Market Melt-up in Progress
Posted to Premium Subscribers Nov. 7, 2013It seems like the US government shutdown has put pretty much everything on hold. The US stock market was on ‘PAUSE’, tapering has been pushed back until March, and yields remain depressed. Any incentive to rotate from yield into more growth oriented stocks has been taken away. As tapering rumors started last spring persisted, you saw a clear rotation into more risk adverse stocks. Growth stocks like FB, LNKD started to lead the sector rotation are now consolidation while yields remain depressed.
What the shutdown did do was ensure the status quo for another 6 months. It is actually healthy, creating a strong base for next launching pad which seems to be starting this in early November. The great ‘meltup’ is beginning, lack of sellers in the market, continued confidence and QE is ensuring that this market will end the year at record highs. The INDU, which was topping out on fear of tapering has a new breath of life. Yield seekers continue to dominate the market, the US banks will continue to lead the way; cyclicals will start to show life’ signalling we are on the verge of the next leg in this bull market. Yes, I said next leg in this bull market. I fully expect the global indexes to reach record highs over the next few years as Europe comes out of recession with the US continuing to lead the economic recovery.
The big question that everyone wants to know is what will tapering do to the markets when it happens?
I see many headlines saying that this a QE fueled market. Well it is. But it is more than that. The markets are at a point where they are damned if you do and damned if you don’t. Except this case damned to go higher no matter what happens scenario. The only chance I give of market going lower is if we have an absolute unforeseen economic collapse on a magnitude similar to 2008.
Well guess what people? Chances of that happening are 0%.
Will the markets drop like gold? I doubt it. If they were going to, they would have already done so in advance like gold has done. What it means is most people are looking for a continued recovery in the segment called “life after QE”… starring of course FED Chair Janet Yellen.
The big concern at the FED isn’t going to be the stimulus and cutting back and potential inflation and jobs. No they are not concerned about how the FED can taper and still maintain control of interest rates. When rates spiked this summer on taper talk, I took notice. I also took notice on how fast Ben came out to jawbone rates lower when he basically did a complete 180 on policy within days. In reality, the language used this summer was most likely a test to see what would happen to rates if they did taper and the FED got their answer. So Janet’s task is huge… how to taper, but at the same time talk interest rates down.
Can she do it? If she does… she should look for a second career in Hollywood after her term at the FED is done.
Wife Pimper to Continue
In early 2012 I wrote an article describing a ‘wife pimper’ rally ahead of us. So after 20 months is it over? Hell no. The ‘wife pimping’ part of the rally is still yet to begin. Some people on Wallstreet call it a face ripper… but those people have a shallow understanding of the market. It’s a ‘Wife Pimper’.
What do I mean about wife pimping?
Well… desperate times call for desperate measures… and in desperate times when you need money… you do desperate things… like pimp out your wife. That extra $100 could turn into a Ferrari if you get it into the market quick enough!!!
Are people really going out and pimping their wives and buying stock with the extra cash?
No. Well maybe some might do it, but generally if you are a person with somewhat normal values; it is probably not something that has crossed your mind. Who knows why it crosses my mind. What I am trying to get across about the rally is to try and get an accurate picture of the greed associated with these ‘face ripping’ ‘wife pimping’ type rallies.
What is driving this market to insane heights? Greed of course. What will eventually drive higher PE ratios into the market? Greed. What keeps people committed to a stock beyond what is anywhere near rational? Greed. When I talk about ‘wife pimping’, I am really trying to capture and describe the extent of the greed in the market. Now you really got to be one greedy muther fucker to pimp out your wife in any situation.
What is the saying about pigs getting slaughtered?
The notion of greed will drive a bull market well into the extra innings. It will drive this market for years to come. It is going to drive this market higher. The catalyst may be rising rates, it may be QE to infinity… who really knows the mind of the shadow US govt? A mind that seems to change on a whim these days.
What I do know is that the markets are breaking out to all-time highs AND THERE IS NOTHING HOLDING THESE MARKETS BACK. NOTHING.
