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Money Morning's "unloved" pick of the week is fracking sand supplier U.S. Silica Holdings Inc. (NYSE: SLCA).
An unloved investment is one that's been beaten down – but is actually a great value. Investors then get an amazing entry point into a good long-term investment.
Money Morning Defense & Tech Specialist Michael Robinson first recommended U.S. Silica stock back in February. With SLCA stock down 38% from its 52-week high of $73.43 reached on Sept. 3, Robinson now considers the company "stupid cheap."
U.S. Silica Holdings Inc. (NYSE: SLCA): About the Company
U.S. Silica has its roots in two silica and sand mining companies founded in the late 1800s: The Ottawa Silica Company of Berkeley Springs, W.V., and the Pennsylvania Glass Sand Corporation of Lewistown, Pa. The two merged to form U.S. Silica and moved the company headquarters to Frederick, Md. U.S. Silica primarily produces sand and silica products used in shale oil and shale gas fracking. However, SLCA offers 250 products that also serve the glass, chemicals, foundry, and building products industries. U.S. Silica operates in 16 locations across the country and employs about 850 people. SLCA has a market cap of $2.42 billion. The chief executive officer is Bryan A. Shinn.
U.S. Silica Holdings Inc. (NYSE: SLCA): Why It's Unloved Right Now
As a supplier to oil drilling companies, SLCA is sensitive to the price of oil. The price of oil nosedived from over $100 a barrel at the start of July to below $85 in October. Oil has continued to slide in November down to about $75.
When the fracking industry starts to have cash flow issues due to low oil prices, Wall Street worries they'll slow purchases from suppliers like U.S. Silica. So investors sold off SLCA stock.
On top of the fall in oil prices, two analysts cut their rating on SLCA stock in recent weeks. Simmons & Co. downgraded SLCA from overweight to neutral on Oct. 31. And Zacks Investment Research dropped U.S. Silica stock from outperform to neutral on Nov. 8.