A year ago, MagneGas Corporation (MNGA) started a decline that would last through the year, kicking 80% of the company value to the curb. However, patient investors saw a reverse in the trend last week on the back of a potential healthy government contract and caught short sellers flat-footed, as shares and volume busted out of the doldrums.
The MagneGas share price shifted into high gear right out of the gates in 2015, and are now up 150% for the year, adding another 10% today on great volume. Yet, this did not come without a gut wrenching test after a rough Q3 2014, when a lethal two-pronged shellacking of yearend tax loss selling and swarming short sellers nearly drove shareholders to the limit, driving prices lower in advance of the tax loss sale set up.
MagneGas Demonstrates Superiority Over Acetylene
This is a common play for funds that specialize in tax loss selling as they adroitly pick their targets, and in the case of MagneGas, they drove shares to all time lows under 50 cents from $2.50. The tide turned last week, though, during a demo at the US Navy Yard, where MagneGas had an opportunity to perform "head to head" travel speed demonstrations against acetylene. The demonstration showed that they would dramatically increase the productivity of their operation, resulting in a verbal commitment to purchase additional products, and MagneGas returned for a second demonstration that is a completely new opportunity within the US Navy.
"We are proud to see solid progress in our penetration of the important armed forces markets through our initial order from the US Navy," commented Ermanno Santilli, CEO of MagneGas Corp. "Providing hands-on testing, training and demonstrations underscores this US Navy facility's interest in improving productivity. The opportunity to help the US Navy turn ships around faster so that our Armed Forces can protect US interests around the globe makes the whole MagneGas team very proud."
The stat CEO Santiilli should also be proud of is the explosion in interest in the stock, and the explosion in volume. This has forced shorts to cover and tweaked every quant trading system from Tampa to Tahiti, as volume took a 5x jump after the news about the details of the contract with the Navy, reversing the fortunes of this alternative energy company after a tough 2014.
I've covered MagneGas for many years, and it's good to see them get their due. They have a $50 million dollar valuation today, but I see good things for them ahead, as they survived the onslaught of short-selling strategies and have secured this initial contract with the Navy. The future is bright for MagneGas, as they worked through a tough 2014 and found a silver lining in an unlikely Navy Yard with torches ablaze.
DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer