Bull & Bear’s April 2011 VOL. 12 NO. 11 INSIDE... Barkerville Gold Mines – Canada’s Newest Gold Producer to Accelerate Growth with Profits from Gold Production in 2011 Great Panther Silver Output Hits Record Levels ; Company On Rapid Growth Path to Becoming a Mid-Tier Silver Producer 3.8 Million Ounce Silver Production Target at Two Mexico Mines for 2012 ALSO FEATURED: Terraco Gold Corp. U.S. Silver Corporation Torex Gold Resources Inc. Nevada Geothermal Power Inc. Latin American Minerals Inc. Rye Patch Gold Corp. By Andrew Leckey Successful Investing How much would you pay for the services of Warren Buffett, Larry Page, Steve Jobs and Jeff Bezos? Quite a bit, apparently. Those CEOs of Berkshire Hathaway Inc., Google Inc., Apple Inc. and Amazon.com Inc. lead companies that command some of the highest individual stock prices. Berkshire Hathaway Class A (BRK.A) at nearly $130,000 a share, Google (GOOG) at nearly $600, Apple (AAPL) at more than $330 and Amazon.com Inc. (AMZN) at more than $165 are the poster children of big-buck stocks. Many companies split their shares when they reach certain price levels to get more investors interested and to broaden their shareholder base. A typical 2-for-1 split turns a $100 a share stock into a more accessible $50 stock. Other companies could care less and let their stock prices escalate to hundreds of dollars. Their stocks are attractive enough anyway, and they figure that if investors are really interested, then they can simply buy fewer shares. Then there are the bragging rights of investors. “Owning a high-priced stock implies you have a very high-quality company and are in an elite group,” said James Hardesty, president and market strategist with Hardesty Capital Management in Baltimore, Md. “These are generally companies that are performing well – at least in the short term – and their news is good.” The problem is that stellar stocks are often “priced to perfection,” Hardesty cautioned. While they are capable of delivering short-run perfection, it is not certain that they can do so indefinitely. Stocks such as Amazon.com with its high price/earnings ratio of 65 are especially susceptible to dramatic price drops. “In every market cycle there are leaders and these leaders change over the years,” explained Kelley Wright, managing editor of Investment Quality Trends newsletter in Carlsbad, Calif., noting that the phrase “What’s good for GM is good for America” was commonly voiced when that carmaker was dominant. “They have everyone’s attention and they are viewed as the trendsetters.” Continued on page 29 High-Priced Stocks Worth the Money?
Great Panther Silver Output Hits Record Levels ; Company On
Rapid Growth Path to Becoming a Mid-Tier Silver Producer
3.8 Million Ounce Silver Production Target at Two Mexico Mines for 2012
ALSO FEATURED:Terraco Gold Corp.
U.S. Silver CorporationTorex Gold Resources Inc.
Nevada Geothermal Power Inc.Latin American Minerals Inc.
Rye Patch Gold Corp.
By Andrew LeckeySuccessful Investing
How much would you pay for the services of Warren Buffett, Larry Page, Steve Jobs and Jeff Bezos?
Quite a bit, apparently. Those CEOs of Berkshire Hathaway Inc., Google Inc., Apple Inc. and Amazon.com Inc. lead companies that command some of the highest individual stock prices. Berkshire Hathaway Class A (BRK.A) at nearly $130,000 a share, Google (GOOG) at nearly $600, Apple (AAPL) at more than $330 and Amazon.com Inc. (AMZN) at more than $165 are the poster children of big-buck stocks.
Many companies split their shares when they reach certain price levels to get more investors interested and to broaden their shareholder base. A typical 2-for-1 split turns a $100 a share stock into a more accessible $50 stock.
Other companies could care less and let their stock prices escalate to hundreds of dollars. Their stocks are attractive enough anyway, and they figure that if investors are really interested, then they can simply buy fewer shares.
Then there are the bragging
rights of investors.“Owning a high-priced stock
implies you have a very high-quality company and are in an elite group,” said James Hardesty, president and market strategist with Hardesty Capital Management in Baltimore, Md. “These are generally companies that are performing well – at least in the short term – and their news is good.”
The problem is that stellar stocks are often “priced to perfection,” Hardesty cautioned. While they are capable of delivering short-run perfection, it is not certain that they can do so indefinitely. Stocks such as Amazon.com with its high price/earnings ratio of 65 are especially susceptible to dramatic price drops.
“In every market cycle there are leaders and these leaders change over the years,” explained Kelley Wright, managing editor of Investment Quality Trends newsletter in Carlsbad, Calif., noting that the phrase “What’s good for GM is good for America” was commonly voiced when that carmaker was dominant. “They have everyone’s attention and they are viewed as the trendsetters.”
Continued on page 29
High-Priced StocksWorth the Money?
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By Jim FinkInvestingDaily.com
If you read my article SEC to Warren Buffett: We Know How to Value Stocks Better than You (posted on InvestingDaily.com), you may find the title of today’s article hypocritical. After all, two days ago I criticized the SEC for claiming to be a better investor than Warren Buffett, so how can I now claim to know how to beat Warren Buffett’s performance?
The difference is that my in-vestment advice comes from Warren Buffett himself! But I’ll write about the honest way to beat Buffett in my daily column. I just learned a second, dishonest way to beat Buffett:
1. Meet with investment bank-ers and ask them to contact one of its clients about a possible takeover;
2. Buy the takeover target’s stock;
3. Meet with the CEO of the takeover target and convince him to accept a takeover offer;
4. Soon thereafter, recommend to Buffett that he acquire the takeover target at a significant premium;
5. Sit back and count your stock profits when Buffett agrees to acquire the company.
This is the road to riches David Sokol, Chairman of Berkshire subsidiaries MidAmerican Energy and NetJets, took in the case of Lubrizol (NYSE: LZ), the cleantech lubricant-additive company that Buffett recently agreed to acquire for $9 billion. According to a Lubrizol proxy statement (pp. 18-20) and a Berkshire press release, here is the timeline:
David Sokol TimelineDecember 13th, 2010: Sokol
meets with Citigroup investment bankers about a possible takeover of Lubrizol. Citigroup told Sokol that it would approach Lubrizol CEO James Hambrick about Berkshire’s interest.
December 14th, 2010: Sokol
buys 2,300 shares of Lubrizol in anticipation of Lubrizol board meeting that same day.
December 14th, 2010: Lubrizol holds regular board meeting but does not discuss Berkshire’s indication of interest.
December 21, 2010: Sokol sells the 2,300 shares of Lubrizol, apparently disappointed that Berkshire’s indication of interest was not discussed at Lubrizol’s December 14th board meeting.
Late December, 2010: Citi-group bankers inform Sokol that Lubrizol will hold a special board meeting on January 6th to discuss Berkshire’s indication of interest.
January 5th through January 7th, 2011: Sokol buys more shares of Lubrizol which total 96,060 shares at prices between $103 and $104 per share.
January 6th, 2011: Lubrizol board holds special meeting to discuss Berkshire’s indication of interest.
January 14th, 2011: Lubrizol CEO calls Sokol and expresses interest in a face-to-face meeting.
January 15th, 2011: Sokol informs Buffett that Lubrizol is interested in discussing a possible acquisition. Sokol tells Buffett he owns stock in Lubrizol, but does
not tell Buffett when he bought the stock and Buffett does not ask.
January 25th, 2011: Sokol and Hambrick have dinner together and Sokol suggests that Hambrick meet with Buffett to discuss price. Hambrick agrees to meet with Buffett.
February 8th, 2011: Hambrick and Buffett meet. Buffett offers to buy Lubrizol for $135 per share.
March 14, 2011: Berkshire and Lubrizol announce the takeover agreement.
March 19, 2011: Buffett first learns when Sokol’s prior purchases of Lubrizol stock occurred (i.e., soon after takeover discussions began).
March 30, 2011: Sokol resigns from all of his executive positions at Berkshire.
David Sokol Makes 30% Profit in Two Months
Given the $135 takeover price for Lubrizol and Sokol’s average $103-$104 price in acquiring Lubrizol shares, Sokol pocketed a quick 30% return in a little more than two month’s time.
Not bad! Since Berkshire’s annualized return over its 46-year history is around 21%, Sokol’s
Continued on page 28
How to Outperform WarrenBuffett and Earn 30% Annual Returns
Small companies remain under-pricedDr. Hans Black: “As 2011 unfolds, we expect
particular volatility in fixed income markets due to the uncertainty surrounding smaller sovereign issuers. Equity markets are presenting select tactical opportunities, particularly in health care, biotech, and precious metals in both small and mid-sized names. Selling of both equities and fixed income assets in 2010 has left portfolios with cash balances sufficient to capitalize upon rapid changes in prices as opportunities present themselves.
They are getting harder to find, but small companies with excellent proven reserves or production potential remain under-priced in our opinion, and will likely surge additionally if real speculative fevor develops. We continue to view micro cap producers on the one hand, and exploration companies such as Tyhee Gold Corp. (TSX.V: TDC) on other, as outstanding medium term investment in the precious metals space.”
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THE TURNAROUND LETTER��5 Friend St., Ste. 801, Boston, MA 0�11�. Monthly, 1 year, $195. www.turnaroundletter.com.
Drew Industries: Appealing acquisition candidate
George Putnam, III: “Drew Industries (NYSE: DW) is a leading producer of components for the recreational vehicle and manufactured housing industries, including windows and doors, chassis parts, hydraulic systems and a wide variety of other components. It has 26 factories across the U.S. and is a key supplier to nearly all of the leading producers of RV’s and manufactured homes.
Both the RV and manufactured housing sectors have been in a severe slump beginning even before the recession of 2008. For example, total U.S. manufactured home sales in 2010 hit its lowest level since the data was first recorded in the 1930s. Drew’s sales fell from a peak of $729 million in 2006 to a low of $398 million in 2009.
Analysis: Despite the historic weakness in its markets, Drew has remained very healthy and is poised to rebound strongly as the RV and manufactured housing industries recover. Moreover, the company took advantage of the downturn to become more efficient by closing nine plants and reducing overhead more than $20 million.
Unlike many competitors, Drew was able to maintain a pristine balance sheet throughout the recession. As a result, it has been able to acquire several smaller competitors over the last year and a half. Even after making these acquisitions, the
company still has no debt and $39 million in cash.There are signs that things are beginning to turn
up in Drew’s markets. Recreational vehicle sales rose 13% in 2010 from the year before. We have yet to see an upturn in manufactured housing, but it will come eventually. Even with the continued weakness in one of its two principal markets, Drew saw its sales rebound to $572 million in 2010.
Management’s interest are well aligned with those of shareholders. Officers and directors of the company own approximately 12% of its outstanding shares. Moreover, the company’s compensation system is strongly tied to results, and management receives much of its compensation in the form of equity. While the company doesn’t pay a regular dividend, it did pay a special dividend of $1.50 per share last December, and when times were better back in 2007, it had a stock buyback program.
Drew Industries is the market leader in many of its products, and as such it is very well positioned to rebound strongly as the economic recovery finds its way down to the RV and manufactured housing sectors. In addition, its leadership position and strong financials could make Drew an appealing acquisition candidate for either a strategic or financial buyer. We recommend purchasing Drew Industries stock up to 33.”
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THE MONEYPAPER, 555 Theodore Fremd Ave., Ste. B-103, Rye, NY 10580. Monthly, 1 year, $153. www.DirectInvesting.com.
Campbell Soup a bargainVita Nelson: “Our Bargain stock Campbell
Soup (CPB), America’s best-known manufacture of condensed and ready-to-serve soups. It also produces such brand names as V8, Pepperidge Farm, Goldfish, Prego, Pace, Swanson, and Arnotts. The shares reached a 52-week high of $37.59 on August 30 and a 52-week low of $32.18 on February 5, so the current price of $33.58 and annual dividend of $1.16 per share gives the stock an INVEST% reading of 135% and a dividend yield of 3.3%. Despite the fact that the company sold more soup in its second fiscal quarter (ended in January), profits were down due to discounts and aggressive promotions on canned soup. Results were also affected by deep discounting from rival Progresso. Still, Campbell was able to earn 71¢ per share in the quarter, down from 74¢ in 2010.
For the fiscal year that ends July 31, consensus estimates call for Campbell to earn about $2.51 per share, up from $2.47 in fiscal 2010, and to go on to net about $2.64 per share in fiscal 2012. Directors and the Dorrance family heirs control 46.5% of the 335 million outstanding shares and Southeast Asset Management owns another 5.7%. In 1993, there were over 503 million shares outstanding, and buybacks continue. Dividends have been paid since 1902 and raised annually since 2004, but only account for about 45% of earnings, which is its historic norm.
Although we identify this stock as a “bargain,” we suggest that you build holdings over a period of time.”
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THE KONLIN LETTER5 Water Rd., Rocky Point, NY 11778. Monthly, 1 year, $95. www.konlin.com.
Biosante developing products for female sexual health and oncology
Konrad Kuhn: “Biosante Pharmaceuticals, Inc. (Nasdaq: BPAX; $1.92), a long-term favorite of TKL, saw its stock trade twice for nearly 100% gains. And, it we’re correct, the stock, with out revised upside objective, could be on the verge of a major long-term breakout. BPAX is a specialty pharmaceutical company focused on developing products for female sexual health and oncology. BPAX’s lead product includes LibiGel® (transdermal testosterone gel) for the treatment of female sexual dysfunction (FSD), which is in Phase III clinical development under a FDA Special Protocol Assessment (SPA), and Elestrin (estradiol gel) developed through FDA approval, which is indicated for the treatment of moderate-to-severe vasomotor symptom associated with menopause and is currently marketed in the U.S.
Other products in development are Bio-T-Gel™, a testosterone gel for male hypogondism licensed to Teva Pharmaceuticals, and an oral contraceptive in Phase II clinical development using its patented technology. LibiGel® remains the lead pharmaceutical product in the U.S. in active development for the treatment of Hypoactive Sexual Desire Disorder (HSDD) in menopausal women. Based on the safety seen to date, BPAX believes that LibiGel® has the potential to be the first product approved by the FDA for this common and unmet medical need. BPAX anticipates the submission of a new drug application for LibiGel® sometime this year and a product launch next year.
Grant and royalty revenue for FY’09 were $2.3 mil., with a loss of (1.40) per share. For the 1st 9 mos. of FY’10, grant and royalty revenues were $2.3 mil., with a loss of (.51) per share vs. (.53) for the same period in the prior year. As of Sept. 30, ’10, BPAX had $35.5 mil. in cash with 70,802,894 shares outstanding. In Dec, the company raised net proceeds of approx. $16.9 mil. on the sale of approx. 10.6 mil. shares of its common stock and warrants to purchase up to approx. 5.3 mil. additional shares of its common stock. Meanwhile, the stock had a major breakout and since pulled back, where investors can use all weakness down into the 1.85-1.90 area to Add/Buy for our revised 1st target of 4.75-5.00 (first needs to close above 2.25) since LibiGel® remains the only product in the world in Phase III clinical development for the treatment of HSDD. In addition, the FDA recently confirmed orphan drug status on its cancer vaccine for patients with Stage II to Stage IV melanoma, the most deadly form of skin cancer. However, if it is recognized and treated early, it is nearly 100% curable. Also in development is a portfolio of cancer vaccines, four of which have been granted Orphan Drug designation and are currently in several Phase II clinical trials to treat pancreatic cancer, acute
myeloid leukemia and chronic myeloid leukemia.According to a study published in the Journal of
the American Medical Association, 43% of American women between the ages of 18-59 experience some degree of impaired sexual function. Importantly, according to IMS data, 2 mil. testosterone prescriptions were written off-label for women by U.S. physicians in ’07. LibiGel® represents a potential compelling near-term product opportunity which could significantly enhance shareholder’s value. Ultimate target 8.00.”
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THE CONTRARY INVESTORP.O. Box 1777, Burlington, VT 05�0�. Monthly, 1 year, $�50. Print or Email.
Chasing yieldAlex Seagle: “In today’s zero interest rate
environment, fixed income investors are going increasingly farafield in their search for yield. Folks who in the past laddered a portfolio of U.S. treasuries have investigated options they never considered heretofore. It is just as important to realize where not to invest as it is to identify good opportunities.
Serious questions about the safety of municipal bond issues have been raised, despite their being insured by AMBAC, MBIA and others. One place the Contrary Investor would definitely stay away from would be Real Estate Investment Trusts (REITs) focused on strip malls. In 1990 there were 18 square feet of retail space per person in the U.S. By 2010 the figure had more than doubled to 40 square feet, and the owners of these properties are scrambling to find tenants – from political candidates to ethnic enclaves. This does not bode well for these REITs’ ability to continue to pay the dividends that originally attracted investors. Most issues like Weingarten Realty (WRI), Equity One (EQY) and Developers Diversified Realty (DDR) boast dividends of around 4 percent. Time will tell if they can maintain these payments. It is true that not much space was added in 2010, and little is likely in 2011 and 2012. But the strip malls that were once the place to get one’s dry cleaning or have your hair styled are increasingly under pressure.
Perhaps a better type of REIT would be those leasing to healthcare interests. Based on stability of the tenants’ cash flow alone, healthcare REITs like Health Care REIT (HCN) and Ventas (VTR) would seem to be the better bet.
REITs generally carry a high dividend yield because they are required to pay 90 percent of their earnings (technically their “funds from operations, or FFO”) to shareholders in order to be exempt from federal taxes. Share prices take a hit from time to time as the companies dilute existing shareholders’ by issuing new shares to raise capital, and investors should take this into consideration.
One huge factor going in favor of healthcare interests is the certain growth in the number of people aged 65 or older – those most in need of healthcare. Demographics matter…you gotta know when to hold ‘em and know when to fold ‘em!”
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THE COMPLETE INVESTORP.O. Box ��8, Williamsport, PA 17703. Monthly, 1 year, $7�. www.completeinvestor.com.
Applied Materials: a “Fab” way to play your chips
David Sandell recently added Applied Materials (AMAT), a fast-growing leveraged play on semicon-ductors and the world’s hunger for technology to his Growth Portfolio.
“This $21 billion company is the world’s leading supplier of the exceedingly complex and precise high-tech equipment used in the “fab” (fabrication) plants that manufacture semiconductors. With a recent gain of 2 percentage points in market share, it now supplies some 20.5 percent of the fab equipment market. This segment of Applied Materials’ business, carried out by its silicon systems group, generated 55 percent of the company’s $9.5 billion in revenues in fiscal 2010 (ended October).
Applied Materials is in the forefront of other tech areas, too. Through its energy and environmental solutions group (16 percent of sales) it’s the leading equipment provider to the solar photovoltaic cell industry and is making inroads in LED technology and energy storage. Its display unit (10 percent of sales) has top market share in the global LCD industry. And the fourth of its major units, applied global services (19 percent of sales) has one of the broadest service portfolios in the industry.
The company is financially sound with $2.6 billion in cash and only $200 million in long-term debt. This strong financial position reduces the risks in the position, while the company’s deep pockets allow for significant investment in research and development (around $1 billion annually). Even with significant spending, the company expects operating margins to grow from their current 17 percent to around 25 percent. With revenues growing as well, this gives the shares an exceptionally attractive valuation of only 11 times current-year earnings expectations and a forward PEG of 1.2.
Meanwhile, two of our existing tech positions have seen their shares zoom with strong fundamental performance. In mid-January, Apple (AAPL) made two significant announcements: CEO Steve Jobs would take a medical leave of absence and the company had booked another record quarter. Jobs, the corporate world’s leading visionary, is likely has been more crucial to the company’s success than any other CEO to any other company. With few details and an undetermined timeframe, the medical leave (although Jobs will remain involved in larger, strategic decisions) has raised some concerns about the company’s future. But the fiscal first-quarter earnings report (period ended December 31) offers some reassurance that Apple continues to fire on all cylinders, at least over the shorter term.
Revenues for the quarter grew 71 percent over the year-earlier period to $26.7 billion, easily besting consensus estimates of $24.4 billion. Earnings rose
to $6 billion, or $6.43 per share, from $3.38 billion. The iPhone accounted for 39 percent of revenues with more than 16 million units sold during the quarter. It’s likely poised for further gains now that Verizon (Income/Value Portfolio), which with more than 90 million subscribers is the largest U.S. wireless carrier, is offering the phone.
Meanwhile, 7.33 million iPads were sold (17 percent of revenues) during the quarter, bringing the total number sold to 14.8 million only nine months after the device’s release. The company’s cash hoard (including marketable securities), now at $59.7 billion, continues to grow as the company raked in $8.6 billion in free cash flow. In a change from its usual stance, management noted it was putting $3.9 billion to work in a long-term, strategic supply agreement. The statement didn’t specify the actual component involved; we’d guess it relates to the LCD displays used in many of Apple’s most popular devices.
While an extended absence by Jobs could cloud Apple’s long-term future, the company remains attractive for now. The “halo effect” from its hottest devices will help boost sales of its other electronics, especially the Mac computer line, where Apple has its smallest market share (roughly 12 percent). Earnings growth over the next three to five years should be around 20 percent, giving shares an attractive PEG of 0.7.
Hand in hand with the availability of the iPhone on Verizon’s network, Qualcomm (QCOM), owner of the CDMA technology underlying the network, released strong results for the quarter. The company earned $1.17 billion in the three months ended December 26, up almost 40 percent from $841 million in the year-earlier period.
Revenues rose 25 percent to $3.35 billion, outpacing expectations of $3.2 billion. Not only was the recent quarter impressive, the market also was happy with Qualcomm’s guidance for the current quarter and year. Management revised its full-year revenue guidance to $13.6 billion-$14.2 billion from a previous range of $12.4 billion-$13 billion, and earnings guidance rose by a comparable percentage. The introduction of the Verizon CDMA-based iPhone will increase the company’s chip shipments by roughly 3 percent this quarter with further gains expected after that. In addition, the inclusion of a CDMA chip in the iPhone suggests it might work its way into the next iPad version, which would be a further boon to Qualcomm. The company is also pushing sales of its new chip, Snapdragon, currently used in some smartphones running Google’s Android operating system. Even as Qualcomm shares approach a new 11-year high, they are trading at an attractive forward PEG of 1.1. The company is financially sound with $19 billion in cash and marketable securities.”
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THE MAJOR TRENDS, published monthly for clients of Sadoff Investment Management LLC, �50 West Coventry Ct., Ste. 109, Milwaukee, WI 53�17. www.sadoffinvestments.com.
Stocks/industries that are pivoting into mega-uptrends
Ronald Sadoff: “Primarily we use a low risk methodology to identify stocks/industries that are pivoting into mega uptrends. The first screening process is to search for stocks/industries that have already undergone a sharp multi-year decline. This descent will have exhibited a major downtrend pattern (using stock price and/or relative strength). Next we look for a major upside breakout above the downtrend line. Most stocks within the industry should be exhibiting a similar breakout pattern accompanied by expanding trading volume that confirms the turnaround. A multi-year significant advance will most likely follow this pivot.
Retail StocksIn the past few months we have added a few retail
stocks to client portfolios. Many stocks in the retail industry have broken out of 5-year downtrends. During the economic downturn in 2008 many of these stocks dropped dramatically. Over the past few years during the recovery we have noticed a few have emerged even stronger than prior to the downturn.
eBay Inc (EBAY) is the world’s largest online marketplace. There are more than 90 million active eBay users and in 2009 $60 billion in goods were sold on eBay. eBay also owns Stubhub.com (an event ticket broker), Shopping.com and Half.com.
A large component of eBay is their ownership of PayPal. PayPal is the preferred online payment method and it has over 87 million active users. Approximately 40% of the top 200 retail sites use PayPal as their payment method. Similar to a credit card fee, PayPal takes a fee for merchandise
purchased. In 2011 PayPal is expected to generate over $5 billion in revenue from $116 billion in purchases.
Weight Watchers International (WTW) is another stock we recently added. Weight Watchers was founded over 40 years ago. Each week approximately 1.3 million members attend 50,000 meetings around the world. In 2009, over $4 billion was spent on Weight Watchers branded food.
The stock has recently broken out of a 5 year downtrend. In mid-February the company announced fantastic earnings powering the shares 46% higher in one day. Weight Watchers is recapturing lost market share from prior years. Their turnaround has been helped by their new PointsPlus program, a successful ad campaign featuring Jennifer Hudson and continued growth from their online component.
Meeting fees generate approximately 58% of revenues, while product sales generate 42%.
Weight Watchers members are spending more money per meeting $18 now versus $11 in 2003 and membership is increasing. While a moderate pullback can be expected after a surge, we are still positive on the shares.
Communications EquipmentDuring the past few years we have added a few
communication equipment stocks to client portfolios. These technology companies have done a very nice job of turning themselves around after the fallout from the technology bubble of 2000. We are finding many companies have broken out of long-term downtrends, with increased revenues and earnings along with growing cash on their balance sheets.
JDS Uniphase Corp. (JDSU) is best known for being one of the stars of the late 1990s tech bubble, rising from $30 per share to $1,200 (reverse split adjusted). Back during the bubble the company made a number of poor acquisitions and fell by over 99%.
After languishing for several years the stock started a turnaround in 2009. The company is a leading provider of test and measurement solutions and optical products for telecommunications providers, cable operators and network equipment manufacturers.
The company has recently expanded its margins to 48.8% from 44.6% a year earlier. Net revenues increased 38% compared to the prior year. The stock has recently been on a tear rising from around $6 per share in late 2009 to $14 by then end of 2010. When earnings were announced in early February the stock rose 26% in one day, then proceeded to rise further gaining 57% in 6 trading days.
We started adding shares of Juniper Networks (JNPR) last fall. Juniper is a networking company that helps companies with their IT infrastructure. Their customers include 99 of the Global Fortune 100. Quarterly revenues recently surpassed $1 billion for the first time. The shares are still 80% down from their tech bubble peak while revenues are nearly 6 times greater and net income is nearly 4 times greater.
JDS Uniphase broke out of a sharp downtrend in 2009 while Juniper broke out in 2010.”
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Barkerville Gold Mines - Canada’s Newest Gold Producer to Accelerate Growth with
Profits from Gold Production in 2011
Barkerville Gold Mines’ QR Mine & Mill began production of gold doré bars in 2010 and is expected to ramp up to an annual production rate of 50,000 oz Au by the close of 2011.
Within a year of beginning gold production in British Columbia at its QR Mine and Mill, Barkerville Gold Mines Ltd. (TSX.V: BGM; OTC BB Pink Sheets: BGMZF; Germany: IWUB)) expects to realize some $30 million in profits and at current gold prices, even more. With a second, high-grade operation expected to start this year, the Company expects to produce at least 50,000 ounces of gold by year-end. In the fall of 2010, Barkerville purchased a second mill facility and plans to be producing at a 100,000 ounces per year rate by the end of 2012.
“The real growth begins now” according to company President and CEO, J. Frank Callaghan. “We spent much of last year focused on bringing our first gold mine into production. Now that that is up and cash-flowing, the Company plans to use some of the cash from mining operations to finance growth. We are permitted to drill over 1300 holes for more than 300,000 meters worth of drilling, which is at or near the tops in our industry.”
This has not come easily for Barkerville, as Callaghan explains: “We are very excited about where we are now. It has been a 17-year labor of love to achieve this success. The stars are definitely aligned for us now.”
Barkerville Gold Mines has been exploring and developing their gold projects in British Columbia’s Historic Cariboo Mining District since 1994. The Company’s holdings now cover over 1,225 square kilometers, or 112,000 hectares, within the Historic Cariboo Goldfields, and encompass the Historic town of Barkerville, home of the famous Cariboo goldrush of the 1860’s, seven past-producing hard rock mines and three current NI 43-101-qualified gold deposits. Within Barkerville’s Cariboo Gold Belt properties, three historic groups of contiguous Crown-Granted mineral claims - known as the Cariboo
Group, Island Mountain Group and Mosquito Creek Group – more than 100 creeks have reported placer gold production with total recorded placer production reaching more than 2.6 million ounces. Between 1933 to 1967, an additional 1.2 million oz was produced using lode mining.
Production Underway at QR Mine, Poised to Begin at Bonanza Ledge MineThe operating QR Mine and
Mill was acquired by Barkerville Gold Mines in early 2010 and Barkerville began producing gold doré bars in September 2010. The Company is currently producing, shipping and selling dore gold bars on a weekly basis and plans to produce 50,000 oz this year.
The 900 tpd QR Mill was originally built in 1994 by Kinross for an estimated $40 million and was their first operating gold mine. Kinross shut down the QR Mine in 1998 due to low gold prices. Since then, subsequent owners spent more than $34 million on acquisition, mill upgrades, mine
development and installation of a new three-phase power line. Barkerville Gold Mines purchased the permitted QR Mine and Mill and all associated assets for 2 million shares (and a half million $1.00 warrants) out of bankruptcy. With all of the “goodbye” money spent by previous owners, Barkerville spent only $6 million to get into production and thus, was able to see cash flow from mining operations almost immediately.
While the permitted and NI43-101 compliant portion of QR is relatively small – less than 2 years worth of production - Barkerville has commenced a development drilling program at the QR’s North Zone, 300 meters below the permitted West Zone, an area drilled by previous owners which contains the largest known area of gold mineralization at QR. The Company plans to develop the North Zone later this year and expects it to become the next to feed the QR Mill.
In 2000, Barkerville’s discovery of a new style of gold mineralization
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on its Bonanza Ledge property confirmed the area’s continuing mineral potential. Since then, the Company has focused its efforts on drilling, environmental studies, a prefeasibility study and permitting in order to get the Bonanza Ledge proposed open pit into production. A permit application to begin production from the Bonanza Ledge property was accepted in Nov. 2010 by the British Columbia Provincial Government for an official 60-day review. Once permitted, the company will begin development and gold production from the Bonanza Ledge property. The company intends to operate a 70,000 tonnes per year open pit mine at the high grade Bonanza Ledge project to augment current gold production at the QR Mine & Mill.
Recently, Barkerville received Government permission to con-struct a haul road to bring ore out through Crown lands, ahead of actually receiving the mining permit. Equipment is on site and road clearing has commenced. The new haul route will provide access to Highway 26 near Wells, BC, and is designed to avoid impacts to local roads and residents by bypassing the communities of Wells and Barkerville Historic Town.
A positive feasibility study completed in 2009 on the Bonanza Ledge project was based on an NI 43-101 resource defined only to a depth of approx 250 feet. In 2010, the company confirmed through drilling that the same type of high grade, disseminated gold was intersected at depths of over 500 feet. Further exploration is planned to follow up the new deeper targets and along strike. In fact, Barkerville Gold is permitted to drill 900 holes in that area and plans to begin that work early in 2011.
Barkerville Gold, however, is looking to grow their production in the near future. A second permit-ted mill was acquired in November 2010 and will be relocated to the company’s gold deposits in the Barkerville Gold Camp. The new 1,360 tpd mill will be expanded to 2,000 tpd capacity as mining pro-duction is ramped up. Ultimately, the Company plans to produce over 100,000 oz per year.
Resource Expansion Drilling Planned at Cow Mountain
Cariboo Gold ProjectThe Cariboo Gold Project (Cow
Mountain) lies within an area where more than 2.5 million ounces of gold have been produced in historical mining dating back to the Cariboo Gold Rush of the 1860s. Barkerville is proposing an open pit mine on Cow Mountain on zones first discovered in the 1930s that were at one point mined underground.
Barkerville Gold Minesis per-mitted to drill 300 drill holes on Cow Mountain and has announced plans to begin with a , 122-hole, 20,000 meter diamond drill pro-
gram at the Gold Quartz Mine on Cow Mountain. The current program is aimed at significantly expanding the existing NI 43-101 resource – to its historic resource of over 1 million oz - and further investigating a new gold zone northwest of the mine outside of the proposed pit area. Quartz vein rock samples collected in 2008 ranged to 232 g/t gold.
“We have an aggressive explo-ration program planned on Cow Mountain,” says Callaghan. “Our goal is to grow the NI43-101 gold resource significantly. In fact, the second mill that we recently acquired is meant to service the proposed open pit mine on Cow Mountain.”
Barkerville Gold's 900 tpd QR Mill was originally built by Kinross for an estimated $40 million.
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Large Scale Exploration Planned at
Island Mountain, Mosquito Creek Deposits
Barkerville Gold Mines’ Island Mountain claim group includes gold-bearing quartz veins worked since the 1870s. At one point, the claims were owned by a Newmont subsidiary. The mine itself was developed on 11 levels to a depth of 2,500 feet via an internal shaft collared on the 4,000 ft. level. Barkerville has started a diamond drill program at the project’s Red Gulch Zone, an untested area northwest of Cow Mountain. Drilling will target gold mineralization in large unexploited areas in and around the project’s past-producing gold mines.
The contiguous Mosquito Creek claim group hosts a small gold mine developed in the early 1980s. Underground development in-cludes a vertical shaft 516 feet deep and levels at more than 4100 feet elevations.
Geology and mineralization patterns at the Island Mountain and Mosquito Creek claim group are similar to that at the Bonanza Ledge discovery, presenting an intriguing and as yet unexplored target for Barkerville.
Investment Considerations
Barkerville Gold Mines’ Presi-dent and CEO Frank Callaghan has extensive experience in the mining sector, serving as a di-rector for numerous public and private companies. Since joining Barkerville in 1994, he served as president for several publicly traded resource companies oper-ating in Alberta and the Yukon. Under his direction, Barkerville
has defined two gold deposits on its large land position in Brit-ish Columbia,is credited for identifying the new type of gold mineralization at the Bonanza Ledge discovery, acquired the QR Mine and Mill and started com-mercial gold production.
Barkerville Gold Mines is in excellent financial shape. The company raised $13.6 million in an equity financing in early 2010 and used much of the money for mining and production start-up, as well as drilling campaigns and working capital. Approxi-mately $5 million remains, an amount Callaghan says will be largely untouched as ongoing
weekly gold production allows for future operating, develop-ment and exploration costs. “It’s just a cushion. We expect to make a profit of about $30 million by September if we meet our targets and gold prices remain at current levels. None of that production is hedged,” Callaghan stressed.
With that money, Barkerville Gold will continue aggressive exploration at both its Barkerville Project and at Cow Mountain. The company is permitted to drill over 1300 drill holes for more than 300,000 meters. In addition to aggressive exploration to expand resources at its Barkerville and Cow Mountain projects, the company is planning blue-sky exploration campaigns over the remaining unexplored 9/10ths of its highly prospective 60-kilometer gold belt acquired over the past 17 years – an area locked up by the Company due to the fact that the geology remains relatively constant throughout.
The company is also continuing to expand control of its project holdings. Barkerville Gold Mines recently agreed to purchase a collective 10% net profit interest royalty held by several parties in the Cariboo Gold Quartz, Island Mountain and Mosquito Creek properties located in the Cariboo Mining Division of British Columbia. The company is also continuing to search for additional deposits that are ready to go into production.
“Barkerville Gold Mines is definitely on the map as Canada’s newest and rapidly growing gold producer,” says Callaghan. “Going into production was a huge milestone, however, we are looking forward to growing the Company rapidly in the coming months and years.”
Disclaimer: This material is for distribution only under such circumstances as may be permitted by applicable law. It has no regard to the specific investment objectives, financial situation or particular needs of any recipient. It is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. References made to third parties are based on information obtained from sources believed to be reliable but are not guaranteed as being accurate. Recipients should not regard it as a substitute for the exercise of their own judgment. The opinions and recommendations are those of the writers and are not necessary endorsed by The Bull & Bear Financial Report. Any opinions expressed in this material are subject to change without notice and The Bull and Bear Financial Report is not under any obligation to update or keep current the information contained herein. All information is correct at the time of publication, additional information may be available upon request. The company featured has paid The Bull & Bear Financial Report a fee to provide an investor awareness program. Management of the company has approved and signed off as “approved for public dissemination” all statements made herein. The directors and employees of The Bull & Bear Financial Report do not own any stock in the securities referred to in this report. The information contained herein may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements regarding expected continual growth of the featured company and/or industry. In accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the publisher notes that statements contained herein that look forward in time, which includes everything other than historical information, involve risks and uncertainties that may affect the company’s actual results, developments, and business decisions to differ materially from those contemplated by any forward-looking statements. Factors that could cause actual results to differ include the size and growth of the market for the company’s products or services, the company’s ability to fund its capital requirements in the near term and long term, pricing pressures, etc. The Bull & Bear Financial Report is not a registered investment advisor or affiliated with any brokerage or financial company.
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Oracle has Sun in hand, wind at backRichard Moroney: “Oracle (ORCL; $33) sees big
opportunities for its Exadata database machine, which handles online transactions and data warehousing for such companies as Bank of America (BAC; $13), Merck (MRK; $33), and Procter & Gamble (PG; $61). Management boasts that Exadata runs Oracle software faster than any rival product. In December, Oracle estimated that Exadata’s order pipeline had risen by a third to nearly $2.0 billion, helped by existing customers buying new machines.
This new device encapsulates a trend pervasive in the sector and specific to Oracle. Tech companies are rushing to bundle hardware with software and services on the theory that integration lowers costs and provides better performance. Exadata is the fruit of Oracle’s most ambitious acquisition to date, the $7.4 billion purchase in January 2010 of Sun Microsystems, whose hardware division now manufactures the machine.
Oracle has grown sales and per-share profits at an annualized rate of 20% over the last five years. Revenue, boosted by the Sun deal, jumped 47% and per-share earnings 40% in the six months ended November. Despite all that growth, the shares trade at 17 times trailing earnings, 18% below their five-year average. Oracle, a Long-Term Buy, represents an attractive pick for two- to three-year gains.
The businessOracle’s software business (65% of revenue in
the six months ended November) sells databases, middleware, and applications to businesses, government agencies, and schools. Middleware helps bridge the gap between computers and networks. New software licenses rose 22% in the six months ended November, expanding Oracle’s base of renewable contracts for software updates and support.
The hardware business (21%) includes the Solaris operating system, computer servers, and storage products. Storage products manage, protect, and archive customer data. Oracle’s services (14%) generate lower profit margins than the software business.
Operating profit margins, hurt by the Sun acquisition, fell to 32% in the November quarter from 37% a year earlier. Profitability at the hardware unit has improved since the deal closed as Oracle shed lower-margin businesses. Management says it is confident it can restore margins to levels seen before the Sun deal.
The outlookFor the February quarter, Wall Street sees
Oracle earning $0.49 per-share, up 29% on 34% higher sales. December-quarter results posted by Oracle’s rivals indicate robust corporate spending on technology. And Gartner ($41; IT) has raised its 2011 forecast for total tech spending, now projected to climb 5% to $3.6 trillion. Oracle, even after it laps the pre-Sun comparisons, seems capable of
growing at a faster rate.Oracle has said it will continue to acquire
intellectual property, including more hardware. In October it purchased a 10% stake in Mellanox, an Israeli company that builds equipment for data centers. An annual report for Oracle Corp. is available from 500 Oracle Parkway, Redwood City, CA, 94065; (650) 506-7000; www.oracle.com.”
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Commodity prices on the riseThomas Bishop: “Events in Libya and the Middle
East remind us how precariously balanced is our supply of energy. Over the long term the price of oil, coal and uranium can only go up. Even before the Middle East tensions blew up oil prices were rising towards $90. Frankly I think the price of oil probably should be priced around $100. In my mind this is a balance between choking off economic growth (and plunging the world back into a recession) and providing sufficient incentives to develop alternative energy sources. And so I am once again returning to the energy sector to stake a bigger position in this important area. Commodity prices are way up there again, reminiscent of the run-up in 2007-2008. It’s not just energy prices; prices from copper and steel to wheat and corn have been soaring. Copper is near all-time highs.
Now food commodities are soaring thanks to last year’s wheat crop bust in Russia due to drought, which has been made worse by 100-year flooding in Australia, and now the winter wheat crop in China is in trouble due to a drought. Not good. This causes all grain prices to rise, and then this spills over everywhere, ultimately leading to riots in countries where food (and fuel) is a much larger percentage of disposable income. Golly, weren’t we just worrying about deflation? Even here in the US it is estimated that the oil price rise in recent months has sucked $80 billion dollars out of disposable income, like a tax increase…that goes to the Middle East. In this environment I’m easing back a bit to 75% invested. Currently most attractive for purchase are Brigham Exploration (BEXP) are Deer Consumer Products (DEER), Ceragon (CRNT), Matthews Pacific Tiger Fund (MAPTX), PetroBakken (PBKEF.PK), International Coal (ICO), Northern Dynasty (NAK) and AgFeed (FEED).”
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We see value in big techGregory Dorsey: “We live in a networked world.
Much of the backbone of that wired and increasingly wireless data/voice/video network is built on equipment produced by Cisco Systems (CSCO). A colossus of the technology sector, it’s the market leader in each of its business segments, including area networks, routing, switching, wireless LANs, web conferencing and digital video.
However, the company has encountered rough sailing over the past year. The stock has declined in stair-step fashion following earnings disappointments due to several factors, including slow growth in the U.S. and Europe because of corporate and government customers delaying purchases or switching to lower-cost products.
After the company released its latest quarterly results, the stock fell to an 18-month low. Although Cisco’s sales met expectations, tighter margins caused the company to miss on the earnings front.
Technology is constantly evolving. And history is littered with once-relevant tech leaders that failed to stay ahead of trends, only to enter long declines, if they even survived. Cisco’s management is aware of this and has successfully navigated numerous transitions in its 27-year existence. We think CEO John Chambers and his team will do so again.
At this point, investor pessimism about Cisco is running extremely high. This is justifiable to some extent. But the bad news likely is already reflected in the depressed stock price. And we expect earnings growth to rebound from the current weak level.
Chambers described this as a year of transition for the company, as customers move to faster, lower-priced routers and switches.
But bandwidth usage continues to grow and the company is positioned to benefit from this, such as captured data center business by bundling servers, switches and storage together.
Further, the company is plowing some 13% of annual revenue into research and development. New product sales are up 15% year over year, and the company’s order backlog grew last quarter. Plus, management is considering shedding poor performing businesses, which would boost profit margins.
Cisco’s penetration in emerging markets is still low, at only about 10% of revenue. But sales in these markets are rising at a 50% annual clip, so they’ll become a much larger portion of the company’s revenue in the years ahead.
All told, we look for Cisco to generate at least 12% average annual growth over the next five fiscal years, starting in August. That’s not robust. But the stock is exceptionally cheap now, trading at just 11 times currently soft earnings.
Cash-rich Cisco (Page 10) plans to pass some of that profit on to shareholders in the form of dividends, for the first time ever. In the past, it has used excess
cash to acquire other companies or buy back shares. Both of those tactics likely will remain staples in the company’s arsenal. But management has indicated that it will also set an initial payout of around 2% and should boost that income stream at a healthy annual rate.
With a dividend on the way, the undervalued shares provide a solid total-return vehicle in an important segment of the technology sector. We now add it to our portfolio, for you to profit when more investors start buying again.
What to do now: Buy Cisco Systems in anticipation of the undervalued stock’s rebound, with dividends to come.”
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PEARSON INVESTMENT LETTERP.O. Box 3739, Apollo Beach, FL 3357�. Monthly, 1 year, $150. www.pearsoncapitalinc.com.
Growth Stocks Aflac and Bank of America rated “Buy”
Donald Pearson included the following two growth stocks in his recent buy recommendations.
Aflac Incorporated (NYSE: AFL; $58.86) is a general business holding company and acts as a management company, overseeing the operations of its subsidiaries. Its principal business is supplemental health and life insurance, through its subsidiary, American Family Life Assurance Company of Columbus (Aflac), which operates in the United States (Aflac U.S.) and as a branch in Japan (Aflac Japan). Aflac’s business consists of two segments: Aflac Japan and Aflac U.S. Aflac Japan sells supplemental insurance products, including cancer plans, general medical indemnity plans, medical/sickness riders, care plans, living benefit life plans, ordinary life insurance plans and annuities. Aflac U.S. sells supplemental insurance products, including accident/disability plans, cancer plans, short-term disability plans, hospital intensive care plans, fixed-benefit dental plans, vision care plans, care plans, and life insurance products. During 2009, the Company acquired Continental American Insurance Group, Inc. Institutional Holdings: 1669.
Bank of America Corporation (NYSE: BAC; $14.29) is a bank holding company, and a financial holding company. The Company is a financial institution, serving individual consumers, small and middle market businesses, large corporations and governments with a range of banking, investing, asset management and other financial and risk management products and services. Through its banking subsidiaries (the Banks) and various nonbanking subsidiaries throughout the United States and in selected international markets, it provides a range of banking and nonbanking financial services and products through six business segments: Deposits, Global Card Services, Home Loans & Insurance, Global Commercial Banking, Global Banking & Markets, Global Wealth & Investment Management, with the remaining operations recorded in All Other. Institutional Holdings: 3235.”
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ResMed developing products to improve sleep-disordered breathing
Douglas Gerlach: “After several years of growing evidence, the medical community is beginning to understand the health damage caused by poor sleep. ResMed Inc. (NYSE: RMD) benefits from this growing awareness.
The most common forms of sleep-disordered breathing (SDB) are snoring and sleep apnea. Individuals with narrow upper airways or poor muscle tone are prone to temporary collapses of the upper airway during sleep, called apneas, or to near closures of the upper airway called hypopneas. These breathing irregularities result in a lowering of blood oxygen levels, triggering the central nervous system to react to the lack of oxygen, or increased carbon dioxide by signaling the body to respond. This causes the individual to subconsciously arouse from sleep, to contract the throat muscles, and open the airway. After a few gasping breaths, the person’s blood oxygen levels return to normal and sleep resumes.
Obstructive sleep apnea, or OSA, is the most common SDB. People who suffer from OSA typically experience ten or more instances of apneas or hypopneas per hour. Surgical treatments for OSA include tracheotomy, cutting a hole in the patient’s windpipe, or other procedures that reshape the airway by removing excess tissue or installing breathing devices. These procedures are expensive and involve prolonged and often painful recovery periods.
ResMed offers the Continuous Positive Airway Pressure (CPAP) device. CPAP is non-invasive and works by applying constant air pressure through the nasal passage to keep the upper airway open and unobstructed. While not a permanent solution to SDB’s, CPAP devices have grown in popularity due to their low cost and ease of use.
ResMed Inc. was founded in Australia by Dr. Peter Farrell in 1989. The firm is the second largest provider of CPAP devices behind the Respironics division of Royal Philips Electronics of the Netherlands.
The company estimates that one in every five adults suffers from SDB at some level, and up to
90% of this group is unaware of their condition, representing a large underpenetrated market. About one in 14 suffer from OSA, a condition that has been linked to heart disease, diabetes, hypertension, and obesity. It primarily affects men (60%, versus 40% of women), the obese, and those over 40. Unfortunately, the growth of SDB should continue as populations around the world age and become heavier, a trend that has been in place for the past two decades.
Doctors and healthcare providers are becoming better versed in understanding the impact of OSA. A disproportional amount of healthcare spending goes to treat heart disease, diabetes, hypertension, and obesity. ResMed estimates that market growth for CPAP devices and accessories is averaging 8%-10% per year.
ResMed aims to grow faster than the market through product innovation and international expansion. The company introduced its newest CPAP machine, the S9, in the U.S. and Europe in early 2010. The U.S. and Latin America represent 54% of fiscal 2010 sales, and grew 10% during the second quarter of fiscal 2010. International sales in local currency grew 17% during the same quarter. The introduction of the S9 in Japan and further product extensions should keep growth moving into 2011.
In early February, ResMed’s CEO, Kieran Gallahue, left the company to become CEO of CareFusion, a medical technologies company. While this normally would be a concern, the firm named Dr. Farrell, its longtime Chairman, as interim CEO. Dr. Farrell’s involvement should minimize any transition problems and keep ResMed moving forward.
Another possible risk for the firm is the impact of healthcare reform. Starting in 2013, the company will have to pay a 2.3% tax on U.S. sales, and in later years adjust pricing to match competitive bidding. We would expect the company will adjust to these headwinds successfully.
Market analysts expect ResMed’s earnings to grow 19% over the next five years. We are more conservative and project 15% growth. If achieved, the price of the stock could reach 69, assuming EPS of $2.79 in 2015 and an average high P/E of 25. This would be an annual total return of about 17%. The downside risk appears to be 33% to a stock price of 21, the product of trailing four quarter EPS of $1.39 and the average low P/E of 15.”
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Hewlett-Packard rated “Buy”Russ Kaplan’s latest pick is Hewlett-Packard
(HPQ). “This is another recommendation in the high tech industry following Intel and Cisco.
Wall Street goes through moods, and its current outlook is negative on this industry.
Hewlett-Packard is currently trading in the low 40 area from a high of $77.8 per share in 2000. The good news about Wall Street moods is that they change and with it the price of the stock.
Hewlett-Packard had excellent earnings for the fourth quarter. But, Wall Street in its current foul mood about technology stocks, found one item on the earnings statement it didn’t care for, resulting in the sharp drop in price of the stock. Because of this current outlook, I believe you should take advantage of the undervalued price in this situation.
High tech is a fast changing industry. One of the things I look for when deciding which companies to invest in this industry is companies that have been around for many years. Hewlett-Packard, founded in 1939, certainly qualifies in this category.
The new president of the company, Leo Apotheker, recently announced a shift from manufacturing hardware to the more profitable area of software manufacturing. A major new development in this area is a new type of software called Cloud Computing, which will give users more opportunities to use software. At the same time, the Cloud concepts will significantly generate more business for this stock.
Hewlett-Packard ranks at the top in the area of financial strength so it can make this or any other transitions that are necessary such as buying other companies if need be to get a jump start in new areas of software.
As a further commitment to shareholder, Apotheker just announced raising the dividend by 50%.”
Resource Stocks
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Seasonal Timing Strategy remains in favorable season
Sy Harding: “Our Seasonal Timing Strategy™ remains in its favorable season (since October 18) and 100% invested. Our non-seasonal Market-Timing Strategy is now on a signal for the U.S. market. It remains on a buy signal for gold, on a buy signal for U.S. treasury bonds, and is now reluctantly on a sell signal on the US dollar.
At the previous sell signal in November our initial downside target was gold’s important 30-week m.a.
By hindsight that was not enough decline to exit
for. But we had concerns this time that the support at the m.a. might not hold, as happened in 2008.
Gold did decline to its 30-week m.a. and did find support there.
So far so good on the new buy signal and holding in the gold ETF GLD.
Gold has rallied further, now back above $1,400 an ounce in reaction to the spreading global turmoil, spiking oil prices, and rising global inflation.
And technically, the buy signal has spread to the slower, but less subject to whipsaws, intermediate-term MACD.
Next we need to see gold break more clearly out to new highs and break up through the potential trendline resistance drawn through its previous short-term peaks. It does have further to rise if the technical indicators are to again reach their overbought zones and stay there for awhile. And investor sentiment, which was very optimistic and excited about the prospects for $2,000 gold in November, plummeted in gold’s minor decline back to its 30-week m.a. and is still fairly cautious regarding gold, another positives for further gains.”
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Kinder Morgan Energy Partners LP: 6.3% yield and strong, steady growth
Roger Conrad: “In the early 1990s Richard Kinder parted ways with his fellow founders of then wildly successful energy upstart Enron. The reason: irreconcilable differences. He wanted to build an empire of fee-generating energy assets. They wanted to run a company based on “optionality,” doing business with other people’s assets.
Enron’s spectacular rise and fall is the stuff of folklore. Less known is the nearly 4,500 percent total return of Kinder Morgan Energy Partners LP (NYSE: KMP; $72.15) since its inception. Moreover, it continues to enrich unitholders with the same formula, boosting distributions four times over the past year for a total of 7.6 percent.
Kinder spent $1.35 billion on acquisitions in 2010, expanding its presence in shale-rich areas and its relationships with prolific producers such as Chesapeake Energy (NYSE: CHK) and Petrohawk Energy (NYSE: HK). This year management has budgeted roughly $1.4 billion for organic” growth opportunities – or expansion of existing assets – as well as prospective acquisitions.
Kinder has historically paid distributions with relatively low cash-flow coverage. The fourth quarter of 2010 was no exception, with a ratio of roughly 1-to-1. Distributions are safe, however, because of extraordinarily steady, predictable and transparent revenue streams, and little energy price risk. Assets now are benefitting from a solid recovery in throughput for a range of operations, particularly
Continued on page 19
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Great Panther Silver Output Hits Record Levels Company On Rapid Growth Path to Becoming a Mid-Tier Silver Producer
3.8 Million Ounce Silver Production Target at Two Mexico Mines for 2012
Great Panther Silver conducting underground mining at its flagship operation in Mexico’s Guanajuato Mining District, one of the world’s most prolific silver districts.
Record 2010 production of silver and base metals by Great Panther Silver Limited (TSX: GPR; NYSE Amex: GPL) bodes well for the company to reach its production goal of 3.8 million ounces of silver by 2012 – an incredible 68% 24-month increase.
“We have had five consecutive quarters of profitability, clearly demonstrating our ability to achieve our goals,” says Great Panther Silver’s President and CEO Robert Archer. “We are one of the fastest growing primary silver producers in Mexico and intend to continue growing while maintaining profitability.”
For investors, the company, which operates two 100%-owned silver mines in mining-friendly Mexico, provides strong leverage to future increases in the price of silver. The fact that the company has gold as a production by-product, providing a comfortable hedge against falling silver prices, is a significant plus. Nor does it hurt that Great Panther Silver is run by a seasoned management team led by Mr. Archer who has previously worked for such major mining companies as Newmont, Placer Dome and Noranda – and is guided by an internationally-recognized board of directors drawn from three continents.
During just the past year, Great Panther Silver invested $17 million from its cash flow to rehabilitate and expand its mines in Mexico, a major accomplishment in itself. The company acquired new equipment, developed new production faces, exceeded plant performance goals, increased resources, defined reserves, and discovered significant new high grade mineralization.
The next two years promise to provide equal accomplishments as Great Panther Silver moves toward its production goals in Mexico and expands its search for advanced silver properties
throughout Latin America.
Record Silver, Base Metals Production
Posted for 2010Great Panther Silver achieved
record production of 2,255,802 silver equivalent ounces (Ag eq oz) in 2010, a 2% increase over 2009. New records were established as well for the output of individual metals – 1,534,957 ounces silver (up 5%), 7,216 ounces gold (up 1%), 1,092 tonnes lead (up 25%), and 1,358 tonnes zinc (up 29%). In the fourth quarter alone, the company produced 565,660 Ag eq oz.