Wife pimping literally translates that you will do anything to get into the market. Literally anything. Including pimping out your wife. What would real life signs of pimping out your wife be? Maybe mortgaging your entire house 3 times to get maximum leverage in the market. Who knows? What I do know is that we are nowhere near that type of sentiment, but at some point I expect to get there.
A Correction Coming?
Not in this Damned if you do and Damned if you don’t market.
- No tapering = stock markets go higher
- Tapering means = Stock markets go higher.
At any rate, when I am seeing typical rotation into higher risk growth oriented stocks, these are signs that the next leg in the bull market is about to begin. These are signs that the US recovery will continue well into 2014 /2015 and most likely right through to 2020 with little pause for thought or reflection here and there like we have now.
What is the invisible hand behind this market that will scoop up any sell-off?
Rising rates set to push Equities into the Stratosphere
How is this possible in a rising interest rate environment? It really seems contrary to common economic logic. Right? Higher interest rates usually mean a slower economy which means equities enter a bear market. Well that is true in a normal economy with normal interest rates.
Rates simply are anything but normal.
Rates are so low and so compressed that pretty much any and all debt are extremely exposed at these record low interest rates. This is the underlying invisible hand pushing up the market. Any jump in rates is going to annihilate the principal on a lot of debt as everything gets revalued for increasing rates. Even treasuries are going to get hit at first. The first leg of the bull market was driven by yield and value seekers. Those guys are still in happy they got high yielding investments and will never exit those positions as long as rates are this low. They certainly won’t be buying debt until rates have somewhat normalized.
Many investors will seek to ‘weather the storm’ in the equities markets. Simply put, for many investors who are seeking to protect their principal, there is no alternative investment except equities or cash.
During a period where interest rates are normalizing from artificially low which in this case is zero…. It really is like one big science experiment in action. We have never been here before so one can’t really tell you what is going to happen. What I do know is the greedy pigs in the debt market after 30 years are about to get slaughtered. Rates cannot stay lower forever and as soon as tapering happens… rates will rise no matter what the FED sets the treasury rate at.
So if you are a bond holder… are you confident in Janet Yellen’s ability to jawbone the market while she tapers? This is going to be very interesting to see how much control they have when they are not printing money and buying all the surplus treasuries.
Will rising interest rates squash economic growth?
The answer simply is no. Normalization will have minimal impact on the economy. Rates are so low, banks have had zero incentive to lend. In fact increased rates may even provide incentive for increased bank lending to small business because increased reward means banks will take larger risks. Rates are so far below historical norms there is zero lending to small business. Leveraging small business is what really drives the economy. Sure banks are lending to corporations, but those loans are not for growth oriented operations, but more for corporations taking advantage of super cheap borrowing costs in simple accounting decisions. These loans do nothing to leverage the economy but rather streamline a company’s balance sheet and income statement with historical low borrowing costs simply by locking in ‘free money’ and take advantage of low rates courtesy of Alan Greenspan and now Ben Bernanke.
The bottom line is that if interest rates rise, banks may have more incentive to lend to small business therefore enhancing economic growth in a rising interest rate environment. Lending to corporations does not leverage the economy. Lending to small business does. Even a jump of 1.5 to 2% over 2 to 3 years would do no harm and most likely increase bank lending to small business which would thus give the economy the shot in the arm it needs when it comes to growth.
Don’t cut taxes. Don’t give out lucrative subsidies. Just allow things to normalize and guess what…?
The US economy will continue to motor along
The last 4 years since March, 2009, the markets have continually climbed a ‘Wall of Worry’. The market has rallied on extremely discounted prices and value and has been driven up on the backs of yield seekers who are desperately seeking income. The markets will continue to climb that wall of worry as tapering worries and fears that markets need the punch bowl. Hell no. What the markets need is the punch bowl taken away.
- Forget about any type of meaningful correction.
- Forget about savers leaving the market and taking profits.
- Forget about low growth meaning markets can’t rise.
- Forget about PE ratios staying in bear market territory. Hell, when it’s all said and done… we may have P/E ratios at record highs and analysts calling the market cheap.
I think tapering and rates easing up will help the meltup and provide a perfect catalyst as debt holders look for creative ways to protect their capital. What better way than participating in one of the greatest bull runs in a generation? But that is just me.
