THE DINES LETTER
P.O. Box 22, Belvedere, CA 94920.
1 year, 17 issues, $195.
Uranium stock group is drastically
underpriced and headed much higher
James Dines: "We rank what we call "The Coming Uranium Boom" as one of the most important, albeit, scariest, predictions in this newsletter's entire history, bigger even than our 1979 call that "China will dominate the 21st century," or as "The Original Internet Bug" in the mid-1990s.
Indeed, many uranium investments are already up more than 10 times, and the question naturally arises as to whether or not "it is too late to buy." Long-term TDLrs are used to our methodology, and newer ones have some serious homework to do, but we like to follow a trend because it is our friend. No doubt the opportunity is no longer as big as it was when we first recommended uraniums because they have risen but, all the way up, we have fended off declarations that it was "too late," echoing DIMAPSO (the Dines Mass Psychology Oscillator outlined in Dines' Mass Psychology book). It is the very fact, at this stage, that investors still feel it is "too late" proves to us there are almost certainly bigger profits awaiting us yet ahead. How much more profit?
We'll need to get closer to get a better idea but, as of today, we are riding the Uptrend and therefore are in no hurry to take all the profits. Those who already have huge profits might want to sell and take small amounts off the table all the way up, at least until you have your original investment back, so that you are then playing with your profits and cannot lose.
The Original Uranium Bug, predicts that Australia is headed for its biggest economic boom in history because of control of over 30% of the world's uranium reserves. Dines has his subscribers heavily invested in companies with considerable uranium interests in Australia.
"Our second prediction is that the Chinese will eventually try to buy Canada's uranium producers, whose stocks are in what we call "screaming Uptrends" and might already be reflecting such buying. The trend is your friend. As pointed out in our 24 Feb 06 TDL, a Japanese corporation purchased Britain's nuclear-reactor builder Westinghouse Electric, revealing its awareness of what we call "The Coming Uranium Boom." Third, President Bush, after having visited India, literally, sneaked into Pakistan, with its capital virtually closed, police squads having closed main avenues, the streets from the airport dark and deserted, and declared that he would not sell comparable nuclear technology to President Musharraf's Pakistan. If al-Qaeda kills Musharraf (there have already been four unsuccessful assassination attempts), or he gets voted out, the Taliban could take over and own Pakistan's nuclear weapons.
The bottom line is that the above considerations presage a sudden expansion of India's nuclear industry, and confirms to us at TDL that demand for uranium will be explosive in coming years. Even though uranium's price has risen from our recommended level of $8/lb to $40/lb, higher prices seem highly likely, barring something unforeseeable. That's not all: Russia has suddenly discovered its own uranium shortage and will increase its production to make up 70% of the amount consumed - by the year 2015. Russia announced that it will need to invest $10 billion toward that goal.
President Bush used to scorn fears of "global warming" because he said it was "based on bad science." A chart (published in The Dines Letter) shows the soaring levels of carbon dioxide in the last thousand years, calculated by measuring gaseous bubbles from ice cores in Antarctica, dating back 650,000 years, that include six periods of ice ages and warming periods. It is a fact that carbon dioxide, one of the leading greenhouse gases, is at the highest levels in our atmosphere in one-million years, and perhaps the last 30-million years. The ice sheets are melting and signs of global warming are everywhere but, with humanity never having initiated such a calamity before, it has no knowledge of when it might reach a "tipping point" that would be irreversible. That is why we have long been making the admittedly-outrageous prediction that environmentalists would become the leading force in favor of nuclear power, and that TDL would lead the charge!
Coal miners in Queensland, Australia do not want to export uranium because it might be used fir weaponry, so they prefer coal and natural gas. But if sea levels rise this century by three feet, water pouring into the coal mines might close them down, not to mention inundating Bangladesh and the Maldives. America is doing something similar.
Aside from global warming, a new phrase is beginning to emerge in the world, called "energy security." Last month the Saudis foiled a terrorist attack on its vast Abqaiq facility, the single most vital link in the world's oil chain. This is the second such attack on Saudi oil facilities and doubtless there will be more, with terrorist accuracy improving every time, until they sever the world's jugular vein.
The above confirms in our minds that TDL's "Coming Uranium Buying Panic" will likely occur, that those with a broad-based position in uranium stocks will make more than enough money to pay for their higher energy prices and that the entire uranium stock group is drastically underpriced and headed much higher.
Editor's Note: For a Special Bonus Offer visit www.dinesletter.com.
THE PERSONAL CAPITALIST
6911 S 66TH East Ave., Ste. 301., Tulsa, OK 74133.
1 year, 24 issues, $195.
