The Uptrend with PM Stocks

Posted on September 17, 2007 , filed under Stocks | Leave a Comment

The uptrend with gold and silver stocks in the past month has been nothing short of spectacular. The interesting phenomenon is that PM stock prices still lag previously set prices during the most recent period that physical PM prices traded at these levels. The explanation for this is likely credit related volatility and a large amount of commercial funds waiting on the sidelines to hear a definitive response by the Fed on interest rates.

Taking a look at a few PM stock charts shows that the uptrend is solidly intact. Here is Yamana Gold’s [[AUY]] chart.

Make sure to visit kitco precious metals for recent announcements.

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1 Working Day Left, Be a Part of the RUSH

Posted on September 17, 2007 , filed under Stocks | Leave a Comment

Here we are at 1 working day left before a decision by the Fed on whether or not to cut interest rates. Gold is holding above $710, silver is above $12.50 and the USD Index is still below $13. All of these figures are encouraging for precious metals fans. I recommend loading up on PM stocks if you are expecting an interest rate cut. Gold tends to trade against the USD and with an expected interest rate cut, there will be less desire by investors to hold the USD as an interest bearing currency.

Refer to my PM stocks watchlist in earlier posts for my list of recommended picks.

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Book Review: The Little Book That Beats the Market

Posted on September 16, 2007 , filed under Stocks | 1 Comment

Purchase a copy from Amazon and remember to “add to cart” before navigating away.

My original review for this book was posted February 9th, 2006. I’ve updated the review since my last post.

In The Little Book That Beats the Market, Joel Greenblatt covers investing in stocks based on a company’s return on capital and earnings yield. It took me two hours to read the 155 page book and it makes tremendous sense. Joel speaks with enthusiasm for value investing.

The little book that beats the market emphasizes a fundamental way of finding bargain investment opportunities defined by the books “magic formula”. Although the phrase “magic formula” may scare some, it really is a misnomer, it should have been called “commonly ignored common sense formula”. Joel suggests buying a basket of stocks with a high return on capital and earnings yield. He then suggests to cycle out of the basket once a year. Although it’s not recommended to do this, I use ROE and ROA criteria for comparable statistics due to the ease of research on Yahoo! Finance.

I have been using Joel’s main criteria for finding undervalued investments on Raw Greed with a mixture of my own screening criteria with spectacular results. With all screening criteria, some objective analysis is necessary if you are going to use it to buy individual stocks. There are some very strong basics in The Little Book that Beats the Market. I highly suggest picking up a copy.

The author Joel Greenblatt is the founder and a managing partner at Gotham Capital. The fund has grown at an average annualized rate of 40%, for over 20 years.

(1 votes, average: 5 out of 5)

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2 Working Days Left, Be a Part of the RUSH

Posted on September 14, 2007 , filed under Stocks | Leave a Comment

We are now two short trading sessions away from a probable rate cut from the Fed. Gold looks like it is holding above $710 and silver now looks solidly above $12.50. The USD continues to remain under $80. There looks to be strong support from breaching the $79 mark as we came within .10 in the last two days.

Prices of PM stocks now look like a tremendous bargain in light of current physical prices. If you are expecting a rate cut, in the words of Jim Cramer, it’s time to “back up the truck”.

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Who is Janet L. Yellen and Why You Need to Know

Posted on September 13, 2007 , filed under Stocks | 1 Comment

If you were an FOMC member or close personal friend of Ben Bernanke, most people would trust your advice on rate cuts. Fortunately, while none of us are close confidant’s of Bernanke, we can glean some well heeled advice from Janet L. Yellen, the President of the Federal Reserve Bank of San Francisco. If you are at all concerned about Federal monetary policy you need to know who Janet Yellen is because she has been 100% correct in all her advance hints about rate cuts.

Readers of my blog know that I like to research news that may slip by unnoticed. On September 10th, 2007 Yellen gave a speech titled, Recent Financial Developments and the U.S. Economic Outlook, to the National Association for Business Economics.

Here are a few notable quotes from Yellen’s speech:

Beginning in mid-July, global financial markets became highly volatile and increasingly averse to risk. In the U.S., perhaps the most dramatic illustration of the ensuing flight to safety was the decline in the three-month Treasury bill rate, which dipped by almost 2 percentage points between mid-July and August 20th.

Of greater relevance to monetary policy are movements in the borrowing costs facing households and firms, since it is these interest rates that influence spending decisions and aggregate demand.

Moreover, some markets have become downright illiquid; in other words, the markets themselves are not functioning efficiently, or may not be functioning much at all. This illiquidity has become an enormous problem for companies that specialize in originating mortgages and then bundling them to sell as securities. The markets for selling these securities have all but dried up, except for the lowest-risk, “conforming” agency mortgages that can be sold to Freddie Mac and Fannie Mae. And a market where many firms, including financial institutions, get short-term funding is illiquid as well, namely, the market for asset-backed commercial paper—short-term business loans that are secured by other assets, often mortgages. With liquidity problems in the markets in which many mortgage companies both sell assets and borrow, these firms have faced serious challenges, and a few have gone out of business.

Depository institutions also face some illiquidity, specifically in the funding markets for maturities in the one- to six-month range. Compounding their liquidity problems are concerns that mortgages and other assets that are normally securitized may come back onto their balance sheets and that customers may draw on unsecured credit lines.

For the conduct of monetary policy, the main question is how recent financial developments and other economic factors affect the outlook for the U.S. economy and the risks to that outlook. The reason this is the main question is that monetary policy’s unswerving focus should be on pursuing the Fed’s mandated goals of price stability and full employment.

…I believe it is critical to take a forward-looking approach—gauging the effects of recent developments on the outlook, and, importantly, the risks to that outlook.

This and previous speeches given by Yellen are linked on the website of the Federal Reserve Bank of San Francisco here: http://www.frbsf.org/news/speeches/.

I found the following analysis of Yellin’s speech on a kitco article, Hyperventilating Hyperinflation by Roger Wiegand.

One of our favorite World Champion Economist’s, whom we revere for his clear thinking and experience is David Rosenberg at Merrill Lynch. Mr. Rosenberg released a two pager analyzing Janet Yellin’s talk and pronounced her speech “a hard-hitting and sober assessment.” Yes!!

David told us, “First, it is worth noting that while she is not a current voting member of the FOMC, she is a highly regarded senior Fed official whose words carry a lot of weight.” We might also add Janet’s opinions have been 100% consistent with overall FOMC voting and attitudes. She has not opposed any of them even once. This tells us when she speaks, that is probably the internal, unspoken consensus within the group and her ideas and opinions are where this bunch goes next. Bottom line says, rate cuts ahead to save the immediate world.

I have to say that from reading Yellen’s speech, the conclusion is that the Fed must take forward leaning action in cutting interest rates to reduce borrowing costs facing households and firms.

In my previous article, The Fed’s Possible Monetary Policy Direction, I wrote that:

I expect to see a large pop in financial and precious metal stocks that have taken a beating. I am watching to see if major commercial banks Citigroup Incorporated. [[C]], JPMorgan Chase & Company [[JPM]], Bank of America Corporation [[BAC]] and Deutsche Bank AG [[DB]] trade closer to their 52-week highs to see if a broader medium-term rally is shapeable.

My stance currently remains the same.

*Disclaimer: The author owns no positions in any of the stocks mentioned in this article.

