3 Tiny Companies Whose Stocks Could Make Huge Moves This Week

The stars are aligning for these 3 small companies to make noticeable moves.

Mar 9, 2014 at 7:00AM

Tiny companies can make for rollercoaster investments. If you're an experienced investor, this shouldn't come as news to you. But sometimes the stars align to cause such stocks to make really big moves. For the three stocks covered below, such could be the case this week.

Each of these companies -- all with market caps below $2 billion -- are set to report earnings this week. But that alone doesn't account for the possibility of increased volatility. All three companies are also heavily shorted, meaning they have a lot of investors betting against them. When these two forces combine, outsized moves are almost always the result.

Investors should prepare themselves for these moves, and keep their eye on the long-term horizon before making any buy/sell decisions. If you own shares of Gogo Inc (NASDAQ:GOGO), Nuverra Environmental Solutions Inc (NYSE:NES), or KiOR Inc (NASDAQOTH:KIORQ), here's what to keep an eye on:

Company

% Shares Short

When to Watch

Expected Revenue (millions)

Expected EPS

Nuverra Environmental

23%

Tuesday

$152

($0.47)

Gogo

14%

Thursday

$85.4

($0.27)

KiOR

13%

Thursday

$1.5

($0.39)

Source: E*Trade.

Nuverra Environmental
On the face of it, Nuverra sounds like the timeliest of investments. The company's goal is to meet the water needs of today's fracking industry -- supplying water, collecting it, treating it, and then recycling it back into the system. Add on top of that a few pipelines to make water transportation easier and less pollutive, and you have a great "story stock."

The problem is that the story doesn't match up too tightly with reality. Shares of Nuverra are down almost 60% since the beginning of last year, and a series of missed steps and a quickly changing industry are mostly to blame.

The company has made a fair share of acquisitions to fuel growth, and the integration of those acquisitions has been questionable at best. Should there be any writedowns on those acquisitions, it would be a red flag for investors.

If you own shares of Nuverra, it's also important to keep your eye on the fact that several industry players are trying to accomplish fracking with the use of less and less water. While this would probably be a net positive for the common good (depending on what replaces it), it would make Nuverra largely obsolete.

Gogo

Screen Shot

Source: Gogo. 

Ever taken a long flight and used the Internet to surf the web, check your email, or get work done? If so, then you should thank Gogo. The company has built out a network of towers that transmit Internet access to special antennas attached to the bottom of airplanes (pictured above).

Though it might sound like a silly thing to invest in, Gogo's growth is no joke. Revenue has increased 85% per year since 2009. That's largely because six years ago, Gogo averaged only 285 in-flight Internet sessions per day. Last year, that number was more than 47,000 average daily sessions. And just last week, a William Blair analyst gave a bullish call for the company and shares spiked over 10%.

That being said, investors are still unsure the company can thwart competition in what is quickly becoming a surprisingly lucrative niche.

KiOR

Screen Shot

Source: KiOR. Notice the "basic inputs" in the lower left-hand corner.

No, your eyes aren't deceiving you: Analysts only expect KiOR to have pulled in $1.5 million over the past quarter. That's less than Jay Cutler earns for every Bears win!

Even though shares are down 75% over the past year, investors are clearly still excited about this company's potential, as its stock trades for 138 times sales. That's because KiOR hopes to be able to take simple inputs (like switch grass or even wood chips), heat them up to the point where they are broken down into their simple elements, and turn them into biofuels that can be used to meet our future energy needs.

The company has been in upheaval lately, with the CFO resigning abruptly and Condoleezza Rice departing from the board of directors. That, plus an uncertain future for its technology, makes it easy to see why KiOR's stock could make big moves following earnings.

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Brian Stoffel owns shares of Nuverra Environmental Solutions. The Motley Fool owns shares of Nuverra Environmental Solutions. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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