GFRE-opinion...
First of all, we have been consistent the last two years in saying that traders should
NOT:
1. Bottom pick.
The market has a way of inventing new lows with disturbing regularity just when one thinks they "got the low"
NOT:
2. Factor in whether a stock is a good "value", "cheap, or use "valuation criteria" [other than possibly IBD's eps ranking]
Price movements in trading periods of time have nothing to do with it.
As we've pointed out several times along the way to illustrate this point:
3 years ago, GFRE went from $12 to $.80 a share [12 X engs to 1 X earnings]. It did that with stellar fundamentals, growing engs and sales, and no worry in the market place of China Fraud [speaking of the period leading up to Dec 2008].
3. That means trade charts and internals only. The chart and internals of GFRE have sucked _______--_______for months.
Other than one dead cat bounce day coming off extreme oversold, upside volume has been non-existent, downside volume heavy. For Months!
That's nasty and should send traders looking for better chart setups immediatly.
4 Traders should always use stops, No exceptions, and NOT double down on losing positions.
That said, and take this with a HUGE allowance for being wrong.
Today [ok we'll give it today or the next 2 days but probably today]...MIGHT mark a low for GFRE, Capitulation day.
IF,
there is no revelation of fraud or allegations backed by information likely to be proven correct. [over the following weeks or months]
That is a major IF.
No sign we can see they are crooks but it's China, never know. No way for us to know for sure. A lot are crooks as it turns out.
Fundamentally, long term investor:
The stock is obviously dirt cheap, absurdly so [2 X likely engs backing out $2 in cash] and it's being priced as if the odds are well over 50% the company is "less than honest"
If they are honest and numbers being reported are legitimate, then upside is huge as a % gain from where it is trading now.
We'd guess that IF they are legit, Downside is $1 from today's low, upside is 5 X that over the next year or two.
Given widespread China Fraud, Any China RTO small cap is high risk. They always have been quite risky but the incident of fraud turned out much greater than we thought it would 1 and 2 yrs ago.
High risk does mean just that, not just big reward.
Fundamentally we've been concerned for 2 quarters about their lack of volume growth in product sold. GFRE will never get a high multiple [in recovery] unless they show decent volume growth in product sold.
Without that, their earnings and sales are at the mercy of product pricing which has been exceptionally good and ever higher but which can not keep going up indefinitely without periods of lower pricing which will negatively impact earnings.
GFRE had been showing that good volume growth [over the last few years] and one hopes they can get back on track with it.
Fundamentally--We feel the reward risk is excellent right now and that GFRE is not a scam. We could be wrong as we have no way of truly getting inside the mind and actions of the CEO and management group.
So far though we feel there is evidence the company is acting responsibly and ethically.
So far....
The market violently disagrees and could be correct
Fabian
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