Last week we started accumulating Emerge Energy Services LP (EMES) and over the weekend we released a post called "EMES: Playing The Bankruptcy Bounce Without The Threat Of Delisting". On Monday EMES rose 56% to $0.55. After EMES popped, we expect Bristow Group Inc. (BRS) to be the next one to go on a run. Like EMES, it has seen a terrible decline in the stock price over the past couple of weeks on delayed financials and management speaking about strategic alternatives, code word for Chapter 11. But also like EMES, since it hasn't officially initiated the process yet, it's not under imminent threat of a delisting and "Q" symbol attachment. That leaves plenty of time to play it for a bounce on a reversal from an oversold condition and short squeeze. We are up to 857 followers despite not giving out a lot of alerts, a fact that we think is indicative of a successful, diligent and prudent stock picking history. If you like our picks you can follow our blog by clicking the follow button on the top of the left hand panel. You can also follow us on Twitter @StockTradePicks. We have over 3,800 followers on Twitter as well.
BRS has had some major ups and downs in 2019 already. In January, the stock moved from $2.65 to as high as $4.88 before making new lows by mid-February. It was over $10 as recently as November, so to say it is oversold is an understatement. BRS has stayed pretty steady at around $0.50 since it tanked on April 16, making it ideal to accumulate for bottom pickers looking for a bounce rather than trying to catch a falling knife. It has a gap to fill between $0.69 and $0.96 and while gaps don't always get filled, the adage should stimulate additional buying once BRS falls onto the radar of day traders .
BRS has 12.46 million shares short out of total shares outstanding of 35.8 million, leaving it with a very heavy 35% short interest with a high possibility of a short squeeze. Keep this in mind. Most of those shorts are in well above $2; many of them above $10. If the average short is in at $5, they are not going to care about whether they cover at $0.50 or $1.00. To them that's a difference of being up 80% versus 90%. What they need is volume to cover a short, and right now BRS' daily volume of 1-2 million shares is not nearly enough to cover that large short interest. We expect to see one of these 20 million + volume days and a rise in excess of 30% soon, similar to what we saw on EMES yesterday.
In addition to this, a fund called Global Value Investment Corp. is setting up a proxy battle to oust current management and bring their own people to the Board of Directors. This activity can be seen as bullish. If GVIC wants to secure a sufficient amount of votes to enact change, it will have to make sure that enough shares are in friendly hands. It, or its associates, would have to buy more shares.
Between the gap fill, extreme short squeeze potential and proxy battle, there are three very good catalysts to see BRS pop substantially from the $0.50 range while all the bad news - threat of bankruptcy and delayed financials - should be out for now. BRS could eventually get delisted for having a price below $1.00 or continued delay of financials, but that type of delisting happens after a several month warning period to get into compliance, not overnight.
Disclosure: We are long BRS
BRS has had some major ups and downs in 2019 already. In January, the stock moved from $2.65 to as high as $4.88 before making new lows by mid-February. It was over $10 as recently as November, so to say it is oversold is an understatement. BRS has stayed pretty steady at around $0.50 since it tanked on April 16, making it ideal to accumulate for bottom pickers looking for a bounce rather than trying to catch a falling knife. It has a gap to fill between $0.69 and $0.96 and while gaps don't always get filled, the adage should stimulate additional buying once BRS falls onto the radar of day traders .
BRS has 12.46 million shares short out of total shares outstanding of 35.8 million, leaving it with a very heavy 35% short interest with a high possibility of a short squeeze. Keep this in mind. Most of those shorts are in well above $2; many of them above $10. If the average short is in at $5, they are not going to care about whether they cover at $0.50 or $1.00. To them that's a difference of being up 80% versus 90%. What they need is volume to cover a short, and right now BRS' daily volume of 1-2 million shares is not nearly enough to cover that large short interest. We expect to see one of these 20 million + volume days and a rise in excess of 30% soon, similar to what we saw on EMES yesterday.
In addition to this, a fund called Global Value Investment Corp. is setting up a proxy battle to oust current management and bring their own people to the Board of Directors. This activity can be seen as bullish. If GVIC wants to secure a sufficient amount of votes to enact change, it will have to make sure that enough shares are in friendly hands. It, or its associates, would have to buy more shares.
Between the gap fill, extreme short squeeze potential and proxy battle, there are three very good catalysts to see BRS pop substantially from the $0.50 range while all the bad news - threat of bankruptcy and delayed financials - should be out for now. BRS could eventually get delisted for having a price below $1.00 or continued delay of financials, but that type of delisting happens after a several month warning period to get into compliance, not overnight.
Disclosure: We are long BRS
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