Social Media Tech Stocks Leading Sector Rotation
One signal I am getting is the massive push in social media tech stocks. This is something that is more than a FAD. For many people these social media stocks are a way of life. They are not going away and are just at the beginning of being able to monetize these massive information assets. The fact that social media stocks are on the rise and in favor means that investors see an environment of growth and lower risk for years, and not just 12 months out. This is a sign of a very healthy market and one that is slowly pushing out on the risk curve into growth bellweathers such as Facebook and LinkedIn. This is definitely confirmation you want to rotate into more cyclical and growth oriented names, unfortunately in Canada, cyclical stocks means materials, which for the most part are not going to participate and are not going to come along for the ride like they have in the past 10 years. The developed world is powering ahead… not the developing world.
FB traded above $50 briefly, Groupon has also been a success story this year and LinkedIn continues to power higher. The $14B Twitter IPO is perfectly timed taking advantage of a healthy sector that looks to continue to grow with little investment alternative in the sector. The timing gives Twitter a huge runway/launching pad to run with the bulls. Even at the revised IPO price, there is ample room for Twitter to run. Its financials are poor, but on the other hand, Twitter brand power and reach which gives it huge potential if properly monetized. If you are going to own social media… you have to own the big 3 which means you own FB, LinkedIn and Twitter. That being said…. Twitter still has to prove a revenue model.
Over the short term I favor Twitter over FB and LinkedIn which have already gone on massive runs this year and are not priced for entry or re-entry. Twitter on the other hand is priced for entry and ready to rock and roll and take advantage of momentum and hype while FB and LNKD find better entry points for 2014 buyers. If you are looking at entry prices for these companies, FB entry looks between $38 to $40 and may test the IPO price while LNKD entry would be sub $200 preferably near the 50 and 200 day moving averages. I might be dreaming on FB touching its IPO price. Revenue is how you should value these companies and their corresponding year over year revenue growth and the revenue potential for these companies is staggering and for Facebook…. GOOGLE-like. These companies have for the most part locked in users for the rest of their lives. Facebook has how many habitual users? Do you know how valuable that is?
Just from personal experience and the ads I experience on Facebook, I am much more receptive to the ones on Facebook than most other sites. Sometimes I even click on them simply because they are targeted and non-invasive. Most other sites when an ad comes on, I mute and look at another web page for a minute so while the ad plays while on Facebook, at least for me anyways are far more effective. In the long run, this type of advertising has much more value than a spot say on ESPN.com selling a car that targets 1 in every 1,000 people. I even don’t mind them in my news feed if it has content and it’s relevant. I think once tweaked, these ads will be more effective than paying for $1M TV commercials… especially when it comes to a direct relationship between increasing sales. Companies will eventually get it and Facebook will rule the advertising just because of the effectiveness of targeting a specific audience.
Facebook could have a revenue model that dwarfs Google simply because of efficacy. Twitter has the same type of potential with ads showing up in your twitter feed. The one problem I see with twitter is that they will have a harder time targeting their audience than Facebook simply because Facebook knows that much more about you.
The New Tech Stocks…
| Company | Symbol | Share price | EPS | Revenue 2013 | Year/year Growth | Market Cap |
| FB | $48.69 | $0.24 | $7.4B | 45% | $118B | |
| LNKD | $228.28 | $0.33 | $1.5B | 55% | $23B | |
| TWTR | $23 - $25 | N/A | $600M | N/A | $10B - $13B | |
| Groupon | GRPN | $10.65 | -$0.14 | $2.2B | 7% | $7.1B |
| Zynga | ZNGA | $3.71 | -$0.08 | $1.0B | (20%) | $2.4B |
| Yelp | YELP | $66.83 | -$0.21 | $230M | 70% | $3.6B |
| Zillow | Z | $80.05 | -$0.33 | $200M | 72% | $3B |
So while tapering has been pushed back and yields continue to be pressed… sector rotation has paused. Yield hunters are back and the market will slowly churn forward. FB and LNKD should correct, especially while the Twitter IPO shines during the month of November making those two stocks better entries in late November early December. But I cannot stress the one company I would exposed to as early as tomorrow and taking a position in first is Twitter. Buy the IPO or wait; you may get it cheaper the first week it trades because generally you have profit takers from IPO shareholders who want to sell shares.