We are in the "sweet spot"
of the commodity supercycle
Sean Christian: "Geopolitical concerns, as well as speculation, aid the biggest climb in gold prices since 2001. Silver surged to a 22-year peak as money continues to flow into commodities. We continue to be comfortable with our holdings in FCX, ABX, and NEM. Actually, we are in the "sweet spot" of the commodity supercycle. Our newest purchase is a zinc play, Zinifex Ltd. (ZFEXF). Zinifex is a major producer of zinc and lead with headquarters in Australia. ZFEXF is the world's number two producer of zinc. Zinc has rallied to a series of all-time highs in recent weeks as investors "home in" on falling warehouse stocks against strong China-led demand and tight mine supply. Analysts are looking at high prices continuing for several years for zinc because there just aren't any new projects "coming on stream" and many of those "waiting in the wings" have several years to get into production. Zinc stocks have been coming down by 3,000-4,000 tons a day, which makes them very tight. We have done considerable research on zinc and feel ZFEXF is our best play. Zinc's excellent corrosion resistance makes it ideal for protecting steel and, by prolonging the life of steel, conserves materials and energy. Zinc diecastings are used in many everyday applications including household appliances, fittings, tools and toys. It is also used in brass, in sheet form in the building industry, and in chemical forms such as in pharmaceuticals, cosmetics, and fertilizer. Look the company up on the web to become more familiar with operations: www.zinifex.com. Every subscriber should own shares."
THE FORECASTER
19623 Ventura Blvd., Tarzana, CA 91356.
1 year, 40 issues, $180.
John Kamin: "There's no need to buy foreign gold coins to get your gold coins near meltdown bullion values; no need to buy South African Krugerrands, Austrian Philharmonics, Chinese Pandas, Australian Nuggets, not even Canadian Maple Leafs. Instead, simply go for 2 of the best, the 2006 USA 1/2 oz Gold Eagle and 1/4 oz Gold Eagle. Strikes early in each year are usually the best strikes from newer dies. They're available at wholesale at just a slight % over bullion value. No need to slab current years GEs.
Why choose 1/2 oz and 1/4 oz GEs instead of 1 oz and 1/10 oz sizes? Simple. Each year it seems that the 1/2 oz and 1/4 GEs are the lowest mintages by far of all 4 sizes, whereas the 1 oz and 1/10 oz are far higher mintages each year.
While you're buying near bullion gold meltdown value, what you're Hoping for is that the lower mintage coins will attain numismatic (collector) value over the years you hold them, and occasionally sell for substantially above meltdown bullion value. It makes sense!
Lesser-known foreign bullion coins may have wider wholesale bid/ask spreads upon resale, and even be harder to resell due to lack of dealer familiarity, little collector following. USA coin collectors make up the bulk of the market, so just go for the best where the (USA) market is!"
PERSONAL FINANCE
1750 Old Meadow Rd., Ste. 301, McLean, VA 22102.
1 year, 24 issues, $97.
Elliott Gue: "It's hard to imagine a sector that's been the focal point of more public attention this year than energy.
Even before Hurricane Katrina and Rita hit the Gulf Coast, high oil, gasoline and electricity prices were the subject of considerable scrutiny in the popular press. And since the storm, you can't turn on your local news without hearing at least some mention of the oil business.
But like any other business, energy has its own set of terminology and slang, much of this lexicon isn't in common use outside the oil patch. And undoubtedly, you'll see or hear plenty of this oil patch lingo during the next few months as the sector remains on the front page.
Fortunately, a few definitions can go a long way in helping you understand the latest from the industry. Here's our brief guide to some of the most commonly used terms:
Barrel: A barrel of oil equal 42 gallons.
Bitumen: A heavy form of crude oil that's solid or near-solid in its natural state. The Canadian oil sands are a classic example.
BTU: Short for British thermal unit, it's the amount of energy required to heat one pound of water one degree Fahrenheit. There are approximately 1,030 BTUs in a cubic foot of natural gas.
Catalytic Cracking: Sometimes simply referred to as "Cat Cracking," this is a refining process that involves breaking heavier crude oil molecules into lighter molecules such as gasoline. Cat cracking units allows refiners to process heavier grades of crude oil.
Crack Speed: A measure of refiner's profitability. This spread compares the price of gasoline and heating oil (a distillate) to the cost of crude oil. Refiners buy crude oil and sell gasoline and heating oil. The higher the number, the more profitable the refiners.
Distillates: One class of products of the refining process. The main distillates in use today are diesel fuel and heating oil.
Downstream Operations: The refining and marketing of oil and gas. This means turning crude oil into gasoline and other useful products to the public or other companies.
