Value investors are trained in the discipline of buying rock-solid assets when they dip. Veterinary health company Zomedica (NYSEAMERICAN:ZOM) isn’t fraught with major problems, and yet ZOM stock recently went down.
That’s exactly the type of opportunity investors should seek out. When there’s a mispricing in the markets, they don’t always last long and the window of opportunity can close quickly.
If you can believe it, it’s possible for a stock to go out of favor with investors because it’s in heavy demand. In a market that’s driven by supply and demand, popularity ought to be considered a good thing.
Yet, the market doesn’t always see it that way. When the perception is negative but the reality is not, that’s your signal to consider making a move — in this case, with ZOM stock.
ZOM Stock at a Glance
When ZOM stock reached its 52-week high of $2.91 on Feb. 8, value-focused investors hopefully understood that chasing stocks after a vertical move isn’t always recommended.
By midday on Feb. 12, ZOM stock was trading near the $2.60 level. That’s a fairly sizable decline from the peak price of just a few days earlier. Suffice it to say that it wasn’t a great week for ZOM shareholders.
The first thing to understand is that a moderate correction doesn’t mean that the uptrend isn’t intact anymore. Price declines are normal and ought to be expected because stocks don’t just go up in a straight line.
Besides, it’s important for investors to put prices in perspective. ZOM stock has a 52-week low of around six cents. The bulls have done a terrific job of providing gains for the shareholders.
If the bulls took a breather, that’s fine because it’s a chance to start a new position or add to your position if you already own ZOM stock.
An Offering Gets Supersized
Zomedica is a veterinary health company that creates point-of-care diagnostics products specially made for dogs and cats. The year-long rally in the ZOM stock price suggests that this market has been quite robust.
So, what’s the seemingly negative event that caused the ZOM share price to fall recently? There wasn’t any major scandal going on at Zomedica, or any other adverse event.
Most likely, the share-price decline was due to a supersizing of a common-stock bought deal offering.
As the company explained, “due to demand, the underwriter has agreed to increase the size of the previously announced public offering and purchase on a firm commitment basis 91,315,790 common shares” of ZOM stock.
That represented a nearly seven-fold up-sizing of the bought deal offering, compared to the original offering size of offering of 13.16 million shares announced on Feb. 8. It’s fair to conclude, then, that ZOM shares are in very high demand.
Follow the Smart Money
Some skeptics and bears might feel that Zomedica is selling too many shares of ZOM stock with this bought deal offering.
That could explain why ZOM stock fell 17% in premarket trading after the announcement of the up-sized offering. Yet, there are two sides to every story.
On the positive side, it’s a great sign that ZOM shares are in such high demand. And when there’s a bought deal offering like this, it’s typically not mostly amateur retail traders grabbing up the shares.
Usually it’s the institutional investors that are getting involved, or what some folks might call the “smart money.” These institutions generally will conduct deep research into a company before purchasing large quantities of the company’s stock shares.
Moreover, Zomedica stands to gain $173.5 million from the now supersized offering. All around, this should benefit the company and, over time, the stakeholders as well.
Since there’s nothing fundamentally wrong with the company, ZOM stock remains a strong value after the recent share-price dip.
These windows of opportunity don’t always last long, so this could be an opportune time to seize the moment and follow the smart money with ZOM stock.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.