Production from Guanajuato is expected to increase steadily throughout 2011 to two million ounces of silver equivalent, largely from increased production as the Los Pozos and Santa Margarita areas reach full capacity, Cata production returns to previous levels, and new production
develops from the Guanajuatito area. Plant throughput for 2011 is estimated at 200,000 tonnes at grades of 240 g/t silver and 1.80 g/t gold for metal production of 1.38 million oz silver and 10,400 oz gold.
Output from the Topia Mine is expected to increase as development on existing and new veins and increased plant capacity contribute to production totals. Topia’s 2011 estimated 40,000-tonne plant throughput is expected to produce 0.56 million oz silver, 800 oz gold, 1,170 tonnes lead, and 1,430 tonnes zinc – the equivalent to 0.87 million ounces of silver equivalent.
The company has set a com-bined 2011 production target from Guanajuato and Topia at 2.87 mil-lion ounces of silver equivalent, (1.94 million oz silver, 11,200 oz gold, 1,170 tonnes lead and 1,430 tonnes zinc), based on prices of $1,200/oz Au, $20/oz Ag, $0.85/lb Pb and Zn.
Considering the company’s low
17
operating costs averaging $7 per ounce of silver (net of by-products) – an amount the company expects to soon lower to about $5 per ounce, increased silver production in 2011 and 2012 will significantly boost the company’s bottom line.
“Silver is more than the poor man’s gold. It is the only commodity that has both industrial uses and monetary value,” says Archer. “With increasing demand from recovering economies, we have recently seen the price of silver rising at a significantly faster rate than gold. Because we are a primary silver producer, this gives Great Panther Silver tremendous leverage.”
Historic Silver-Gold Guanajuato Mine Complex on a World-Class Deposit
Great Panther Silver’s Gua-najuato Mine Complex is located in Mexico’s second-largest pro-ducing silver district of the same name where more than one bil-lion ounces of silver have been produced over the past 400 years. The Company’s property on this world-class silver-gold deposit has a 4.2 kilometer strike length. The underground mine has 25 shafts, over 100 kilometers of un-derground tunnels, three ramps, and has produced more than 4.8 million ounces of silver equiva-lent since the Company restarted production in 2006. The plant has the capacity to double cur-rent production rates to about 1,200 tonnes per day. During the final quarter of 2010, the Gua-najuato plant achieved record gold recovery and excellent sil-ver recovery of 91.1% and 89.1% respectively. Improvements to plant operations and equipment will continue in 2011.
Production from the Los Pozos area on the 310 and 345 meter levels accounted for more than 50% of the total silver production at the mine during the fourth quarter of 2010, while production at the Cata Clavo and Santa Margarita areas will be increased in 2011. Exploratory core drilling of the Guanajuatito North Zone indicates mineralization continues to depths below the 80 meter level. Most recently, the company
Producing Silver in Mexico
18
discovered deeper mineralized silver-gold zones grading as high as 8.53 g/t gold and 1,300 g/t silver over more than a half meter in width at its Guanajuatito Mine at the northwest end of the Guanajuato Mine Complex. An access ramp will intersect the vein on the 120 meter level here to allow for more detailed exploration in preparation for an additional stoping area.
Underground exploratory core drilling between the Valenciana and Cata mine areas is also underway. Deep drilling under the main Valenciana Mine will begin in the second quarter of 2011 to test structures in the Valenciana area below the 390 level and along a 600 meter strike length.
The NI 43-101 compliant reserves for the historic Guanajuato Mine strongly indicate the project’s long-term viability and, more immediately, an anticipated improved output in 2011 and 2012. Guanajuato contains a measured and indicated mineral resource of 5,450,000 Ag eq oz, with inferred mineral resources estimated at 2,678,000 Ag eq oz. The measured and indicated mineral resources include 4,372,000 Ag eq oz of proven and probable mineral reserves, using a cut-off grade of 185 g/t silver equivalent.
High-Grade Topia Mine Producing Silver, Gold,
Lead and ZincGreat Panther Silver’s historic
Topia silver-gold-lead-zinc mine property encompasses 6,500 hectares, dominating this mining district in the Sierra Madre Mountains of Durango State. Mining in the area dates back to 1538. The deposit is characterized by high-grade, narrow veins. Although currently identified resources will support a 10-year mine life, a pending updated resource estimate is expected to significantly extend the length of economic production at the mine.
The Topia Mine recorded strong production in Q4 2010 of 129,650 oz of silver, 108 oz of gold, 515,305 lbs of lead, and 669,216 lbs of zinc from milling 9,081 tonnes of ore. This equates to 195,598 Ag eq oz, 26% higher than in Q4 2009. Ore
grades averaged 458 g/t silver, 0.46 g/t gold, 2.78% lead and 3.64% zinc. New flotation cells for the zinc and lead concentrate circuits will enable a 22% increase in plant throughput in 2011, from 180 to 220 tonnes per day. Q4 metal recoveries at the Topia plant were high: 91.5% for silver, 81.5% for gold, 92.7% for lead and 91.8% for zinc.
Mine development at Topia continued to extend known areas and provide access to new mining areas. Mining of the San Gregorio and El Rosario veins contributed almost 40% of the silver production. Ramp development at Argentina is now fully mechanized, and access to the third level is expected in the Q2 2011.
Great Panther Silver plans to increase production at Topia by 20% per year through 2012. Mineral resource/reserve estimates are pending.
Investment Considerations
Great Panther Silver is well
capitalized with $13.5 million in its treasury, and a growing cash flow sufficient to fund production, expanded mine development and exploration. Currently, some 70% of the company’s revenues derive from silver. Now in its second year of its ambitious three-year plan to reach an annual production rate of 3.8 million ounces of silver equivalent by 2012, Great Panther Silver also has its eye on potential future acquisitions.
“Profitable growth is the key to maximizing long-term shareholder value,” says Archer. “We will grow production and earnings from mining operations, while maintaining a positive cash flow and actively pursuing promising exploration and development opportunities in Mexico and South America.”
If Great Panther Silver’s track record during the past year is any indication, the company could well make good on its promises. For not only did the company set record production numbers in 2010, it conducted successful diamond dril l ing programs at the Guanajuato Mine, the nearby San Ignacio Project and the Topia Mine that delineated new resources and identified intriguing new mineralized areas. Exploration during the coming year promises more of the same: Great Panther Silver has more than doubled its 2011 drilling program to about 60,000 meters of further exploratory and infill drilling.
For example, the company will spend $2.8 million on further exploration and development at San Ignacio where it is evaluating sites for a portal to an underground ramp. Ore extracted during the development phase will be trucked to the Guanajuato plant for processing. The cash flow generated will offset the cost of exploration and development.
“Our strategy for growth beyond 2012 is to target undercapitalized projects that can be made profitable by introducing new equipment and mining methods,” says Archer. “This could add millions of ounces to our books and bring Great Panther Silver to mid-tier status.”
GREAT PANTHER SILVER LIMITED
TSX: GPR NYSE Amex: GPL
Contact: Erick J. Bertsch, Vice President of Corporate
Development
2100 - 1177 West Hastings Street Vancouver, BC V6E 2K3, Canada
government mandated ethanol deliveries (fourth-quarter volume up 19 percent).
A master limited partnership (MLP), Kinder is sometimes criticized for the higher-than-average take of its general partner, Kinder Morgan Inc. (NYSE: KMI). The latter’s initial public offering last month should improve transparency on this score. But in any case, the 6.3 percent yield and strong, steady growth are enough to recommend this MLP. Buy Kinder Morgan Energy Partners LP up to 75.”
Aurcana Corp. solidly on track to becoming the next silver producer
James Rapholz: “Aurcana Corporation (TSX.V: AUN) is solidly on track to becoming the next primary silver producer. Goal = Five million ounces of silver production every year.
$85 milllion in financing allows development of second producing silver mine.
Aurcana Corp. Highlights(1) Pure Silver Leverage; Established, profitable
producer(2) Producing silver at 92% owned La Negra Silver-
Copper-Lead-Zinc Mine in Mexico(3) Bringing Texas-based Shafter Mine to production
in 2012 with the potential to double mine life through in-fill drilling
(4) Growing annual silver production to 5 million ounces by 2012, placing Aurcana in Mid-Tier silver producer space
(5) Compelling market valuation: EV/(M&1 + 1) less than $1 per ounce cost of production
(6) N1 43-101 Compliant Silver Reserves and Resources: Proven and Probable reserves of 1 million oz; Measured and Indicated Resources of 27.7 million oz.; and inferred Resources of 22.8 million oz.
The Aurcana Corporation is dedicated to becoming one of the world’s premier pure silver producers. The completed development of the company’s two current projects, La Negra and Shafter, has the potential to quadruple currently established silver production to over five million ounces of silver per year.
The recently expanded 1,500 tons per day La Negra mine is located in Queretaro State, Mexico. Annualized production starting in 2010 is forecast at 1,200,000 ounces silver, 4 million pounds of copper and 7 million pounds of Zinc. With 28 fully accessible deposits containing different metal ratios, Aurcana can respond quickly to changes in metal prices. The Shafter Silver Mine, located in mining friendly Presidio County southwest Texas, has a N1 43-101 silver resource of 24.6 million ounces Measured and
Indicated (2,900,000 tons @ 8.48 ounces per ton), and 22.8 million ounces Inferred (2,167,000 @ 10.52 opt; assumes a 4.0 opt silver cut-off). This project is considered to have a low development risk and low operating risk. In addition, much of the key infrastructure and development expertise is already in place. A positive feasibility study estimates capital cost expenditures at $45 million, with a payback in 1.9 years using the three year average silver price of $15.53.
Financing for the developing the Shafter Mine is secured and construction is underway. Production for years one and two is scheduled at 3.8 million ounces silver recovered. Construction is expected to take 18 months. Production at the Shafter Silver Mine is expected to take 18 months. Production at the Shafter Silver mine is expected to increase output of silver in all of the United States by 10%.
[Rapholz Note] At the present time, I am encouraging silver investments above gold and oil investments. Silver at the present time, has been trading higher and higher every week in sympathy with gold. Gold has reached the point where it not only is very expensive but, the average investor believes that it can’t go any higher in price. Therefore, many folks are turning an eye toward silver investing. And, you must remember that when investing in mining stocks; you are not only investing in current corporate profits; you’re also investing into what they still have in the ground. I expect silver to be trading at $50 per ounce by the end of June and also expect gold to continue rising in price. You should also be looking at the market prices. Silver is trading today at about $34 per ounce and if it goes up one dollar that’s an approximate gain of nearly 3%. On the other hand gold is trading for approximately $1400 per ounce. So if it goes up by $1, you only reap a gain of about 7 tenths of one percent.
Investment ConsiderationsThe participation of major financial institutions,
such as Sprott Asset Management LP, in Aurcana’s recent financings is a very strong endorsement of the company’s management and the quality of its La Negra and Shafter Silver mines. In fact, institutional funds took $50 million of the $60 million equity financing, which totaled a whopping 150% Aurcana’s market cap. Aurcana’s solid performance at the end of its third quarter (September 2010) speaks volumes for the quality of its present operations and prospects for the future. Consider that when comparing the quarter with the same period in the previous year, Aurcana increased its silver production 72%, increased its net revenues 43%, and increased earnings from mining by 72%. Actual ounces of silver sold jumped by 72%.
Aurcana Corporation is an excellent investment up to $2.00 per share.
For more information on Aurcana Corporation contact Corporate Relations at 1-866-532-9333, or (604) 331-9333. E-mail: [email protected] or visit the website at www.Aurcana.com.”
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THE PRIMARY TREND3960 Hillside Dr., Ste. �0�, Delafield, WI 53018. Monthly, 1 year, $80.
Trim Oil HoldingsBarry Arnold: “We feel that oil is trading at the
whim of global tension and not based on embedded market forces. The bullish consensus on oil futures is at its highest level (65%) in over two years. When oil traded at $30-$40, bulls on crude languished at less than 25%. Contrarian indicators such as this spell too much optimism at present.
Oil is overbought and extended in our view. The energy sector has jumped by 60% since August in sympathy. We have taken advantage of this latest upswing. We sold ConocoPhillips (COP) near $79 for a total return of more than 60% in less than a year. We have also taken partial profits in Cabot Oil & Gas (COG) with its huge move from under $30 in September to over $45 recently. We continue to hold COG common in anticipation of further gains.”
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INVESTOR’S DIGEST of Canada133 Richmond St. W., Toronto, ON M5H 3M8. 1 year, �� issues, $137.
Stocks to consider in this market ‘meltdown’Jennifer Dowty: “Tensions in the Middle East,
rising oil prices, disappointing trade data from China, European sovereign-debt concerns, inflationary risks, weak U.S, employment data and increasing negative investor sentiment are several key drivers causing the stock market meltdown. Stocks in sectors sensitive to Chinese growth and higher oil prices are particularly weak. Investors seem to be looking for reasons to sell stocks rather than looking for reasons to buy stocks.
The market often overshoots to the upside and similarly oversells on the downside. In this issue, I did a screen of stocks that have had strong price corrections over the past month. Discussed below are two stocks that are starting to look attractive at current levels and are ones to watch during this market correction.
Chesapeake Gold Corp. (TSX.V: CKG; $11.64) is focused on the exploration and development of precious metal projects in the United States and Mexico, geopolitically stable countries. Chesapeake’s major project is its 100 percent owned Metates gold project in Durango, Mexico. Grades are low; however, this is offset by the large size of the project.
Metates is one of the largest undeveloped gold and silver projects in the world. The Preliminary Economic Assessment indicated the potential for Chesapeake to produce an annual average of 773,000 gold equivalent ounces with cash costs of U.S. $366 an ounce over a 27-year mine life. The project has access to infrastructure such as highways, railways, power and water. Management anticipates completing its prefeasibility study next year.