But how much and how eager to sell?
That is a mystery so the price could do anything. It really all depends on the appetite and how many inside sellers there market had to eat up. With FB… there was a tonne of insiders who were eager to take the money and run. What makes things even iffier is the fact the IPO priced was raised and on an earnings basis… TWITTER is more expensive than its peers. There is now a better chance that the price cannot sustain the initial hype, but this will be an excellent time to pursue an entry. Some say Twitter will double on the first day… I am skeptical… but who knows? An entry of $20 would be ideal, but if it starts to run, buy it quick and don’t wait for a pullback. A pullback at $30 won’t get you an entry anywhere near if you bought chasing the stock in the initial days. What is going to tell a lot about Twitter in the first year is how fast they grow revenue quarter over quarter.
The investing environment is ripe for these big social media names. The markets are looking to rotate and rising yields will force debt holders out of debt and into equities. Twitter could easily trade on par with FB when it comes to share price and all these stocks could trade at crazy valuations for years just because of the Perfect Strom that is on the horizon for equities. These are the high demand, hip names to own in the market. Well except maybe Zynga. Zygna has not been so lucky to turn the tide of sentiment. It is pretty hard to convince the street that you can make money on a ‘free gaming model’ and have all but given up on pursuing a paid gaming model. With revenues dropping 20% this year, Zynga has lagged but the chart looks like it wants to break out over $4.
If Zynga wants to establish a free gaming model, I hope to see some acquisition to establish a commanding market share position and create a model where top app makers hope to get bought out by Zynga while establishing ad revenue and other in game paid features. If they can establish a top market presence, an ad revenue model could easily be established to derive revenue from free gaming model with millions of users. That is the one problem with Zynga… they promote users while the market is looking at the top line growth. The market is not convinced it can monetize those users are that they are worth as much as other social media stocks. The potential for Zynga is there. Execution is important and the company still needs to cut a lot of fat and firmly establish some sort of revenue model that encourages growth.
Thoughts on Uranium
Right now the uranium industry is holding its collective breathe.
Actually, it is not just the uranium industry, but anyone who cares about the health of our global ecosystem should be concerned. This summer TEPCO announced that thousands of gallons of radioactive water are leaking directly into the Pacific Ocean. Radiation levels are up everywhere, cesium has been detected in plankton in all ten areas tested across the Pacific, and 30 months after the initial disaster when the world thought we would be healing from Fukushima, the opposite is happening.
Fukushima is getting worse.
Until Fukushima is under control, there will be no relief for uranium stocks. FIS/AMW could be one of the biggest and shallowest and high grading discoveries in the Athabasca Basin and no one is going to care and currently is extremely undervalued considering the magnitude of the discovery, especially when compared to buyouts such as Hathor’s Roughrider which sold to Rio Tinto for almost $600M. With all the successful drilling this summer Fission should be at around $2, not $1. Alpha Minerals and Fission’s combined market cap is $300M and change. Only half of what Rio Tinto bought Hathor out for.
And PLS is infinitely better in every way….
- In depth to surface.
- In grade.
- In zone width.
- And even in strike length
There is no comparison. PLS is much higher grade. PLS has been traced along a much wider extend and the zone widths are massive when compared to Roughrider. Then you take into account that a lot of the mineralization is less than 100 meters to surface… there is nothing like PLS in the Athabasca Basin. PLS should at least be on par with Roughrider even before a 43-101 resource report based on the drill results and the metrics I suggested above.
But hence; you have Fukushima 30 months after the initial meltdown spewing radioactive material into the environment killing and maiming life thousands of kilometers away on the Pacific West Coast. We pretty much have the worst case scenario unfolding before our eyes.
Don’t believe me?
Here are 5 events this summer that speak otherwise that something is seriously wrong in the Pacific Ocean.