(1 votes, average: 5 out of 5)

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3 Working Days Left, Be a Part of the RUSH

Posted on September 13, 2007 , filed under Stocks | Leave a Comment

We are now 3 working days away from a probable rate cut by the Federal Reserve. A precious metals rush is coming and in a big way. As indicated in my September 11th, 2007 article, we did experience a small breather in the market. It will be important for gold to stay in the $700-$710 range and for silver to stay above $12.50. It is encouraging for PM investors to see that the USD Index inching closer to $79. I recommend anyone invested in the USD to consider alternative currency investments such as the Australian or Canadian Dollar. Both countries have heavy exposure to natural resources. Canada in particular has a strong base of metals, natural gas and oil.

I have an open buy order for Hecla Mining Company, [[HL]] at $7.65.

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Investing in Gold and Silver, 4 Working Days Left, Be a Part of the RUSH

Posted on September 12, 2007 , filed under Stocks | 5 Comments

26 year high for spot price of gold in May 2006

Spot price of gold in September 2007

Take a look at these two charts. With gold currently at $711, we are less than $20 away from gold’s former 26 year high of $730 set during May, 2006. I still see that many PM stocks are a far way off from trading at the levels seen while spot prices were previously this high. This spells catch-up to me for PM stocks and has been the recent overwhelming theme of Raw Greed. My writing has been focused on finding fundamental investments from speculation and greed. This is about as speculative as you can get.

There is tremendous continued strength in the spot prices of gold and silver. It looks like gold may form a base above $710. We are also looking at a rapid drop in the USD Index. The $80 mark was a key psychological barrier. We are now 4 trading sessions away from a pending rate cut by the Fed and it looks like the market is pricing in the likely cut. Front page articles on Yahoo! Finance, like the one titled: Stocks End Higher on Hopes for Rate Cut add to the fervor.

Taken from the article:

“Bernanke didn’t really say anything about interest rates, but at this point the feeling on Wall Street is that it’s mandatory,” said Steven Goldman, chief market strategist, Weeden & Co., speaking about a rate cut.

I put in an order to buy Hecla Mining Company [[HL]] yesterday at $7.69. The stock shot up past my range of $7.50-$7.80 rather quickly. If you aren’t in on PM stocks because of the recent rapid appreciation, I urge you to take a small position in PM stock options to gain some exposure to the possible extended bull run.

For reference, here is the list of PM stocks that I am watching:

Barrick Gold Corporation [[ABX]]
Newmont Mining Corporation [[NEM]]
Silver Wheaton Corporation [[SLW]]
Gold Fields Incorporated [[GFI]]
Coeur d’Alene Mines Corporation [[CDE]]
Tanzanian Royalty Exploration Corporation [[TRE]]
Northgate Minerals Corporation [[NXG]]
IAMGOLD Corporation [[IAG]]
Hecla Mining Company [[HL]]
Pan American Silver Corporation [[PAAS]]

*Disclaimer: The author is currently holds positions in Coeur d’Alene Mines Corporation, Tanzanian Royalty Exploration Corporation and Northgate Minerals Corporation.

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5 Working Days Left, Be a Part of the RUSH

Posted on September 11, 2007 , filed under Stocks | Leave a Comment

The countdown is continuing. There are now 5 working days left before an anticipated rate cut by the Fed on September 18th. We may be due for a small breather as the market weighs in the certainty of the rate cut. I expect to see a high degree of volatility in the trading action for PM equities in comparison to spot prices.

Gold managed to stay above $700, silver managed to stay above $12.50 and the USD Index managed to stay under $80 as we exited the overnight Asia market. Hecla Mining Company [[HL]], mentioned in my article below, is now in my price range of $7.50-$7.80.

(2 votes, average: 5 out of 5)

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Raw Greed’s Top 3 Silver Miners

Posted on September 10, 2007 , filed under Stocks | 1 Comment

Metals are still going strong with gold hovering over $700. Silver has managed to break $12.50 and the USD Index has managed to stay under $80. It will be interesting to see the COT report this week. I expect to see a decrease in commercial shorts again and an increase in commercial long positions. Prices of stocks in PM miners still remain relatively low. Here are my top 3 silver mining picks. You will notice that all three silver miners follow my recent theme of buying stocks with all cash and no debt positions.

