Tuesday, March 19, 2013

Twelve super-cheap gold and silver stocks that could see explosive rallies

Buy low, sell high. How many times have we heard that well worn saying? How about, 'buy when there is blood in the streets'? Or, 'sell when others feel greedy and be greedy when others are selling like hell', or something like that.

Well guess what. Here is your chance to have the last laugh no matter how sick and tired you are of getting the short end of the stick with this or any sector of the stock market. This article will quickly show you a dozen gold and silver miners that will give you the very opportunity to 'buy low and sell high' you have grown weary of hearing. The potential at this very moment is simply mind-boggling.

The mining sector, by every metric known to stock analysts, gurus and the rest of us, is now selling at a discount - an enormous discount - to the underlying product of their business which is, of course, mining gold and silver. Prices of mining shares are quite literally at lows seen maybe 5 times, if that, in the past 100 years. 

Companies and their stocks can be valued in a variety of ways and I don't think there is a particular evaluation method that singularly gets the gold star. But it has always made sense to me to ask this question: "if I bought this entire company - every single share of it - and then decided to tear the company apart, first paying the creditors then liquidating the assets at a fair market price, how much money would I then have?" 

And, "would I have more money because I bought the company at a discount to its fair tangible value or would I have payed a premium that entirely evaporates into a loss for me when the value of the pieces are completely sold off?"

Using this evaluation method, that is, finding gold and silver miners that are selling for less than their tangible value, I constructed the table below to include the 12 miners that I found to be priced by the stock market even lower than their tangible value. And if you look at their 2013 earnings projection you will note that most have decent earnings ahead - some even project explosive earnings.

The column Price / Book Value is where you will find the degree to which each miner is discounted. 

A reading of 100% would signify that a miner is selling exactly at its tangible book value. Most miners today sell well above 100%. For example, Goldcorp (GG) sells for 130% of book value. Barrick Gold Corp (ABX) sells at 230%, Newmont Mining Corp (NEM) sells at 140%, and Gold Resources Corp (GORO) sells at 730% of tangible book value. 

Here is my carefully researched list where everything is selling below book value. And should you do a little further research by looking at the charts of these miners, be sure you note the price of the stock when gold was nearing $1900 in 2011 - because once gold gets back on the bull and starts bucking higher, those prices could easily become your selling price.

Click on any chart to ENLARGE
It would only be fair of me to expose my bias to readers who are not frequent readers. I own Claude Resources (CGR) and US Silver and Gold (USGIF) in both my trading and retirement accounts.

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Using BB On Volume To Determine Tops/Bottoms

On Friday the volume on the Nasdaq exceeded the upper bollinger band that I’ve plotted on the volume section of the chart. I also noticed a large number of stocks on my volume scans that seem indicative of an index re-balancing, but keep in mind I don’t watch the news, so I’m not sure if that is really the reason. I’ve just noticed this in the past.

Anyhow, this is not an indicator to use on it’s own, but it’s something to take not of. Lots of volume with little or no movement in the actual index is worrisome. My timing signals remain on a buy signal except for the TSX which is in neutral mode at the moment. Take a look at the 2nd chart below for a weekly look at the Nasdaq to really add some clarity to this new way of using the bollinger band in conjunction with volume.


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Actavis Inc (NYSE: ACT)

Actavis, Inc., an integrated specialty pharmaceutical company, engages in developing, manufacturing, marketing, selling, and distributing generic, branded generic, brand, biosimilar, and over-the-counter pharmaceutical products worldwide. The company offers its products for various therapeutic categories, such as cardiovascular, dermatology, urology, women's health, oncology, pregnancy prevention, hormones and synthetic substitutes, anti-infective agents, central nervous system, pain management, depression, hypertension, attention-deficit/hyperactivity disorder, and smoking cessation.
It operates through three segments: Actavis Pharma, Actavis Specialty Brands, and Anda Distribution. The Actavis Pharma segment develops, manufactures, and sells generic pharmaceutical products, as well as distributes generic versions of third parties brand products. The Actavis Specialty Brands segment promotes and co-promotes Rapaflo, Gelnique, Crinone, Trelstar, Generess Fe, Androderm, Kadian, Crinone, AndroGel, INFeD, and sodium ferric gluconate branded products. The Anda Distribution segment distributes generic and selected brand pharmaceutical products, vaccines, injectables, and over-the-counter medicines to independent pharmacies, alternate care providers, pharmacy chains, and physicians offices. Actavis, Inc., sells its generic and brand pharmaceutical products primarily to drug wholesalers, retailers, and distributors; hospitals, clinics, mail order, and government agencies; and managed healthcare providers.
To analyze Actavis' stock for potential trading opportunities, please take a look at the 1-year chart of ACT (Actavis, Inc.) below with my added notations:
1-year chart of ACT (Actavis, Inc.) Back in October, November and December ACT hit resistance at $90 (blue). During the last week of December the stock experienced a false breakout (red) thru that resistance only to fall back below it the next day. Earlier this week ACT broke through $90 again. Is the 2nd time a charm for the stock?
The Tale of the Tape: ACT has broken through its $90 resistance, again. A long position could be entered on a pullback to $90 with a stop placed below that level, or a short trade could be placed on a break back below $90, if that should happen.