- May 22… Researchers find high cesium in some Pacific plankton
- June 29th… Millions of krill wash up on Oregon, California beaches
- August 16… DFO investigating reports of bleeding herring
- October 24… Researcher: High death rate, ‘puzzling’ behavior in B.C. orcas
- October 26… Biologists search for cause of sea start deaths
So with the revelation that Fukushima is still spewing radioactive material, there is just no way that this sector gets off the ground. Half the investment thesis revolves around the Japanese restarting nuclear operations. I don’t care what Jim Dines says about shivering in the dark, you can always add an extra layer of clothes. No big deal. Eventually other countries like Russia and China will pick up the slack, but 48 nuclear reactors going offline is the equivalent demand to the entire HEU program.
So let’s do the math…
- 432 nuclear reactors in operation before Fukushima.
- 384 reactors in operation today.
- An 11% reduction in nuclear reactors.
- Japan required 20M to 22M pounds per year.
- HEU supplies approximately 24M pounds to the market. Net effect?
Then you have to count for the fact that the market has 50M pounds of excess uranium accumulating for 30 months of production without 20M pounds annually from Japan… and it is no wonder the spot price of uranium has drifted under $40 to $35 and in reality… no sign of relief until the excess supply is taken off the table. And now Cameco has drastically shaped up operations and has dramatically reduced costs to $17.68 per lb making $34 quite profitable for the company while most Midwest USA mines and even in Namibia have a hard time competing against. Cameco is still forecasting a $50 uranium price, but the market is saying otherwise and I have a hard time believing $40 uranium is in the cards without a Japanese restart.
A Japanese Restart Likely?
I am not betting on one. Politicians usually go with the will of the people and on this subject the most damning piece of information regarding nuclear energy in Japan, a poll in 2012 put Japanese at 80% opposed to nuclear energy and no longer trusted their government regarding radiation information. So much for Jim Dines theory about shivering in the dark. Apparently the Japanese have chosen to shiver in the dark. With Fukushima going off how it is; a huge cloud continues to loom over this sector.
And you think the worst is over?
The worst may still be yet to come. TEPCO last week accepted the US offer to help with the cleanup which will take years. Sometime this November TEPCO will be removing the fuel rods from Unit 4. One wrong move and horrific quantities of radiation could be released into the atmosphere or cause an explosion much worse than the original meltdown. One of the biggest revelations yet have the World Nuclear Association coming out with a report stating radioactive materials released into the environment have been underestimated by the Japanese by a whopping 97%.
Nuclear is not somewhere I would be. I might be exposed to FCU because of the fact it is a one of kind special delivery type of deal… but the entire investment climate has changed since TEPCO announced the contaminated water is still pouring into the Pacific Ocean. In fact I just cannot see this one coming to life.
On the other hand… if good news does come out of Japan and things can be cleaned up and the healing process start… things could turn around and people could forget… but the pride of the Japanese and not asking for international help has most likely created an even bigger problem in the long run. I always thought of nuclear as green energy because the contents can easily be stored and buried unlike atmospheric pollution. But the disaster at Fukushima has me starting to think differently about nuclear energy being green.
Marijuana Stocks
A new theme that I will slowly be starting to pound the table on is Marijuana. Marijuana is one of the biggest growth sectors of the 21st century. First you have the medical marijuana which treats everything from back pain to IBS to diabetes to AIDS to curing cancer. But you also have the recreational market which is being legalized in certain states. In reality, this is the biggest wave in medicine on the horizon and will give the entire industry a big shot in the arm. A lot of people are skeptical that the medical aspect is not worth it because you can’t patent a plant… point taken.
What makes this industry so unique is the 100’s of different ailment it treats and it’s all because of Cannabinoids contained in the marijuana. The great opportunity is taking these cannabinoids and increasing the concentrations well beyond what you exist naturally in a plant and in different combinations for different desired results. There are 6 cannabinoids that have been studied extensively, but there are over a 100 different cannabinoids in the marijuana plant, each with different and unique properties.
That is what makes this the opportunity, the endless combinations and potential to treat numerous ailment a lot better and more efficiently.
Just by tweaking Mother Nature you can get a product that is 10 times better and more effective than what someone could ever smoke in a joint or vaporize or eat in brownie. You can do in a lab what you can’t do in nature. You can bring a product to market that you can patent and no one can replicate. Just like any other pharmaceutical. And the big point… the potential to revolutionize the market in so many different medicines and diseases.