Hecla Mining Company [[HL]]
Market Cap: 950.26 Million
Trailing P/E: 17.79
Forward P/E: 20.79
Cash Position: 180.64M
Debt: 0
ROE: 23.73%
ROA: 6.16%
52-week range: $4.90-$9.89

On September 3rd, I wrote this article about possible investments in IAMGOLD Corporation [[IAG]] and HL. My price target to buy HL was under $7. I now view HL as an attractive investment at the recent price range of $7.50-$7.80.

Pan American Silver Corporation [[PAAS]]
Market Cap: 1.97 Billion
Trailing P/E: 23.61
Forward P/E: 16.08
Cash Position: 143.73 Million
Debt: 0
ROE: 16.65%
ROA: 8.93%
52-week range: $17.50-$32.46

Silver Wheaton Corporation [[SLW]]
Market Cap: 2.77 Billion
Trailing P/E: 32.34
Forward P/E: 31.12
Cash Position: 40.33 Million
Debt: 0
ROE: 14.06%
ROA: 8.46%
52-week range: $7.95-$14.92

*Disclaimer: The author holds no positions in any of the stocks mentioned above.

To track silver announcements visit the Kitco precious metals silver site.

(1 votes, average: 5 out of 5)

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Purchasing QLGC - QLogic Corporation

Posted on September 10, 2007 , filed under Stocks | 1 Comment

In a follow-up to my previous post, I’ve purchased 500 shares of QLogic Corporation [[QLGC]] at $12.65. I intend to purchase an additional 1000 shares at my original target price under $12.50.

(1 votes, average: 3 out of 5)

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QLGC - QLogic Corporation, Another Undervalued Stock Pick

Posted on September 7, 2007 , filed under Stocks | 2 Comments

By now, Raw Greed readers know what I like to see in an investment. I’ve formed an investment strategy around Joel Greenblatt’s primary statistics for finding undervalued investments. I like to see cash rich, no debt, high ROE and ROA companies. Today, I’ve added QLogic Corporation [[QLGC]] as one of my top undervalued picks.

QLogic Corporation supplies storage networking solutions and network infrastructure solutions. It produces host bus adapters; and Fibre Channel switches, including core, blade, and stackable switches.

Let’s take a look at the statistics:

Market Cap: 1.87 Billion
Trailing P/E: 19.49
Forward P/E: 14.12
Cash Position: 478.64 Million
Debt: 0
ROE: 12.44%
ROA: 11.10%
52-week range: $11.46-$22.94

The cash position of QLogic Corporation is 25.59% of the companies market cap. What’s more, Qlogic’s high ROE and ROA mean the company is still generating strong returns for shareholders. While competitors like Broadcom Corporation [[BRCM]], Brocade Communications Systems, Inc. [[BRCD]], Emulex Corporation [[ELX]] and Cisco Systems, Inc. [[CSCO]] also enjoy strong cash positions, none of them contain as high a cash to market cap ratio as Qlogic. With the exception of Cisco’s higher ROE and ROA, all of the statistics for the companies mentioned above are worse than Qlogic’s.

The 52-week range for QLGC shows that Mr. Market is largely underpricing Qlogic, most probably due to an overreaction as the market convulses in wild directions. QLGC is currently trading close to its 52-week low. There are plenty of fundamentally weaker stocks in the technology and networking sectors with a better marketing story that are trading closer to their 52-week highs. All of this spells out undervalued for QLGC.

If the market rebounds, I expect to see a repricing of QLGC shares closer to the $15-$18 range in the short-term. I plan to pick up 1000 shares at or under $12.50.

*Disclaimer: The author owns no positions in any of the companies mentioned above.