Drilling Rig: The actual equipment used to drill the hole through which oil and gas are produced. On land, rigs are usually truck mounted; offshore, they're either mounted on a floating platform called a floater or on a mobile platform that rests on the bottom called a bottom-supported rig.
Heavy, Light: Terms applied to crude oil. Heavy oils contain large molecules and are more difficult to refine into products like gasoline and jet fuel. Some refineries can't process these crudes. Light oils are easier to refine.
Henry Hub: A hub for several major pipeline systems located on the Louisiana Gulf Coast. Serves as the designated delivery point for New York Mercantile Exchange natural gas futures.
Jack-up Rig: A common bottom-supported, shallow-water drilling rig. Several were damaged or destroyed by Katrina in the Gulf; one was widely reported as having washed ashore in Florida.
LNG: An abbreviation for liquefied natural gas. Natural gas becomes a liquid at -260 degrees Fahrenheit and can be transported by tanker ship. LNG must be-gasified before use.
Midstream Operations: The processing, transport and storage of oil and natural gas. This includes the tanker, pipeline and natural gas processing industries.
Naptha: A product of the refining process commonly blended to make jet fuel. Kerosene is also used for this purpose.
NGLs: An abbreviation for natural gas liquids. Natural gas is mainly composed of methane but often contains several other gases that liquefy at atmospheric pressure. The list includes butane, propane and condensate (natural gasoline).
Production Platform: Sometimes simply called a platform, this isn't a drilling rig. Platforms are located offshore and collect and separate oil and gas produced by many subsea wells. Oil and gas collected on a platform can be loaded onto a tanker or pipeline for transport to shore.
Semisubmersible Rig. A deeper water floating offshore oil rig unit. These rigs have air chambers that are partially flooded, submerging the lower part of the unit. This offers stability in rough seas. Some platforms are also designed as semisubmersibles. The rigs pictured in the Gulf are semisubmersibles.
Sour, Sweet: Terms applied to both oil and natural gas. Sour hydrocarbons have a high concentration of sulphur, a corrosive pollutant. Sweet hydrocarbons are relatively free of sulphur.
Suezmax Tankers: A mid-sized crude oil tanker ship. The name comes from the Suez Canal; this is the largest size tanker capable of fitting through the Suez Canal.
The Loop: A common abbreviation for Louisiana Offshore Oil Port. This is one of the largest import terminals for crude oil in the US.
Upstream Operations: Any activities related to the exploration and production of oil and natural gas. That means finding energy reserves and removing them from the earth.
VLCC Tankers: Abbreviation for very large crude carriers. One of the largest common classes of tanker ship, they're generally used to transport oil long distances.
Editor's Note: Elliott Gue is an associate editor for Personal Finance, 1750 Old Meadow Rd., Ste. 301, McLean, VA 22102, 1 year, 24 issues, $97, and editor of The Energy Strategist. To sign up for his free biweekly e-zine The Energy Letter, visit www.energyletter.com.
EMERGING INVESTMENTS,
P.O. Box 97, Williamsport, PA 17703.
Monthly, 1 year, $287.
Energy: Coming through
a bull-market correction
Steven Lord: "Every investor knows the feeling. A stock or sector you own is doing great, going up and making you money. You feel smart and lucky at the same time, and although you know the old saying about pigs on Wall Street getting slaughtered, you also believe the story that attracted you to the investment is still intact. Then wham! A sharp and severe correction comes out of the blue and severely tests your faith in the position.
In a nutshell, this is what investors in energy shares have been going through for the past several weeks. Sharp corrections are to be expected in any sector that has undergone the kind of appreciation we've seen in energy, and while it doesn't make them any easier to tolerate, such moves are a good reminder of why successful investing relies on as little emotion as possible. In fact, the smart money was adding to positions as the sector fell. As we went to press most energy stocks had stabilized and were moving upward again.
Our Emerging Leaders portfolio holds several energy stocks, and they collectively took it on the chin during the correction. However, as trying as the downdraft was, strategically nothing we could see had changed, and earnings for our group continue to come in extremely strong. Our group is concentrated intentionally in the services and alternative energy areas of the sector, since we see the greatest leverage to high energy prices in these areas and because there is a large number of smaller-cap names in the space.
One of the best-known names in our group is Oceaneering (OII), considered the worldwide leader in subsea systems, including remote-operated vehicles and mobile offshore production systems. It's an expert in deep water search and salvage, being involved in everything from the secret recovery of a Russian submarine during the Cold War to the RMS Titanic operation and the salvage of the Confederate submarine Hunley from Charleston Bay.