The biggest prize is bringing a class of cannabinoids cancer drugs to market which represent a ZILLION dollar opportunity. Cancer is the biggest epidemic of our time. It dwarfs AIDS. We will be here with cancer well after AIDS and other diseases have been eliminated. Cancer isn’t something you catch; it is something that happens when your cells go bad, and with all the cancer causing things in today’s environment. It is not going away.
And a cure? Well I am of the opinion that cancer treatments will always be a reactionary medicine and the closest thing to a cure we find.
Colorado and Washington = $2B Recreational market
Then there is the recreational element. This is another massive market opportunity. It is estimated that just in Colorado and Washington were marijuana is legal; it will grow to a $2B plus market. Just in those two states alone!!! The next Bud-wiser will definitely grow up from among these companies that are just starting to pop up on the radar screen. You still don’t have any public companies entering the recreational business or that are even legitimate enough to invest in yet, especially when there are medical companies which are much more legitimate.
Cannabis is still illegal in 48 states so the recreational part does not have the growth potential yet… but legalization in Colorado and the Washington States have set a trend for the rest of the country. How fast will it happen? It is hard to tell, but it is something that could have a snowball effect as more and more states start to push for legalization and decriminalization. Portland Maine became the first city to legalize marijuana and there seems to be a push in California as well as Oregon. At some point the Federal Government will enact country wide legislation. If I were to guess, full legalization may happen sometime between 2016 and 2020. It will probably be a very big issue in the 2016 election which may make the Hillary Clinton ticket unbeatable if she takes up the cause. I think if anything; despite Obama being the pothead from rumors I have heard, this is an issue the democrats don’t want to let out of the armory too quickly. That is just what I think at least. If they have done their polling right… they will find that many Americans will vote in spite of partisan lines in favor of this issue while at the same time not dissuading people who are against it not to vote for them. Maybe I got this one wrong.
At any rate, the great thing about this emerging growth sector is that you don’t have to hang your hat in just the legalization and the recreational aspect. That is just another goodie to fall from the money tree later on. The story right now is the medical marijuana market which is just as lucrative and much more open to exploitation. GW Pharmaceuticals NSADAQ:GWPH who recently launched Sativex in the USA has tripled from a sub $9 low in July to a $32.75 high in late October. This would be my favorite in the entire sector but at this time I think other companies are priced a little bit better. If GWPH falls to $20 then it becomes a much more attractive buy. The great thing about GW is that the company patents all their products and acts like a real pharma stock unlike the rest which are still in incubancy stage and trying to establish legitimacy. If there is a company on track for buyout for a bigger name to make a splash into the sector then GW is the obvious choice.
On the watch list I have 5 companies that I am watching closely and am familiarizing myself with. This list will grow as the industry grows, but being the industry is what it is… these companies need to be scrutinized a little bit more.
| Company | Symbol | Product | Market Cap |
| GW Pharmaceuticals | GWPH | Research, development, and commercialization of a wide range of cannabinoid prescription medicines. Sativex is the company’s flagship drug approved in 20 countries to treat MS (spasms) with several other cannabinoid based drugs in the pipeline. | $451M |
| Medical Marijuana Inc. | MJNA | Is a holding company that owns a variety of companies that are innovating products in the hemp/marijuana industry. | $134M |
| Cannabis Science | CBIS | Develop, produce, and commercialize novel cannabinoid based therapies for treatment of cancer and HIV | $24M |
| CannaVest Corp | CANV | Produce raw/bulk Cannabinidoil (CBD) | $313M |
| Nuvilex Inc | NVLX | Own subsidiary Medical Marijauna Sciences and applying CBD/THC to produce effective class of anti-cancer drugs | $78M |
New Picks!!!
Western Forest Products WEF-T
Shares Out… 260.9M
Market Cap... $407M
Since there is no respite in materials or gold for the next 2 or 3 years, I continue to persue other themes. In fact, there is no guarantee that materials will come back for another generation. Gold may come back, but I am not counting on it. The Chinese are in no hurry to pick up growth to previous levels. Growth in China is morphing into value added growth. It isn't about raw GDP growth and growing out, but more about China growing up.