(1 votes, average: 5 out of 5)

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6 Working Days Left, Be a Part of the RUSH

Posted on September 7, 2007 , filed under Stocks | Leave a Comment

Here we are with gold above $700, silver above $12.40 and the USD index under $80. All the things I have written about have come to pass, albeit much quicker than I anticipated. It will be critical for gold and silver to form new bases close to current prices for investors to feel confident that we aren’t looking at a false breakout. We are 6 trading sessions away from an anticipated cut in interest rates from the Fed. A cut would be a boost for the market and even more so for precious metals equities.

I can point to the recent surge in physical precious metals prices as confidence by institutional investors that what I am analyzing and writing about has a high probability of happening. Prices of PM equities are still low so get in while you can and load up prior to the 18th.

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ZOOM ZOOM ZOOM - GOLD AND SILVER

Posted on September 6, 2007 , filed under Stocks | 2 Comments

Gold is now at $695 and a few dollars away from approaching $700. Silver is at $12.40 and inching closer to breaking $13. The USD Index is under $80.40. Gold futures just broke $700. Combine all this with a Fed interest rate cut as I mentioned below and you have the formula for an explosion in precious metals prices. I wrote the article below more than 24 hours ago and set it to post early this morning. Let’s hope gold and silver can maintain and break these levels without seeing another false breakout. The strength in physical prices has slowly seen upticks in the last few sessions, it looks amazing and is undoubtedly supported by institutional investors betting on the next leg of the bull run.

(1 votes, average: 4 out of 5)

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8 Working Days Left, Be a Part of the RUSH

Posted on September 6, 2007 , filed under Stocks | 2 Comments

Be a part of the rush, the next precious metals rush that is. I am guessing that we are 8 working days away from the beginning of a major rally for precious metals stocks. This rally, as I have written in the past, will be driven by a possible cut in interest rates by the Fed. I am looking for a 0.25% to 0.5% cut on September 18th.

I urge readers to pay special attention to the three charts at the top of the Raw Greed blog. What we see is that gold and silver are making major moves up and the USD index is falling closer to breaking under $80. If we can maintain levels above $680 for gold and $12 for silver, it should be a cinch for gold to break $700 and silver to break $13 using an interest rate cut as the fuel.

Commercial shorts, as evidenced by the most recent COT report, seem to share the perception that an interest rate cut is highly likely.

The official COT summary of options and futures for gold, silver and copper can be found here:http://www.cftc.gov/dea/options/deacmxsof.htm

Prices of many gold and silver mining stocks are far more depressed than the actual price of the metals. Plenty of gold mining stocks are trading as if gold were closer to $600 instead of $700. Silver mining stocks are trading as if silver were closer to $10 instead of $13. There is a lot of catching up to do to for prices of precious metals equities to match physical prices. I suspect that we may shatter all records on the heels of the Fed.

Here are a few precious metal mining stocks to consider that are on my watchlist, in no particular order:

*Disclaimer: The author is currently holds positions in Coeur d’Alene Mines Corporation, Tanzanian Royalty Exploration Corporation and Northgate Minerals Corporation.

(1 votes, average: 4 out of 5)

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Yahoo! Finance Changes Stock Data Download URL

Posted on September 5, 2007 , filed under Stocks | Leave a Comment

Some readers may notice some strange things going on when they view their favorite stock blogs. My own blog, Raw Greed, and a number of other blogs use plugins that are powered by Yahoo! Finance. Yahoo! decided to change the stock data download url leaving many blogs with the message “the document has moved” when trying to view stock quotes or stock charts generated by plugins. Graciously some developers like Andrew Hill, that created the plugin that powers my portfolio picks in the sidebar have updated their plugins very quickly.

I’m sure some other publishers that use Yahoo! Finance powered plugins are having some difficulties unless their plugins were updated to reflect the address change. I just wish Yahoo! would keep track of services that use the stock data download url and inform developers with a prominent notice on the Yahoo! Finance page that they are making technical changes. A notice after hours would have been very practical and saved some publishers like me a tiny bit of angst.

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