Stocks to Buy Before They Join This Market Rally: Fairmount Santrol (FMSA)
YTD Performance: -40%
Weakness in crude oil prices has taken down oil and gas service stocks so far this year. Premature optimism in late 2016 hasn’t helped, either. But the 38% decline in shares of Fairmount Santrol Holdings Inc (NYSE:FMSA) stock seems overdone.
Fairmount Santrol provides “frack sand” to shale gas drillers. And while oil prices are lower, activity in U.S. shale regions in particular has accelerated over the past few months. Investors didn’t like FMSA’s Q4 earnings — shares fell almost 16% — but performance did improve sequentially, and the company highlighted further strength in the first quarter.
Meanwhile, an equity offering last year helped clean up the balance sheet.
FMSA still is a high-risk play, to be sure, and debt is higher than many investors would like. But its business is based on drilling, not just oil prices — an important distinction the market appears to be forgetting at the moment.