So raw materials they still need… but they will want different raw materials.
They are no longer interested in manufacturing raw low cost goods so out the window is iron ore. I doubt iron ore will ever come back, or if it does, it will because a nation like India decides to urbanize. Instead the Chinese are turning to creating wealth in for society as opposed to the country where China has become great on the backs of slave labor of the majority of its citizens. One way I keep preaching the Chinese will create wealth is buy pursuing a strong dollar policy and importing the wealth of other nations. They will import BC wood. BC has high qulaity wood and is ideally located geograhically to become a major trading partner with China.
Telsa recently opened their first showroom in China which attracted a lot of young wealthy Chinese which is proof of this growing class in China. As more and more Chinese come into wealth by China focusing on internal policies, BC lumber will be high on the value added list. For BC, this is an emerging market that could spur growth for companies like Western Forest Products for the next decade and provide a market that may eventually be bigger than the US market. Lumber companies are in the midst of a boom just like airlines… how do you know the economy is humming along? Airlines and forestry companies are smooth sailing.
Yup. Things must really be rosy. I didn’t think lumber companies made money.
This is a multiyear bull run for companies like WEF which traded as low as $0.20 back in 2009 and nearly went out of business. WEF is riding the USA housing recovery wave along with every other lumber company, but has the added benefit of a growing Pacific Rim trading partner who will be demanding more of BC softwood products as the Yuan continues to appreciate versus all currencies. Forest products is one materials/resource that looks like it has a bright future over the next 2 to 3 years while the USA continues to recovery and China chugs along with polices that are focused on increasing Chinese wealth.
QHR Technologies QHR-V $0.97
Shares out… 48.0
Market Cap… $46M
QHR technologies is an example of a company that is melting up. QHR is perfect example of high growth company in the high growth medical sector with a product that makes everything more efficient. The basically offer a suite of software modules that provide computer based medical records for family physicians, medical specialists, and surgeons. A key component in the move throughout Canada and the rapid growth over the last five years was providing electronic healthcare records for all Canadians.
They are now taking their medical platform to the USA where Obamacare is being implemented and from the sounds of things, it looks like the USA GOVT has a problem with the technical software aspect of things. I am not sure exactly whose QHR competition is or if they have any, but the rapid growth in Canada with revenue growing from $6.5M in 2008 to $29.5M in 2012, there is a huge opportunity if they can replicate this type of success in the States.
At any rate, this company I have been watching since $0.50/$0.60 and like always...the $0.60 rule is a great predictor of stocks that take the next level. So if you like KLH… I might suggest that there is still a lot of legs on QHR before it gets ‘pricey’.
NCI-V is another stock that is taking a break because it hit $0.60 and couldn’t crack it the first go around is going to drop back off… especially if it came from sub $0.20 where it came from. You would like to see $0.40 hold, but sometimes they don’t and go right back down to where they came. NCI came in with another great quarter putting the company on track to make $0.08 per share. At $0.40 that is 5 times earnings and most likely a bottom if it gets there. It is always nice when a company has earnings to supprot its share price.
Pretvim Update
Since I announced that PVG was a ‘balls to the wall’ buy… PVG and Snowden have been slapped with class action lawsuit in both Canada and the USA. With the potential that POG has further to drop, it appears that PVG may drop even further before a bottom is firmly in. I stress that this is an extreme buying opportunity and you are getting two quality deposits that both have merit as mines. At the current price of $350m market cap, you are getting PVG for about $6 per ounce of gold which is a ridiculous price for a company with the extension to Seadridge’s KSM deposit which is going into production. If this level breaks… I wouldn’t touch PVG until $2 or so but at that price the risk reward is massive.
From the Oct. 31 new release regarding Pretium and a class action lawsuit filed in New York…
The Complaints allege that Defendants made materially false and/or misleading statements, regarding the Company's mineral resources, probable reserves and the life of mine. Specifically, Defendants did not properly measure resources or probable reserves contained within the ore located at the Valley of Kings ("VOK") mining zone at the Brucejack Project and failed to disclose that its sampling methods were not in conformance with industry standards.
