Floating Right Into Your Portfolio

As I watch Zoltek's stock price defy the laws of gravity, I think we need to go back and ask ourselves, "how and why?" First and foremost, they did report good numbers the last quarter, but that is not the whole story. Zoltek also have a massive monopolistic hold on the carbon fiber market, which is used to make the wind generators that have become more and more economically viable as we watch the energy prices sky-rocket. This really made the growth investors flock to the company, and due to the fact that Zoltek has such a small float (number of shares available for trading) the price went up even more dramatically. Remember, that stocks on the most basic level are driven by supply and demand. Zoltek also had been mentioned by Jim Cramer on the way up, so that brought even more buyers to the table. This is very evident if you sit and watch a company with a large float like Lucent, Sirius or Motorola. These companies stock prices do not make these type of dramatic moves, because the market is so diluted with the amount of shares outstanding, that it becomes difficult for the stock to move at all either up or down. The only way a company can increase it's float is to free up some of it's restricted stock by means of a secondary offering or by issuing a stock split. Both of these tend to be signs of a healthy business, as the company is confident that there is enough demand for the stock, and these secondary offering often raise a pretty penny for the company to spend on research and development or just pay down debt. Recently, companies such as Google and Netflix have both issued such offerings to invest in research and development. So I think Zoltek will do something similar possibly. Where do you think Zoltek is headed? Post your prediction below. Price targets for any stocks welcome as well.

1 comment:

Anonymous said...

I agree ZOLT has got what it takes. Looking at their chart makes me think it's about time that they will go back up.
I have a good feeling about them.

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