As one would expect, the secular trends in deepwater oil drilling, well construction, and expanding production are driving OII's results, helped by hurricane-related repair and inspection work that is likely to last at least through 2007. The company reported sales of $998 million and EPS of $2.33 last year up, 28% and 48%, respectively. For 2006, the firm should earn $3.20 on at least $1.2 billion in revenue, and $3.85 in 2007. Moreover, OII isn't just sitting back and letting energy prices do all the work; the firm is concentrating on expanding margins (dayrates for the firm's fleet of 175 ROVs hit a record $6,236 per day in the fourth quarter) and using cash flow to pay down its already manageable debt.
OII has returned nearly 30% since our recommendation in October 2005, and amazingly its performance ranks it as our second-worst energy stock in the energy subgroup. It also is the least volatile, having barely dipped during the recent correction. The company's laser-like concentration on what it does best, its undeniable command of an extremely narrow niche, and its fundamental strength gives OII an admirable "moat" around its business. In addition, OII's relatively low market capitalization (under $2 billion) make it clearly an attractive takeover candidate for any of the larger energy conglomerates. With strong underlying trends and share price that has not yet fully discounted OII's niche dominance, we think the stock is among our most undervalued energy plays.
Ditto for Hornbeck Offshore (HOS), another energy stock that has been in our portfolio since the October 2005 issue. HOS is also our largest energy laggard, down over 8% as we went to press. Frankly, the stock's performance to date makes no sense fundamentally.
Hornbeck provides offshore supply vessels, tugs and barges to the oil & gas industry in the Gulf of Mexico. Directly leveraged to the exploding demand for oilfield equipment in the region, HOS booked a record $0.55 per share in profits last quarter, versus expectations of $0.45 and prior-year results of $0.22, on 22% more revenue. For the year, HOS's revenue rose 38%, to $183 million, while earnings per share jumped to $1.61. Like Oceaneering, the dayrates for HOS's ships have been going through the roof, rising 17-18% per quarter and now over $20,000 for forward spot contracts. Reflecting the scramble underway for equipment in the Gulf as well as pressure related to hurricane repair work, demand is outstripping supply and HOS is able to enjoy both full utilization of its fleet as well as record prices for its services. This should translate into strong earnings growth for the next several years. Indeed, profits should reach roughly $2.50 this year and $3.00 in 2007.
Interestingly, HOS has intentionally refrained from booking its 2007 capacity, despite several attractive long-term contract offers, because it anticipates supply vessel dayrates will be moving even higher. We agree - the level of new drilling activity by the majors in the Gulf virtually guarantees it - and think management is being shrewd to delay committing capacity early in what should prove to be a multi-year uptrend in pricing. Financially, HOS boasts strong profit margins north of 20%, about 25% of capitalization in long-term debt and $75 million in operating cash flow last year.
Hornbeck reached a high of nearly $40 before the energy correction hit, and it fell to the low-$30s in spite of truly phenomenal quarterly results. The company is now valued at roughly 12 times 2006 expected earnings and for a PEG ratio of well under one. With high leverage to rising dayrates in the Gulf, high fleet utilization (with new vessels coming on line at the end of this year), and significant opportunity for growth either from acquisitions or expanded services, we think HOS's price does not reflect its 2-3 year earnings potential. We're maintaining it in the portfolio and are table-thumping bullish on its prospects.
One thing the Emerging Leaders portfolio currently lacks is exposure to drillers, since we initially wanted to focus mostly on services. However, as we wrote in our February 23 Weekly Update, W&T Offshore (WTI) is a great way to add a rapidly-growing small-cap driller to your portfolio. Although not as leveraged to the cycle as your typical services firm, drillers tend to have something they do not; reserves. In periods of rising prices, this "inventory" often acts like a floor under a driller's stock.
WTI works over 100 oil fields, 250 shallow-water offshore rigs and boasts 467 billion cubic feet of equivalent oil & natural gas reserves. The company is buying Kerr-McGee's Gulf oil & gas properties in the Gulf of Mexico, which will boost its reserves by a massive 77%, and this step should set up earnings growth of 40-50% annually over the next three to five years. Moreover, it adds roughly 650 billion cubic feet of probable/ possible reserves and a host of exploration targets. The acquisition should be immediately accretive, and the $1.3 billion in debt taken for the deal should be easily handled by WTI's strong cash flow. Sales of the combined entity should reach nearly $1.2 billion this year, with EPS rising from $2.68 per share in 2005 to at least $4.50 this year. 2007 should see EPS of $7 as acquisition synergies and increased production take hold.
