• The market cap of this stock as of March 18th is $639,095 (just to use a current number) This company has a gross asset value of 8.9 mil. Which means this stock is only trading at 7% of its gross asset value or at a 93% discount to gross assets alone.
Using the Market Cap total shares outstanding number of 45.6 million this stock should be trading at a price of $0.195 based on gross asset (and people are wondering if this could be a 10 bagger)
Note: I have focused on the gross assets because the vast majority of XTOG current liabilities comes from convertible notes and warrants which are included the fully diluted share number. It made my calcs a little less cumbersome.
You may have also noticed that I did not include revenues and future earnings in my price per share calc, just looking at the assets was going far enough to tell me this stock is undervalued and quite frankly, I am not an oil person. The future earnings of an additional 55 producing wells is beyond me. If there is an oil expert on this board that wants to try to estimate future earnings it would be welcome. If one does factor in revenue and future earnings; today’s share price should be a lot higher than $0.195.
• At the current price of .013 this stock is trading at only 47% of its 0.03 earnings per share as of September 30,2012. I have never come across a stock that is trading below its earnings.
• The company is still in its infancy as it was only purchased in 2006. So it makes perfect sense to me that the revenue is not impressive. Most companies run at a loss for the first 5 years. I really like this management, they are not spending beyond the company means. Q3 even shows production costs and management expenses reduction of 20%. It is noted that the majority of their debt is convertible as of September, if the creditor chooses to convert , debt and interest expense will be greatly reduced.
• I also see growth, a great deal of growth. This management has put together $325,000 deposit towards obtaining a commitment for a $20 million line of credit with RO Financial to develop the untapped reserves on each of their properties. As of the Q3 the financing was not in place but, considered imminent. At present XTOG owns 10 gross producing wells and 55 non -producing wells. When all properties are developed and producing it will increase asset value and earnings. Based on this ridiculous 2012-2013 price drop because of a 40% reduction in earnings. …a 450% increase in earnings could easily put this stock back to its beginning of 2011 price ….perhaps even 2010 prices
• I enjoyed reading Section 3 -Related Party Transactions . In June 2012 the Company purchased a Salt Water Disposal Well, which is producing revenue already. If one looks: a Company Officer, the Director and even an employee all pitched in their personal capital to help this company purchase this SWD well. Moral at this office must be great, these people are investing with their own money. How can anyone not admire that? Another thing I noticed in my travels….on the ihub XTOG home page where the company obviously supplied some promo pictures. The image second row right hand side….. I believe the man standing behind the truck getting his hands dirty is the CEO. That made me smile.
• One of the comments I read time and time again when going through message boards of stocks that have dropped into the oversold range is “this management does not care about the shareholders.” Nothing could be further from the truth with XTOG. Getting their shares back to 2011 prices and beyond is paramount. The company wants to increase revenue and develop properties but, the option to raise capital by issuing more shares is not an option as would result in significant dilution. If this stock price would rise anywhere near its asset value more funding options would be feasible. Plus, the deadline of September for note conversion puts this management under extreme pressure to increase the share price. Not to mention, a large percentage of this stock is insider owned . They went from being millionaires on paper in 2010 to…. well look at the price.
So why is there still so much selling pressure for a trading at an extreme discount?? Beats me ..XTOG is obviously not the “it’ stock. The selling pressure suggests trader ADHD mentality “ if this roller coaster ride isn’t spectacular I’m outta here “ & the volume suggests lack of prom queen popularity. No one is looking at value. Perhaps the Q4 coming out at the end of this month will help bring awareness to this undervalued stock.
Disclosure: I purchased 200 K at $.012 and an additional 500k at $.0101. If this stock has the audacity to reach its low again I will buy another 300k to make it an even million. I have patience, I will hold for 2011 prices and If I lose all it is ok, it is not my entire portfolio plus, I lost $40,000 in one day when ZNGA tanked on earnings last summer. …I still slept like a baby.
GLTA
AI