The capital required to bring this project into production is very high, therefore it is likely that the company will have to either bring in a joint-venture partner or sell the company to an intermediate of
senior gold producer. Insiders own about 18 per cent of the shares outstanding, and Goldcorp Inc. has an eight per cent interest.
Four analysts cover this small-cap stock. One analyst has a “buy” recommendation and a one-year price target of $24; another analyst has a “buy” recommendation and a price target of $15.
Technically, there is support around the $11 level and then at $10, where the 200-day-moving average price lies. The stock can be rather illiquid and therefore quite volatile. Over a five-and-a-half weak period, from January 28 until March 9, the stock price has declined over 23 per cent. The relative strength indicator is at 28, suggesting the stock is oversold (a reading below 30 is generally viewed as oversold).
Bottom line: The potential size of this future project combined with buoyant gold prices make this stock attractive for long-term investors. Chesapeake is a stock I recommend buying during this market meltdown.
Teck Cominco Ltd. (TSX: TCK; $50.87) is a diversified resource company operating in three key commodities: coal, copper and zinc. In 2010, 47 per cent of the company’s revenue was derived from coal, 24 per cent from copper and 29 per cent from zinc. Teck owns or has interests in 13 mines in Canada, the U.S., Chile and Peru. The company operates in politically safe jurisdictions.
The company’s guidance for 2011 is to increase production of coal by about eight per cent and copper by 12 per cent. Coal sales are anticipated to be between 24.5 to 25.5 million tons, copper is anticipated to be 350,000 tons, and zinc production is anticipated to contract by about two per cent to 905,000 tons. By 2012, management targets copper production of over 400,000 tons and by 2013, coal production is aimed to be over 30 million tons.
In February, the company reported weaker than expected fourth-quarter earnings results, $0.93 a share, below the $1.17 consensus estimate. Weak quarterly results, combined with labor-disruption concerns and weak equity markets have put pressure on the stock price.
There are 19 analysts covering this stock: 14 have “buy,” three have “hold” and two have “underperform” recommendations. The average one-year price target is $70.70.
Technically, the share price momentum remains weak. Year-to-date, the stock price has dropped 17.7 per cent. There is technical support at $50, and then at $45, near its 200-day moving average.
Bottom line: The stock price could potentially decline further to the mid $40s, potential low $40s, if labour unrest continues to disrupt production. At these levels, the stock would be trading at an oversold valuation. The company has sound operations, a solid balance sheet and cash flows, even offers a semi-annual dividend with a 1.2 percent yield. I would accumulate a position, but at slightly lower levels.
For disclosure purposes, either my employer or I may have investments mentioned in this column.
Editor’s Note: Jennifer Dowty, CFA, is Managing Director and Portfolio Manager at Manulife Asset Management. Ms. Dowty’s article appeared in the Investor’s Digest of Canada, 133 Richmond St. W, Toronto, ON M5H 3M8, 1 year 24 issues, $137. Call (416) 869-1177 for a Special Offer.
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DELIBERATIONS on World Markets, P.O. Box 18�, Adelaide St. Station, Toronto, ON M5C �J1. 1 year, 18 issues, $��5.The most important chart in the gold market
Ian McAvity: “Gold in US$ remains above a rising 200 Day, and its 50-Day MA has been above its 200 Day since Feb 11/09 when it closed at $944.50. The 50/200 MA ratio is a lagging, trend-confirming tool. The Feb’09 upturn was only the 5th upward cross from the secular trend low of early 2001. It’s been a remarkably orderly trend for a decade.
The surge off the post-Lehman crash has shown more acceleration against the US$. The runs that peaked in May’06 or Mar’08 were followed by more extensive corrective phases which seems to worry current players. In my travels, I keep hearing about the need for a greater pull back. The skepticism I hear about the sustainability of the probes above $1400 over the last six months truly astonishes me.
The 2005 upside breakouts against US$, Yen & Euro above really marked the return of gold to the global monetary stage as it took off against the three dominant currencies. Successive higher highs and higher lows against each of them just reaffirms the persistence of the uptrend. Plotted inversely would really reflect the loss of gold purchasing power by the three major currencies. An ounce of gold is an ounce of gold. The paper it’s measured against is rapidly losing value.
The emerging powers who dominate the G-20 (China, Brazil, India, Russia & Saudi) now hold about $5 ½ trillion of forex reserves that were mostly held
in US$ or Euro and its predessors. They aren’t too impressed by the track record of the G-7 ‘old boys club’ (US, UK, France, Germany & Japan, plus Canada & Italy for cosmetics) who ran the global monetary system into the ground with mountains of debt over the last four decades. Officially and probably in much larger numbers unreported/unofficially, they have been converting G-7 paper into gold reserves and other tangible assets around the world. That’s the real message of the trends above.
I’m not all worried about the larger trend, Gold’s 50 Day MA has been above its 200 Day since $945 nearly 26 months ago. For a few of my trigger happy friends…No I wouldn’t bail, or short because we may have a correction looming. This trend is way too powerful, and we may indeed still be digesting the breakout, particularly on the GDM Majors…who could suddenly come to life with more conviction. I don’t want to be impatient, but they’d better get going if they’re going to go, because risk of the S&P 500 cracking & taking everybody with it is looming.
If you bought a $4 stock six years ago that’s gone up in an orderly trend to $14 ½, would you panic out if it briefly dipped back to $13 ½ or even $12 ½? I doubt it…but add two zeroes and people foolishly get their knickers in a knot!”
BHP Billiton world’s largest diversified natural resource company, rated a Buy
Ingrid Hendershot: “BHP Billiton Limited ADR (BHP: $93.91), www.bhpbilliton.com, is the world’s largest diversified natural resources company. The company’s strategy is to invest in tier one assets that are large, low-cost and long-life to provide a balance portfolio of export-oriented commodities, including steel-making products, such as iron ore, metallurgical coal and manganese; non-ferrous products, such as copper, aluminum, nickel, diamonds and potash; and energy products, such as petroleum, energy coal and uranium. The company’s stock trades on the Australian and London stock exchanges with ADR’s trading on the NYSE in the U.S.
Diversified Market LeaderBHP Billiton was formed from a merger between
two highly complementary companies – BHP, a leading global natural resources company with a diversified commodity suite that includes minerals, oils and gas, and Billiton, one of the world’s premier mining companies with a portfolio of best-in-class mining and metals operations.
With a history that dates back to 1885, BHP Billiton today is one of the world’s premier suppliers of iron ore, the third largest copper and nickel producer, and the sixth largest producer of primary aluminum. In addition, the company is one of the world’s largest producers of export thermal coal, servicing the major
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power markets of Europe, Asia and the U.S., and is also the largest global supplier of seaborne traded hard coking coal. BHP Billiton has a significant global oil and gas business with producing operations in Australia, the U.K., the Gulf of Mexico, Trinidad and Tobago, Pakistan and Algeria. The company also is a leading producer of lead and zinc while BHP Billiton Manganese operations produce a combination of ores, alloys and metals. In addition, the company’s annual diamond production represents nearly three percent of current world rough diamond supply by weight and six percent by value.
BHP Billiton is a low-cost producer with unique assets that are critical to the growth of the world’s developing economies. Management focuses on optimizing opportunity while reducing risk to deliver predictable business performance from a diversified portfolio of commodities spread across diversified markets and geographies.
Robust Cash FlowsAs a result of record production volumes and record
prices in many of their key commodities over the past several years, BHP Billiton has generated very strong cash flows. These robust cash flows have enabled the company to internally fund existing operations; make acquisitions, such as the recently announced $4.75 billion offer to buy Chesapeake shale gas assets; and return capital to shareholders through dividends and share repurchases.
Free cash flow increased 153% during the first half of fiscal 2011 to $15.4 billion leading management to increase the dividend 10% and expand its share repurchase program to $10 billion to be completed in calendar 2011. BHP Billiton has a strong track record of returning excess cash to shareholders. Once management completes the $10 billion share buyback program, the company will have repurchased 15% of shares outstanding since 2004 while increasing their dividend more than five-fold over the same period. BHP maintains a strong liquidity position with $16 billion in cash on hand and a solid A credit rating.
Given the company’s f inancial strength, management plans to invest $80 billion in capital expenditures over the next five years to support significant future organic growth opportunities.
Profitable OperationsFor the first half of fiscal 2011, the company
reported revenue increased 39% to $34.2 billion with operating profit drilling up a 59% gain to $14.5 billion as an improving global economy and broader supply constraints supported the company’s core commodities. BHP Billiton delivered production records across three commodities and five businesses during the first half of fiscal 2011.
BHP Billiton generates consistently high margins and returns with an operating margin of 42% in the first half and an underlying return on capital of 48%, excluding capital investments associated with investments not yet in production. BHP Billiton is a HI-quality market leader with an uniquely diversified business model, robust cash flows and profitable operations which long-term investors should dig. Buy.”
Lawrence Roulston’s RESOURCE OPPORTU-NITIES, 1510 - 800 West Pender St., Vancouver, BC V6C �V6. 1 year, �0 issues, $�99. Includes Instant Alerts, www.resourceopportunities.com.
Romios Gold planning aggressive drilling program on its Trek project
Lawrence Roulston: “Romios Gold Resources (TSX.V: RG) is planning an aggressive drilling program on its Trek project in northwestern British Colombia. The company holds a large property position immediately adjacent to the Galore Creek project of NovaGold and Teck. Those companies are presently updating engineering studies in support of a development decision. That deposit hosts 9 million ounces of gold, 65 million ounces of silver, and 12 billion pounds of copper.
The billion tonne shaft Creek deposit of Copper Fox and Teck, located northeast of the Romios property, is also attracting a great deal of investor attention, with a feasibility study slated for completion by midyear.
The Trek property, wholly owned by Romios, abuts the southern edge of the Galore Creek property. The mine now under consideration by Teck and NovaGold to exploit that massive deposit would have ore from the Galore Creek deposits transported by conveyor through a tunnel to a mill site in the valley. That tunnel passes through Romios’ Trek property. The access road to the Galore Creek site also traverses Trek. That road, which is partially completed, will link Galore Creek to Highway 37.
Romios drilled 23 holes on the North Zone of Trek which all encountered broad zones of copper-gold-silver values. The highlight was hole TRK08 – 01 that hit 131 meters of 0.6% copper, 0.39 grams per tonne gold and 8.4 g/t silver. Geophysical surveys and surface sampling have outlined an extensive area of mineralization that sits directly above the proposed tunnel.
The company is planning a larger drill program this year that would lead to a resource estimate for the North Zone. Several other mineralized zones have been identified on the Trek property. Further work is also planned on those zones over the summer.
Romios also has roughly 400 square kilometers of property southeast of Trek in which it holds from 50 to 100% interests. Drilling by Romios together with historical results on one part of that property, called the Northwest Zone, has led to a compliant resource estimate of 1.4 million tonnes at 4.4 g/t gold, 6.4 g/t silver and 0.22% copper. That resource is wide open to further expansion and several other mineralized zones have been identified in the area of the Northwest Zone.
The Dirk property, the western-most portion of the Romios claims in that area, hosts at least four zones of copper-gold-silver. Surface samples have returned values up to 6% copper. A recent report by the British Columbia Geological Survey confirmed early work by Romios and its consultants that the geology underlying that property is similar to Galore Creek. (That observation was noted in this newsletter several years ago.)
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Romios also holds exploration projects in Ontario, Québec and Nevada. Two of those projects involve past producing mines – the Corne molybdenum mine in Quebec and the Scossa gold mine in Nevada. The company is currently evaluating methods by which to gain shareholder value for those projects.
There is an enormous amount of exploration and development activity in that portion of British Columbia. The commitment by the provincial government to extend the provincial power line to the region has added impetus for mine development. In addition to Galore Creek and Schaft Creek, noted above, other big copper deposits in the region are also headed toward development. The extensive Romios property position represents a valuable asset for which the company is not getting anywhere near the value it merits. Activity in the region and drilling over the summer by Romios should bring a lot more attention to this company, pushing the price higher. Positive results from the Romios drilling could have a big impact.
Price March 11, 2011: C$0.35 Shares Outstanding: 122 million Shares Fully Diluted: 147 million Market Cap: C$42.7 million. For further information on Romios Gold Resources Inc. contact Tom Drivas, President, Phone: (416) 221-4124, Fax: (416) 218-9772, Email: [email protected] or visit the website at www.romios.com.”
Market Outlook
THE ELLIOTT WAVE FINANCIAL FORECASTP.O. Box 1618, Gainesville, GA 30503. Monthly, 1 year, $��8. www.elliottwave.com.
U.S. Dollar rally high probabilitySteven Hochberg: “In December, EWFF pointed
to a large bet against the U.S. dollar placed by hedge funds as evidence of a bearish extreme. At that time, the cumulative large speculator net position, as tallied in the weekly Commitment of Traders report, carried to a record, in which large specs, a traders’ category mainly comprising hedge funds, were lopsidedly bearish the buck. The dollar rallied from late November and held up until mid-January. Then, however, the dollar reversed and fell back to current levels. Hedge funds are making big bets against the dollar. When nearly everyone is committed to a given financial outcome, it usually pays to stand against it. Hedge funds are not alone in assessing dollar doom. A major headline in a recent Wall Street Journal says “Why the Dollar’s Reign is Near an End.” In the article, an economics professor recapitulates all the fundamental reason why the dollar must go down. The 5- an 10-day averages of The Daily Sentiment Index (trade-futures.com) shows that dollar optimism among small traders has contracted to less than 10%, and the longer-term, 30-day averages shows just 11% bulls. At the June 2010 high, when the dollar index was at 88.71, all three DSI averages
were near 90% bulls. So sentiment is pinned to the opposite extreme now. Unfortunately, the dollar is not displaying ideal Elliott wave form here, but with so few anticipating a dollar rise, a bullish outcome remains much more probable in our view.”
