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1-Star Stocks Poised to Plunge: Houston American?

Based on the aggregated intelligence of 160,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, oil and gas explorer Houston American Energy (Nasdaq: HUSA  ) has received the dreaded one-star ranking.

With that in mind, let's take a closer look at Houston American's business, and see what CAPS investors are saying about the stock right now.

Houston American facts

Headquarters (Founded)

Houston (1981)

Market Cap

$576.6 million

Industry

Oil and gas exploration and production

Trailing-12-Month Revenue

$6.0 million

Management

Founder/CEO John Terwilliger
CFO James Jacobs

Trailing-12-Month Return on Equity

(23.3%)

1-Year Return

954%

Competitors

Stone Energy (NYSE: SGY  )
Berry Petroleum (NYSE: BRY  )
Brigham Exploration (Nasdaq: BEXP  )

Highly Rated Retail Energy Alternatives

ExxonMobil (NYSE: XOM  )
Chevron (NYSE: CVX  )
ConocoPhillips (NYSE: COP  )

Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.

On CAPS, 73% of the 157 members who have rated Houston American believe the stock will underperform the S&P 500 going forward. These bears include boghead and FreeMortal, both of whom are ranked in the top 15% of our community.

Just last month, boghead seemed highly skeptical of the stock's stunning price performance: 

I have been following this stock for a month or so. I have been blown away by the rising price. Looks like their earnings don't support the rally, or this price at all.

In an earlier pitch, FreeMortal expands on why Houston American bulls may have a problem:

They have about $5 million in cash and about $1 million in receivables. Considering the fact that this is a micro cap, that isn't too bad, if they had their act together. They had twice as much cash last year and they are steadily burning through it with operations and equipment purchases and still no profit.

There is a Texas expression that applies here: They are spending all their time saddling up instead of riding.

The price is already too high by any measure and this latest run-up appears to be just hype. Gravity will soon take over.

What do you think about Houston American, or any other stock for that matter? If you want to retire rich, you need to protect your portfolio from any undue risk. Staying away from dangerous stocks is crucial to securing your financial future, and on Motley Fool CAPS, thousands of investors are working every day to flag them. CAPS is 100% free, so get started!  

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Fool's disclosure policy always gets a perfect score.


Read/Post Comments (3) | Recommend This Article (9)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 31, 2010, at 11:14 AM, shawncoons wrote:

    Neither this article or either of the short posts by boghead or FreeMortal mention HUSA's property in Colombia.

    In fact, boghead appears to have taken a hit to his CAP score from HUSA, and then re-entered to take another hit to his score. FreeMortal took a hit from HUSA and now appears to be out of it entirely.

    I'm really surprised that this article basically references two short and incomplete posts from several months ago, by two people who have miscalled HUSA's direction so far.

    The reason I've been invested long in HUSA is because of research like this: https://www.kaching.com/research/6070

    "Assuming the CPO 4 Block comes in on the low range of the estimated recoverable barrels of 1 billion. HUSA's 25% working interest will net them 250 million barrels of recoverable oil and with a current market capitalization of $150 million, the oil in the ground is being priced by the markets ridiculously cheap. The upside potential from the current price of $5.60 is a compelling value, especially taking into account that oil will soon be a scarce commodity on the export markets just a few years out.

    Developing the CPO 4 Block will most likely take a few years and this story will take 3-5 years to fully unfold. The enormous return potential here will certainly be worth the wait for patient investors."

  • Report this Comment On March 31, 2010, at 4:16 PM, BottomFinder wrote:

    It's all based on speculation and very risky at these levels, as well as extremely overpriced based on fundamentals.

    In your article it states at $5.60 it is a compelling value, well it is at $18.50 now.

    I think you need to re-evaluate your position, I am short.

  • Report this Comment On April 01, 2010, at 12:04 AM, shawncoons wrote:

    I'm in at around $5 a share and expect it to go quite higher than $18.50 in the next several years. I don't try to time the market. I look to buy really good values cheap and patiently wait for them to increase.

    HUSA will definitely be volatile in the short term, but I'm OK with that.

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