Update: Horsehead Raises $50 Million For Potential Acquisitions - Book Partial Profits

Aug.27.14 | About: Horsehead Holding (ZINCQ)

Summary

Horsehead has raised $50 million through two debt offerings, and earmarked the capital for possible acquisitions.

In my original article, I said that Horsehead, a producer and seller of zinc and nickel-based products, could give you excellent returns in a relatively short span of time.

Although I'm still bullish on the stock in the long run, I believe that it's time to book at least half of your profits following the debt offerings.

Horsehead (ZINC) has raised $50 million through two separate but simultaneous debt offerings, and earmarked the capital for potential acquisitions. Ali Alavi, the company's senior vice president of corporate affairs, said, "What we're looking to do is maintain a certain level of liquidity for potential strategic alternatives and general corporate purposes."

Horsehead could enhance its presence in the environmental services platform, which involves recycling waste materials to extract metals. The company started its move beyond zinc with the 2009 purchase of International Metals Reclamation Co. "We haven't ruled anything out and if there are opportunities in the nickel business to expand Inmetco, we're hoping to look at them," Alavi said.

In my original article, I said that Horsehead, the producer and seller of zinc and nickel-based products and the leading supplier of zinc in North America, has been in a steady uptrend since 2011. When I first recommended the stock nearly a year ago, it was trading around $12.38, and has given investors a whopping 70% return since then. Although I still believe that Horsehead could trade at $25 or even beyond, I'd recommend selling at least 50% of your positions in ZINC following the debt offerings. The reason is simple - acquisitions are good, but they strain the balance sheet, particularly when funded by debt. Smart investors seldom like inorganic growth stories.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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