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THE INTELLIGENT FUND INVESTOR�6106 Tallwood Dr., N. Olmsted, OH ��070. Monthly, 1 year, $�79. www.harloffcapital.com.
Last correction is overDr. Gary Harloff: “Our HVI values are turning up
now. And other market timing mathematics, that are loudly sounding this correction is over. Thus, while it is early for other market timers to say, we declare the last correction over.
Our S&P 500 timer switched from neutral early in March to a buy. Our other timers remain the same.
We like consumer products, biotechnology, and pharmaceuticals at this time. We also like energy, basic materials, and telecommunications. Our sector picks from best to worst are: oil, and precious metals. Emerging markets are positive at this time.”
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The Peter Dag PORTFOLIO STRATEGY & MAN-AGEMENT, 65 Lakefront Dr., Akron, OH ��319. 1 year, �� issues, $389. www.peterdag.com.
Long-term outlook very strongGeorge Dagnino: “The stock market. The market
has reached the near term bottom that we have been anticipating would take place toward the end of March. Our gauges have reached oversold levels and some of them are rising sharply, signaling that a rally is ahead of us. The market has held above the crucial 1250 and is likely to rally until May. The next bottom should take place in June.
The long-term outlook (next 12 months): momentum remains up – very strong.
This is a classic business cycle. The Fed eases aggressively. Interest rates are below inflation. The economy recovers. Commodities strengthen. Inflation starts rising two years after the end of the expansion. Profits rise. Stocks, energy, metals, commodity based sectors, soar. This is what is happening.
What’s next? The rise in commodities will depress profits. And above all, forget about what you hear from currency expects who do not know the difference between Swiss and Swedish (as I head on CNBC)!
Technical indicators. Our indicators that have fallen to extremely oversold levels are now bouncing up strongly. The message is that the market is heading higher. Any near term correction will be limited and will be an opportunity to buy more.
Sentiment, Optimism has moderated and is at neutral levels.
Outlook and strategy. The market is trying to find a bottom. The position of the business cycle suggests that metals, commodities and energy are the strong sectors.”
�5
U.S. Silver, a Pure Silver Play, Posts Strong Silver Production, Poised to Reopen Second Mine In Silver Valley
US Silver Corp owns/operates the Galena Mine in the historic Silver Valley of North Idaho. The Galena Mine and Mill, along with the Coeur Mine and Mill and the Caladay Project were acquired
from Coeur d'Alene Mines Corp for $15 million in �006. The Coeur d'Alene Mining District is the most prolific silver district in United States history with over 1.� billion ounces of silver production. Historically, the company's mines have produced some 9.9 million tons of ore containing over �00 million ounces of silver, 160 million pounds of copper, and �� million pounds of lead at an average grade of �1.� ounces per ton of silver, 0.8% copper and 8.8% lead. The Galena Mine ranks as the second largest primary silver mine in US history. U.S. Silver recently announced successful results from its �010 exploration program, including �9,37� feet of drilling. The program identified new silver veins as well as extensions of existing silver veins at the Galena mine. The drilling results also identified both new silver-copper and new silver-lead mineralization and provided reserve additions in excess of that produced during the year.
US SILVER CORPORATION
TSX.V: USA • OTC QX: USSIF
Contact: Thomas Parker, CEO
P.O. Box 440, Wallace, ID 83873
Phone: 208-752-1116 Fax: 208-556-1587
Corporate Office: Christopher Hopkins, CFO 401 Bay Street, Ste 2702
Terraco Gold Puts Nearly 1 Million Ounces of Gold on Its Books with Acquisition of Almaden Project in Idaho
Terraco Gold Corp.'s Moonlight Property is located in Nevada about five miles north of the Coeur d'Alene Rochester silver-gold mine which has produced over 1�5 million ounces of silver and well over one million ounces of gold in its �� year history and
has recently returned to production. The Moonlight Property also adjoins, on the north side, the Barrick Gold Corp. / Midway Gold Corp. joint venture of the Spring Valley Project (Spring Valley is between Terraco and Coeur Rochester). The Spring Valley project,operated by Barrick, has an NI�3-101 resource of 1.85 million ounces with minerization open on the north towards the Moonlight Project. The Middlegate Property is located in Churchill County in a region of Nevada that has historic success and includes such notable mines as the Wonder, Fairview, Paradise Peak and Rawhide. Terraco recently completed a merger with Western Standard Metals Ltd. The combined assets of the Company have created a mix of advanced and early stage gold-silver projects in the western U.S.
Torex Gold Targets 5 Million Gold Oz. Resource in 2011; Production to Start in 2014 at Morelos Gold Project in Mexico
Torex Gold Resources Inc. is a well funded, growth oriented Canadian mining company engaged in the exploration and development of precious metal resources with a focus on gold. It owns 100% of the Morelos Gold Project, an advanced stage gold exploration property, located 180km southwest of Mexico City. The Morelos Gold Project encompasses a large �9,000-hectare land position in a rapidly growing gold mining
camp where more than 15 million ounces of gold have been discovered to date. The project's current NI-�3 101 compliant resource estimate stands at 3.0 million ounces of gold in the measured and indicated category plus an additional 900,000 ounces of gold in the inferred category. Torex has been aggressively drilling at its Morelos Gold Project and plans to complete 100,000m by mid �011 with an exploration budget of C$35 million. Torex’s goal is to increase the existing resources to 5 million ounces of gold at the existing deposits.
THE DINES LETTERP.O. Box ��, Belvedere, CA 9�9�0. 1 year, 1� issues, $�95. www.DinesLetter.com.
TDL’s Seasonalities: April Rally Ahead?James Dines: “DJI: Based on the Dow-Jones
Industrials, April has been the top performing month in the past 61 years, up 39 times and down 22 times, almost 2 to 1 bullish odds, averaging a 2.0% rise for the month. S&P 500 corroborates at 42 up and 19 down, 69% bullish.
Our research additionally reveals that April has been a month with a pivotal reversal of the March trend 65% of the time (31 out of 48 years) since 1963, and at least a semi-important Top has been reached in virtually every April or May since then. April was notably a pivot month to the upside in 1994, 1997, 2001, 2002, 2003, 2005 and 2007, coinciding with our very important “Buy” signals on 5 Apr 94, 14 Apr 97, 18 April 05 (two days before rock bottom for the year) and on 20 Apr 07 after which the DJI soared 1,280 points to its Top. (April 1995 and 1999 were not pivot months, and simply continued the DJI’s bullish drive). April churning has frequently led to declines in May or June in preparation for the seasonal “summer rally,” as was the case in 1984, 1985, 1986, 1988, 1991, 1992, 1998, 2000, 2004, 2006, 2008, 2009, and 2010.
In 31 of the past 49 years the first two weeks of April ended more positively for the DJI than the final two weeks (63% of the time). The average percentage rise from 1 April to 15 April was 1.33%; the average for the period 16 April to 30 April was 0.54%. The S&P 500, when subjected to the same analysis, corroborated those results. Since 1955, the April 1 to 15 rise averaged 1.15% but from April 16 to 30 it was only 0.45%. This particular Technical Indicator predicts better market action in the first half of April than the last half.
Gold & Silver: The Dines Gold Stock Average (DIGSA) in the last 43 Aprils has risen 18 times, declined 24 times, and was neutral once. Bearish 57% of the time. The Dines Silver Stock Average (DISSA) has risen 19 times and declined 24 in the past 43 Aprils, for 56% bearish odds.”
Steven Halpern’s THESTOCKADVISORS.COM
Each day, editor Steven Halpern posts timely and insightful commentary, market outlooks and specific stock and fund recommendations from the nation’s top newsletter advisors on TheStockAdvisors.com. Here are a few recent postings.
Ultrapar Participacoes: A proxy for BrazilMark Skousen, editor High-Income Alert, www.
markskousen.com: “I see good prospects Ultrapar
Participacoes (UGP), a Brazilian energy play; based in Sao Paulo, Brazil, Ultrapar is a fuel distribution and chemical giant.
Ultrapar is an excellent proxy for the Brazilian economy. And that’s a good thing as the country’s GDP growth is likely to exceed 7% this year.
It operates more than 5,000 service stations under the Ipiranga brand. The company got a big boost a little more than a year ago when it bought Texaco’s gas distribution operations in Brazil for $520 million.
It also controls about a quarter of Brazil’s LPG dis-tribution market, delivering bottled LPG to roughly 10 million households.
It owns and operates a chemical business and is the largest producer in Latin America of ethylene oxide, the feedstock for agrichemicals, paints, cosmetics, detergents and other products.
The company also owns and operates Ultracargo, a storage business with annual sales approaching $200 million.
Car sales are booming in Brazil. (In fact, they rose even during the depths of our recession.) That spurs the company’s gasoline distribution business and gas station franchise.
Ultrapar just completed its 18th consecutive quar-ter of growth. Recent quarterly profits rose 81% on an 8% increase in revenue.
Total sales have exceeded $25.5 billion after the last 12 months. Every one of its businesses is experiencing volume growth.
In addition, Ultrapar is a low-risk cash flow gen-erating machine. Yes, the 3.5% dividend yield is less than what some of our other stocks are paying. But that is more than offset by the enormous capital gains potential here.”
CRR: Brings oil & gas deposits out of shale
Ian Wyatt, Small Cap Investor, pro.smallcapinves-tor.com: “Carbo Ceramics (CRR), a company that specializes in the horizontal drilling used to bring oil and gas deposits out of shale; it is the world’s largest producer of ceramic proppant (a granular material) used in the hydraulic fracturing.
Proppant helps facilitate hydraulic fracturing of sedimentary rock, making the process of extracting the oil, or gas, more efficient and keeping the wells operating longer and for cheaper.
Carbo Ceramics makes its ceramic proppant at three U.S. plants and two more in Russia and China. Over the past decade, sales volume has tripled, keep-ing its plants operating at capacity.
Sales in 2010 were $473 million, an increase of 38 percent year over year. Earnings per share came in at $3.40, compared with $2.27 in 2009. This year the company’s earnings are expected to grow an im-pressive 27 percent, and by 62 percent by the end of 2012.
With a forward P/E of 24 and a five-year PEG ratio of 1.25, investors might find Carbo a little pricey.
But Carbo Ceramics is growing rapidly, and pays a dividend yielding 0.6 percent. The company has a history of regularly raising this dividend.
�7
As the search for oil and natural gas continues, both onshore and offshore, Carbo Ceramics should continue to be a strong performer.”
com: “I suspect that as long as the dollar continues its slide our focus on commodities and resource stocks focusing will prove rewarding.
For our latest buy recommendation we’ll revisit an old favorite of ours. Over the years we’ve held 4 posi-tions in Conoco-Phillips (COP) and they’ve gained an average of about 32% for us.
We last sold the stock in 2009; at the time I was turned off by the company’s overpayment for Bur-lington Resources at the height of the natural gas market, and even more so by its big investment in Lukoil, the Russian oil company.
Conoco finally wised up on Lukoil and got rid of the last of its stake earlier this year and even managed to make a small profit on it.
Prior to these two gaffs, the Conoco’s management had a great track record of increasing shareholder value, and it is currently in the process of slimming down further to focus more on its most profitable assets.
Management seems chastened and has appar-ently gotten over the urge to get big for the sake of size itself.
With its prior good record, we can assume that period of silliness was brought on by the heady atmo-sphere of oil rising from $40 to a hundred-something dollars in a matter of a few years.
Conoco’s balance sheet is rock solid with operat-ing cash flow covering interest payments more than 14-times.
The company has raised its dividend at a healthy rate every year of the last decade, save one, and still has a nice yield, currently at 3.4%.
Its payout ratio is a very small 27%, meaning it has plenty of room to raise dividends in coming years. In fact, the company spent about 33% more last year buying back stock than paying dividends.
I’d prefer it just paid higher dividends, but in any case, it’s clear the company has plenty of free cash with which to reward shareholders. Buy Conoco-Phillips up to $85. Take a 4% position in our main portfolio.
Reasons To Buy Conoco-Phillips:• Great long-term track record of enhancing share-
holder value.• Rock-solid balance sheet• Good dividend with history of 14.5% growth over
the last decade• Low payout ratio leaves room for higher divi-
dends and more stock buybacks.”
GLAD and GAIN: BDCS for conservative income
Adrian Day, editor The Global Analyst, www.adriandayglobalanalyst.com: “Gladstone Capital (GLAD) and Gladstone Investment (GAIN) are
business company development companies (BDCs), providing financing and mezzanine debt to small and mid-cap companies.
Both are smaller and more conservative than other BDCs, have very strong balance sheets and offer solid yields.
Both BDCs have been slow to build the portfolio, and both are trading at premiums (lower yields) to the group.
Yet the low risk justifies the lower yields; as such, the stocks are still attractive in the current environ-ment.
Gladstone is beginning to put money to work and looking to build the portfolios. Unlike many other BDCs, he does not have to worry about reducing debt at present.
Indeed, Gladstone’s biggest challenge, in both companies, is to put on long-term debt to enable the companies to grow safely. It was the sudden yanking of credit lines during the depths of the credit crisis that caused the companies problems.
Gladstone Capital has very little outstanding on its line with $50 million in cash. It has made five new investments in recent months, though the growth in still slower than expected.
With the dividend fully covered by NII (unlike some other BDCs), we feel it is safe; the current yield is 7.5%.
Trading a tad below NAV, we would buy GLAD as a long-term conservative income vehicle with growth potential. The big investment firm Blackrock recently acquired 4.6% of the stock. Pay up to $11.20.
