Avalon Holdings Corp (NYSEAMERICAN: AWX) has seen a metioric rise in value over the past week or so. The run in value started on July 24th after closing on July 23rd at just $2.20 per share. At the time I’m writing this article, the stock is up another 49.96% today, trading at $15.32. Interestingly, there has been no news released by the company that would substantiate a nearly 7-fold increase in value. All in all, the stock is in the midst of a short squeeze. I expect that the stock will fall back to a reasonable valuation over the next few trading sessions. Here’s why:
Digging Into AWX
Avalon Holdings is a holding company out of Warren, Ohio. The company provides waste management services to higher-level clients in the northwestern and midwestern United States markets. The clients that receive these services are in industrial, commercial, municipal and governemtnal spaces.
Outside of the waste management services provided, Avalon also owns a golf and country club, known as the Avalon Golf and Country Club. This entity operates a golf course and related facilities.
There Is No News To Back Up This Rise In Value
When I see a stock running in multiples, I want to know why. This leads me digging for news, and trust me, I dug. I searched Avalon’s investor relations website, Yahoo! Finance, Google News, Bing News, Google Finance, and more. At the end of my hunt, I came up with absolutely nothing. The company has released no news that can back up the massive gains in value we’ve seen over the past few trading sessions.
The move is actually nothing more than a short squeeze. Before the stock started to rise, short interest was massive, sitting at around 30%. As AWX started to trade in the green, the heavily shorted stock suddenly started to see a reduction in short interest as shorts were squeezed out of their positions by gains. Since, we’ve seen a 66% reduction in short interest, which currently sits around 10%. With no real reason for the gains that we’re seeing in the stock, it is likely to become a victim of heavy short interest yet again, driving it toward the bottom.
Just Consider The Current Valuation And You’ll Want To Short AWX Too
Before the massive rise in value that we’ve seen throughout the past few trading session, the market cap at AWX was just seven and a half million. At the time of writing this article, that market cap had grown to $53.399 million. That move didn’t happen in years or even months. No, it happened in just a few sessions without any news!
Think about it, is a waste management company with a historic valuation of under $10 million who owns a golf course really worth more than $53 million? I think not!
The Gains Are Nearing Their End
AWX providing a fun run for many traders. However, at this point, the run is likely over. The company is a relatively small one and hasn’t released any news. There is absolutely no reason that the stock should be trading at nearly 7 times where it was trading just one week ago. As such, I’m expecting that as we saw a metioric rise in value, we will soon see a metioric rise in short interest, driving the stock back down to a reasonable valuation.