Fairmount Santrol Holdings Inc (NYSE:FMSA) shares are up 1% today at a time when the broader market is flat and peer sand companies are down.
We think the relative strength might be due to the company’s management scheduled to meet with analysts at Piper Jaffray on March 22 to 23. The meeting is in Chicago, and if positive, sentiment could improve. Michael Sabella of Citi also recently called the sell-off in the stock a ‘Buying opportunity’, and setting a $9 price target. While that’s less than the $14 target the analyst had earlier, the target price is still substantially higher than the present stock price.
At this point, we would be cautious on fracking sand names until we get more visibility in terms of what OPEC will do and if U.S. shale production will drop if oil prices stay below $50 per barrel. If U.S. shale slows, business for Fairmount Santrol Holdings Inc (NYSE:FMSA) could slow. If oil pops, however, the stock will likely rally. Business for the sand producers was very strong one quarter ago as many analysts noted price increases and robust demand. Now, given that crude prices are hovering around $48 a barrel, we think that the price hikes for fracking sand might not be sustainable. That could always change if oil rises above $50 again, however. Shares of the stock have been very volatile, rallying from under $2 in early 2016 to a 52 week high of $13.12 per share. Due to a combination of being cautious, profit taking, and falling oil prices, shares of Fairmount Santrol have halved however.
What does Smart Money Sentiment Say?
Our data shows that elite funds were rather bullish in the fourth quarter. Of the 742 elite funds we track, 30 funds owned $581 million of Fairmount Santrol Holdings Inc (NYSE:FMSA) and accounted for 22.10% of the float on December 31, versus 24 funds and $153.79 million respectively on September 30.