I am not exactly sure how big the disagreement in estimating techniques is, but I surmise that what PVG and Snowden have done is take partial high grade samples and extrapolate it across the entire high grade zone. This technique is common in low grade deposits because the mineralization is quite consistent but in a high grade zone, generally the entire section should be analyzed. If they have done this then the company may have a real legal problem because high grade is so variable and testing a nugget across a half meter sample in a zone as narrow as two meter could overstate the results, especially if the 0.5m section tested 1000 g/t and the rest tested 1 g/t. All of a sudden 2 meters at 1,000 g/t becomes 2 meters at 250 g/t. The big problem is that it is one industry professional opinion vs. another and in reality, if the gold is there, has there been a fraud committed?
These situations are always tough, that is why I call it a balls to the wall buy… you really gotta have some big kahunas to dip your toe into this mess. But like I have said before… the stock is so cheap… the entire high grade resource value has been stripped out of the stock and it trades on par to Seabridge. It may get cheaper but I suggest even if gold drops to $1,000, the SP on Pretium will be insulated at the current prices.
If I had a millions dollars and someone put a gun to my head and said “spend it on a gold stock or I kill you”… I would probably buy this one.
Mock Portfolio
| Company | Symbol | Market Cap | Earnings | Industry | |
| Stocks on the ‘buy’ list… | |||||
| Kandi Technologies Group | KNDI | $290M | N/A | Electric Vehicles | |
| Macro Enterprises | MCR-V | $203M | $0.61/sh. (6 mos.) | Oil Services Industry | |
| Cipher Pharmaceuticals | DND-T | $180M | $0.19/sh. (6 mos.) | Biotech industry – Absorbica | |
| Stellar Biotechnologies | KLH-V | $141M | N/A | Biotech industry – KLH | |
| Village Farms International | VFF-T | $46M | $0.10/sh. (6 mos.) | Agricultural - Greenhouse tomatoes | |
| Energizer Resources | EGZ-T | $30M | N/A | Graphite Mining | |
| Sirona Biochem Corp | SBM-V | $16M | N/A | Biotech – skin lightening | |
| MedX Health Corp | MDX-V | $5M | N/A | Biotech – Mole Mate | |
| Zynga | ZNGA | $2.85B | -$0.08/sh. | Social Media Gaming | |
| Groupon | GRPN | $6.45B | -$0.14/sh. | Social Media Tech | |
| Pretvim | PVG.T | $347M | N/A | Distressed gold asset | |
| Bitcoin | BTC | N/A | Currency | ||
| New additions… | |||||
| QHR Technologies | QHR-V | $43M | $0.01/sh. | Medical Technologies | |
| Enterprise Group | E-T | $67M | $0.09/sh. | Energy Services | |
| Western Forest Products | WEF-T | $407M | $0.20/sh. | Forest Products | |
| Nuvilex Inc | NVLX | $78M | N/A | Biotech | |
| GW Pharmacueticals | GWPH | $451M | N/A | Biotech | |
| Stocks on the ‘hold’ list… | |||||
| Fission Uranium Corp. | FCU-V | $166M | N/A | Uranium – PLS Discovery | |
| Tesla Motors Inc. | TSLA | $20B | $0.20/sh. (Q2) | Electric Vehicles | |
| Lomiko Metals | LMR-V | $5M | N/A | Graphite/Graphene | |
| Barkerville Gold | BGM-V | $83M | N/A | Gold | |
| NTG Clarity Networks | NCI-V | $18M | $0.06 /sh. (9 mos) | Tech Services | |
| AgriMinco Corp | ANO-V | $7M | N/A | ||
| Canada Carbon | CCB-V | N/A | Miller Vein/Lump Graphite Mine | ||
| Stocks on the sell/sold/short list… | |||||
| Labrador Iron Mines | LIM-T | Iron Ore | |||
| Zenyatta Ventures | ZEN-V | Amorphous Graphite | |||
| GTA Resources | GTA-V | Mineral Exploration | |||
| West Africa Iron Ore Corp | WAI-V | Iron Ore | |||
Christopher Skidmore
Beat the Market Stock Picks
