Chasing Value: Newcastle's Huge Gain Leaves Me at a Loss

All the major indices are down and Newcastle is up big. I search for news and find none. I look at recent insider buying activity and it's tepid. Then I think someone is playing pump and dump but it's long out of the penny stock arena. It's like they discovered oil under some of their properties -- I don't think so.

There could be some institutional buying now that the stock has elevated above the $5.00 threshold. There must be some major players because the volume today is more than double the 30 day average. 564,000 shares versus 1.13 million, and that's just half way through the trading day.

Taking a look at some of the current metrics that stand out we can find that there has been 50% growth year over year and the company that acts as a CMBS lender and an independent owner of a diversified real estate portfolio has trimmed debt at the same time. The current P/E ratio has gone from negative to 4.45 with a forward looking view of 2.96. The PEG ratio displays the same potential opportunity at a very low 0.59. The price-to-sales is only 0.28, also very low.

This is all very good and the trend is certainly positive; however, it is all based on recent developments and the run-up in the stock is a big bet it will continue. For myself, I must admit that when I bought it I thought there was value, but the pick was speculative at the time. Naturally I believed there was money to be made, but the rapid rise is far greater than I could have imagined in the given time frame and that is luck. NCT is trading at $6.20 mid-day. I will update after the close.

Update: Closing price $6.25, up 0.53 or 9.27%

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value™ and Serious Money. Disclosure: He currently owns shares and/or options of NCT