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Small Cap Atlas Energy Goes Parabolic (AHD)

While the major indices were taking a hit yesterday due to the ongoing catastrophe in northeast Japan, there were actually a handful of small-cap companies hitting fresh 52-week highs.

Out of those handful of companies natural gas producer Atlas Energy ( AHD ) was the one company that caught my attention, for the simple reason that it's been absolutely parabolic for the month of March.

The stock managed to hit new 52-week highs five out of the last seven trading sessions on above average volume.

Today Atlas Energy ( AHD ) tacked on an additional 4.7 percent and surpassed another new 52-week high at $23.00. So far over the past six months the stock surged over 156.2 percent and 526.7% since hitting a 52-week low back in June 2010.

As the owner of the largest percentage of natural gas wells in the Appalachian region of the Eastern United States, $1.2 billion market cap Atlas Energy recently raised guidance from estimates released just a few weeks ago on a conference call. For the calendar year, Atlas now sees $1.10 to $1.20 in pro forma distributable cash flow, versus previous guidance of $0.70 to $0.80. The company also stated that it expects distributable cash flow to "increase substantially" in 2012.

Also, on March 7 th investment bank Morgan Stanley upgraded Atlas Energy to overweight from equal-weight. The bank sees a 2011 EPS of $1.30 and 2012 EPS of $1.94

The stock still looks quite cheap at 0.49 times sales and a P/E ratio of 12. Moreover, the company should continue to benefit from the increasing demand in natural gas as the price of oil continues to rise.

Power struggles throughout the Middle East have been a major catalyst for the recent rise in oil prices. The unrest in the region has serious implications for the world's markets and will continue to do so until the geopolitical concerns are calmed.

Oil recently hit a two year high. Given all of the uncertainties in the Middle East, oil prices could continue to move towards the all time high of $147 a barrel. If so, companies such as Atlas will continue to benefit as the need for alternative fuels become more and more apparent.

As you could probably guess the recent surge in the price of Atlas Energy shares have led to the stock becoming overbought from a technical standpoint. I would suggest remaining patient with Atlas. Add the company to your watchlist. Perform your due diligence on the company and make sure it's an investment that fits your individual portfolio requirements. Look for dips to add shares to your portfolio.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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