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AVD – American Vanguard Agriculture Stock With Strong Bullish Chart

Another trading idea as I am always looking for great set-ups within the Agriculture sector. I still think this could be one of the strongest sectors in the years to come. In any case, my beliefs don’t matter. I stick to the charts. They need to confirm my beliefs.

AVD – American Vanguard is a good example. It is trading near its all time high and is worth putting on a position from a purely technical perspective. The recent shakeout below the moving average 200 should ultimately turn out to be a picture perfect false move. The stock is now powering higher and on its way to take out the second pivot point around 35. I believe AVD has the potential to behave exactly the same way ONXX – Onyx Pharmaceuticals recently did. My annotated charts exemplify what I am talking about. I have a position in AVD.
AVD - American Vanguard
AVD - American Vanguard

ONXX - Onyx Pharmaceuticals
ONXX - Onyx Pharmaceuticals
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Forbes: Cyprus Bailout: Welcome To Another Great Depression

So, this is going to be a very sour reading of what has happened in Cyprus this weekend. It will also be a very partisan one, possibly even a partial one. But if Milton Friedman and Anna Schwartz were right in their insistence that it was actually the Federal Reserve that caused the Great Depression (which is something that Ben Bernanke himself has insisted that the Fed will not repeat) then one way of interpreting what has happened is that the European Central Bank has just set us all up for another Depression. The trigger is that “tax” of a little over 6% on all depositors.

This isn’t an analysis that you’ll be able to get all economists to sign up to. But the basic story told by Friedman and Schwartz in “A Monetary History of the United States” was that the 1929 crash was indeed a serious crash. But it would not have led to the Great Depression without the Federal Reserve making some serious mistakes. Two of which were to allow the intertwined collapses of both the money supply and the banking system. Given that it is the banks that create credit and thus the wider money supply they are, to a great extent, the same thing.  (more)

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Commodity Core Fundamentals Improving: Baker

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"All The Conditions For A Total Disaster Are In Place"

Cyprus: The Next Blunder
The Cyprus bailout package contains a tax on bank deposits. This column argues that the tax is a deeply dangerous policy that creates a new situation, more perilous than ever. It is a radical change that potentially undermines a perfectly reasonable deposit guarantee and the euro itself. Historians will one day explore the dark political motives behind this move. Meanwhile, we can only hope that the bad equilibrium that has just been created will not be chosen by anguished depositors in Spain and Italy.
The decision to tax all Cypriot bank deposits has attracted massive attention (Spiegel 2013) – and rightly so. It is a huge blunder:
  • In the unlikely event that all goes well, the government will receive a bit of cash – but not enough to cover the loan generously offered by its European partners – and the Cypriot banking system will be history.
  • The alternative is a massive bank crisis in many Eurozone countries – a huge blow to the euro, maybe even a fatal one.

Not an emergency measure

Policymakers have been debating the Cyprus bailout for nearly a year; this cannot be classified an 'emergency action'. They engaged in a lively debate whether Cyprus is 'systemic' or not, the answer to which can only be 'it depends'. It depends not on the size of Cypriot banks but on the way the Eurozone acts. They also debated the Russian deposits that apparently represent a sizeable proportion of bank liabilities. The debate turned around the issues of how dirty this money is and how to do the laundry. They also debated on the size of a possible loan to the Cypriot government. The government itself requested something to the tune of 100% of its GDP, why not? After all this amounts to 0.2% of Eurozone GDP.  (more)

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