Gladstone Investment similarly is in a strong position, with no debt outstanding and $40 million in cash, but without long-term debt its ability to leverage is limited, despite a strong pipeline of op-portunities.
With a yield of 6.5%, it is one of the lowest-yielding BDCs, but again, it’s a safe dividend.
During the quarter, GAIN sold another of its strong investments, boosting income and the cash balance; the dividend is now well covered by NII, not all of which has to be distributed because of prior capital losses.
The stock trades at a P/E of less than 9X, and almost 20% below NAV, so it’s inexpensive.
Again, this is a conservative company with a strong balance sheet, potential to grow, and an inexpensive stock with a low-risk dividend make GAIN also a long-term buy; there’s no need to pay over $7.50 at present.”
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This timeline reeks of insider trading by Dave Sokol. Yet, in yesterday’s press release, Buffett states that “neither Dave nor I feel his Lubrizol purchases were in any way unlawful.” Come on, Warren, how can you say such a thing with a straight face! I am disappointed in Buffett’s lack of candor, just like I was disappointed last June concerning his testimony about Moody’s (NYSE: MCO) before the Financial Crisis Inquiry Commission (FCIC).
Don’t get me wrong – I don’t think that Buffett was complicit in Sokol’s insider trading. My disappointment simply revolves around Buffett’s lack of honesty in discussing Sokol’s resignation. The press release says that Sokol’s Lubrizol stock purchases “were not a factor in his decision to resign” and that Buffett was “surprised” that Sokol decided to resign. Both of these statements are lies.
Why Berkshire Hathaway Fell on the NewsNews of the resignation came after the market close
yesterday, and Berkshire Hathaway stock promptly fell more than 3% after hours. Investors didn’t like this news for three reasons. First, it sullies Buffett’s reputation as an honest, grandfather figure. Second, there is likely to be an insider trading investigation of not only Sokol but Buffett’s potential role. This investigation will probably be a significant distraction for Buffett, which will hurt his ability to maximize shareholder value in the coming months. Third, Sokol’s resignation increases uncertainty concerning Buffett’s successor at Berkshire. Buffett is 80 ½ years old and his sidekick Charlie Munger is even older at 87. It was widely expected that Sokol would assume the Berkshire CEO position after Buffett’s retirement or death.
Ajit Jain is the New Heir ApparentWho is Buffett’s likely successor in the wake of
Sokol’s resignation? The new frontrunner is Ajit Jain, head of Berkshire’s reinsurance businesses. On March 22nd, during his trip to India, Buffett told reporters that Berkshire’s board favors Jain to succeed him as CEO. Is it just a coincidence that Buffett gave the nod to Jain only three days after learning about Sokol’s insider trading? I think not.
Stay TunedYou don’t need to invest in Berkshire Hathaway to earn
Buffett-like returns. In fact, I’ll show you InvestingDaily.com how to beat Warren Buffett at his own investment game. Insider trading is not required.
Editor’s Note: Jim Fink is senior online editor for Investing Daily, an online service of KCI Investing. He writes the “Stocks to Watch” daily column that provides readers with timely insight into current events and their potential impact on publicly listed companies. For more information visit www.InvestingDaily.com.
Outperform Buffett
�9
High-Priced Stocks Worth the Money?
Epsilon, an email marketing giant, reported a security breach that may have compromised your name and email address. The potentially affected include cus-tomers of Best Buy, JPMorgan Chase, TiVo, Capital One, Wal-greens, to name a few.
The very same hackers the companies are warning you about could be using your email address to send so-called phishing emails to get your personal information, says Damon Brown a contributor on bnet.com.
Brown suggests five ways you can avoid phishing scams:
Go to the actual company website: If you receive an email, type in the actual company website directly in your web browser. Phishing emails have links that look like they would go to the website, but actually send you to a fake one.
On the actual website, look for a notice: When a security breach happens, nearly al l websites post a front-page notice in addition to sending an email.
5 Ways To Avoid Phishing ScamsAvoid giving personal infor-
mation: Legit companies rarely, if ever ask for personal information within the context of an email. On the other hand, phishing emails often use threats, like “We will shut down your account if you don’t log in,” to fool you into giving up your username/password.
D o w n l o a d s a r e n e v e r necessary: During an email breach, a company would never ask you to download a piece of software to protect your account. Phishers want you to download their software so their program can scan your computer, track your keystrokes, or another nefarious plan.
Look for mistakes: The most obvious way to spot a phishing email is to look for grammatical and visual. Note any misspelled words or off-looking icons. Companies have whole departments dedicated to customer communications, so you can bet that they would not send out an email with errors. A phishing email would not have the same standard.
Continued from page 1
For example, Google is the 800-lb. gorilla in the online field, and its high stock price indicates that to the world, said Wright. Yet not every top-notch company buys into that logic.
Firms such as McDonald’s Corp. (MCD) and Walgreen Co. (WAG) regularly split shares when they reach certain price points, in part because they like investors being able to easily buy 100 shares at a time. International Business Machines Corp. (IBM), while still pricey at around $160 a share, used to let its shares roll on up into the $300 to $400 range but has since instituted a policy of splits.
The psychological purchasing advantage of a lower price per share remains, though brokerage fees have become so competitive that buying fewer shares isn’t quite the problem that it once was.
“You used to get a break on commissions if you bought a round lot of 100 shares, but that’s changed in the past 20 years so it doesn’t matter so much anymore,” said Paul Nolte , managing director of Dearborn Partners in Chicago, Ill. “These days, buying 10 shares in a company can be as inexpensive as buying 100 shares because commission rates are more standard, stable and lower.”
The king of high-priced shares is Berkshire Hathaway Class A (BRK.A) at almost $130,000 a share. The less-expensive Class B shares (BRK.B) have less voting rights. Now around $85 a share, they were split last year to facilitate the acquisition of Burlington Northern Santa Fe Corp. “Buffett has said he’s never going to split that stock in the future because there’s no benefit in doing so,” said Nolte, while Wright noted: “Investors are buying Buffett because he has been ‘the man’ over the decades, and it is great to ride his coattails.”
Analysis proves that paying a lot for Berkshire isn’t such a bad idea.
“Take apart Berkshire Hatha-way and value its different parts – such as the reinsurance busi-ness, Burlington Northern Santa Fe, Geico and the stake in Coca-Cola – and you see the company is really worth quite a bit,” said Hardesty, who believes that the company could be liquidated at a much higher value than that at which the stock is currently selling.
The problem is that Berkshire has become so big that Buffett can no longer simply buy a stake in a company but rather must buy the whole thing in order to make a significant difference to Berkshire, Hardesty added. Another unavoid-able consideration: Buffett is 80 years old.
Google, benefiting from in-creased online advertising, brand strength and a strong cash posi-tion, has high ambitions and is in tune with a younger generation. “A
college kid who uses Google a lot might get interested in investing in it, but, at its current price, even buying 10 or 15 shares would be a lot of money,” said Hardesty.
Apple, with the rising potential of its iOS mobile operating system and its proven ability to attract new customers, draws upon the genius of Steve Jobs to come up with innovative ideas such as the iPhone and iPad. The health of Jobs is therefore watched closely by investors.
Amazon.com Inc. is the world’s largest online retailer known for strong customer service and customer loyalty. However, its ventures outside of its core business haven’t done well.
The moral: Some outstanding companies do merit a pricey stock, but every company must still be monitored.
Editor’s Note: Andrew Leckey’s column, “Successful Investing,” appears regularly in The Bull & Bear both in print and online.
JUNIOR RESOURCE COMPANIES
Atna Resources Ltd.Rapidly Growing Gold Producer;
Starting Construction at Reward Minewww.atna.com
Aura Silver Resources Inc.Strong Potential for Significant Deposits in Mexico & Canada
www.aurasilver.com
Aurcana CorporationSolidly on Track to Becoming the
Next Primary Silver Producerwww.Aurcana.com
Aurizon Mines Ltd.Gold Producer Utilizing Cash
Resources to Grow Productionwww.aurizon.com
BacTech Environmental Corporation
Cleantech Reclamation of Historic Mine Tailings
www.bactechgreen.com
Barkerville Gold Mines, Ltd.Canada’s Newest Gold Producer, Expects $30 Million Profit by Fall
www.barkervillegold.com
Great Panther Silver LimitedFast-Growing Silver Producer
Based in Mexicowww.greatpanther.com
Inter-Citic Minerals Inc.Exploring One of China's Largest
Undeveloped Gold Resources www.inter-citic.com
Lucas Energy Inc.Public Oil & Gas Company; Focused on Texas Oil Fields
www.LucasEnergy.com
Latin American Minerals Inc.Exploring Potential New Gold District in Paraguay
www.LatinAmericanMinerals.com
Mines Management Inc.Montanore Silver-Copper Project Advancing Toward Development www.minesmanagement.com
Nevada Geothermal PowerLeading in the Development of
Clean, Renewable Powerwww.NevadaGeothermal.com
Romios Gold Resources Inc.Exploring British Columbia for Huge Copper-Gold Resource
www.Romios.com
Rye Patch Gold Corp.Dominates Newly Discovered
Oreana Gold/Silver Trend In Nevada www.ryepatchgold.com
San Gold CorporationCanada's Newest Gold Producer Spectacular Exploration Success
www.sangold.ca
SMW GoldDeveloping Multi-Million Ounce
Gold Deposits in Egyptwww.smwgold.com
Strategic Resources Inc.Developing the Rare Earth
Potential of the Gallinas Mountains in New Mexico, USA
www.strategicresourcesinc.ca
Terraco Gold Corp.1 Million Ounce Gold Resource
at Almaden Project in Idaho www.terracogold.com
Torex Gold Resources Inc.Targeting 5 Million Gold Oz Resource
at Morelos Gold Project in Mexicowww.torexgold.com
Pay Only If Profitablewww.goldETFtimer.collective2.com
VectorVestNobody Analyzes Gold and Silver
Stocks Like VectorVestwww.vectorvest.com/BB
PUBLICATIONSThe Bowser Report
Featuring Blue Chip Penny Stockswww.thebowserreport.com
The Buyback LetterTurning Buybacks Into Profits
www.buybackletter.comThe Dines Letter
Cycle Analysis Precious Metals Stocks
Explicit “Buy” to “Sell” Advicewww.DinesLetter.comThe Grandich Letter
Market, Economic, Social, Political and Life Commentary
www.Grandich.com
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Rye Patch Gold Holds Sizeable Gold/Silver Resource, Seeking Major New Nevada Property
Rye Patch Gold is exploring more than 85 sq km in key mineral districts of Nevada, the world's fourth-richest gold region. The company's primary asset is the advanced-stage Wilco project, where drilling continues to upgrade an expanding gold/silver inventory. Rye Patch has acquired advanced assets and explored
aggressively towards its goal of a 10-million ounce gold inventory within 36 months. Rye Patch management, with extensive major and mid-tier experience worldwide, brings an unusual level of technical, financial and executive skills to a junior company. The group has developed and operated major mines and managed large exploration budgets on five continents. Rye Patch plans to spend a total of $3.5 million in �011 on its Nevada project portfolio. Within the Oreana trend, a total of $�.�5 million is planned for its Wilco, Lincoln Hill and Gold Ridge projects. A $750,000 first-pass drilling program is being planned at the Garden Gate Pass project. Management also is seeking new acquisitions in Nevada.
1740 - 1177 West Hastings St. Vancouver, BC Canada V6E 2K3
Phone: 604-638-1588 Fax: 604-638-1589
Website: www.ryepatchgold.com
Nevada Geothermal Leading in the Development of Clean, Renewable Power Nevada Geothermal Power Inc. is an experienced renewable energy developer focused on producing clean, renewable geothermal electric power from high temperature geothermal
resources. NGP has five properties in the Western United States: Blue Mountain, Pumpernickel, North Valley , and Edna Mountain in Nevada and Crump Geyser in Oregon. NGP's phase 1 development at Blue Mountain 'Faulkner 1' geothermal power plant is operating and generating revenue. The company's geothermal energy projects have a production potential of up to �00 MW - enough to power approximately �00,000 homes. Geothermal power is a renewable and cost effective alternative to coal, oil and natural gas fired power plants. NGP recently signed an agreement he exclusive right to purchase a 100% ownership of Iceland America Energy, Inc.'s geothermal assets comprised of the New Truckhaven, East Brawley and South Brawley Projects in California's Imperial Valley, one of the world's premier geothermal areas.
NEVADA GEOTHERMAL POWER INC.
OTC BB: NGLPF • TSX.V: NGP Contact:
Paul Mitchell / Ashli Gauvreau Corporate CommunicationsSuite 900 - 409 Granville St.
Latin American Minerals Rapidly Exploring Potential New Gold District in Paraguay
Latin American Minerals Inc. is a dynamic mineral exploration company managed by individuals with a proven and consistent history of discovery. The company's commitment is to create wealth for our shareholders by focusing on the acquisition and development of emerging exploration opportunities in the under-explored but highly prospective countries of South and Central America. Latin American Minerals is focused on the drilling and development of its Paso Yobai Gold Project and
is also exploring a Niobium and Rare Earth Element project, both also located in Paraguay. The Paso Yobai Gold Project consists of a very large footprint epithermal gold system exposed near surface along two trends. Latin American Minerals recently announced an agreement for the joint venture development of the Corporation’s Itapoty Diamond Project by Olivut Resources Limited. The Itapoty Diamond Project consists of four concessions 100% owned or controlled by the Corporation, totaling approximately ��5,000 hectares.
LATIN AMERICAN MINERALS, INC.
TSX.V: LAT
Contact: Miles Rideout, President & CEO
357 Bay St., Ste. 602 Toronto, ON, Canada M5H 2T7
Phone: (416) 363-0841 Toronto Cell: (416) 902-8558