As small-cap industrial stock, WTI is a dream come true; a 22% return on assets, 40%+ return on equity and 47% operating margins, all significantly better than its nearest rivals. The stock trades for a forward P/E of only 8 and a PEG that barely registers on the radar screen. Already back to its pre-correction levels near $40 and one of the best-positioned drillers of its size, WTI is a buy at current levels."
THE COMPLETE INVESTOR
P.O. Box 248, Williamsport, PA 17703.
Monthly, 1 year, $72.
Stephen Leeb: "In coming quarters, one of the best bets you can make will be on gold - the metal itself, gold stocks, gold funds, you name it. If it's got gold in it, it's likely to be golden.
Why are we so convinced gold is in for a major bull move? One key reason has to do with the historical relationships between higher oil prices and higher gold.
Over the long term, gold prices have kept rough pace with rises in oil. But the relationship isn't perfect. During shorter stretches of time, rises in gold have lagged rises in oil. Other times, gold prices have leapfrogged sharply ahead of rising oil prices.
In the past five years gold has been lagging. But that's about to change in a big way. We're nearing a juncture where if oil prices, as we expect, continue rising, gold will soar. Oil at $100 a barrel could mean gold at $1,500 or even $2,500 an ounce.
When we first started forecasting a sustained rise in oil prices, our invoking $100 oil seemed, in some eyes, to make us candidates for the loony bin rather than for investment kudos. Now $100 oil within the next year or two seems practically conservative given that virtually every major oil exporter is in a political hot spot.
But why should further rises in oil cause gold to soar - to outpace oil price rises - rather than just continue a more sedate uptrend? The reason: our economy is approaching a key inflection point where rising oil prices finally will bring on inflation. And that will be manna for gold.
Recently gold has been trading at about 9 times the price of oil. This is close to a historical low and about one-half the historical average of 18.
The 1970s were the last time oil prices were in a sustained uptrend. In mid-1976, the gold/oil ratio was roughly at today's level. Inflation, though above 5 percent and high by today's standards, had fallen from the double-digit levels that had prevailed earlier in the decade. The economy had seemingly adapted to higher and rising oil prices, up around fivefold from their early-1970s lows.
But the economy was growing and the dollar was starting to stumble. As a result on the inflation front there was no margin for error: any additional rises in oil prices were fated to bring on inflation. And they did.
By mid-1979 oil had risen an additional 50 percent; inflation was above 10 percent. And gold? It had jumped nearly 300 percent, from about $100 to $400. In some respects, that huge move simply brought gold to within historical norms, in that the gold/oil ratio rose from about 9 to 20, a shade above its historical average.
The message from that era is that once oil starts to have a significant impact on inflation, the gold/oil ratio will rise - making gold dramatically leveraged to further rises in oil and other commodities.
But even in the unlikely case that oil backs off, dropping, say, to $50 and staying put, gold still will be a winner, because oil is only one of several factors driving inflation and therefore gold. Another important factor is the dollar, particularly its relationship to the Chinese yuan.
Historically, the dollar and gold move in opposite directions. When the dollar is weak, gold is strong, and vice versa. In the past two quarters, though, this relationship seems to have broken down, with an apparently strong dollar going hand in hand with rising gold.
This, however, isn't as contradictory as it might seem. For while the dollar has been strong relative to most currencies - in particular the euro - it has begun to slide against what is arguably the world's most important currency, the yuan.
In the third quarter of 2005, the Chinese government let the yuan float within very narrow boundaries. This seemingly symbolic action has likely had major repercussions. As we've noted repeatedly, the yuan is deeply undervalued against the dollar. Since 2005's "symbolic" gesture, the yuan had continued to drift higher. We think its long-term upward trajectory is nearly assured. And a rising yuan changes the entire inflation calculus.
That's because the cheap yuan, which meant low prices for the scads of Chinese goods imported by the U.S., was the key force counteracting rising commodity prices and helping to keep inflation in check. No wonder, then, that gold began to rise despite the strong dollar/weak euro in late 2005.
The fact that the dollar is likely to remain weak indefinitely against the yuan is another reason to believe gold will return to its historical ratio in terms of oil. The general rule is that once inflationary forces start to gather steam - whether stemming from oil, currencies, or any other factor - the gold/oil ratio rises. And from where it sits today, there's tremendous room for it to rise. Even if oil fell back to $40, you still could make a case for gold in excess of $700 as long as other inflationary forces were present.
Now for how best to invest in gold. There are basically two ways to go: investing in individual gold mines or buying the metal itself via an exchange traded fund (ETF), such as Growth Portfolio's streetTRACKS Gold Trust. Both have merit: While mines have - very slightly - outperformed the metal over the past 37 years, they're also a lot more volatile, dramatically underperforming the metal, for instance, in the mid-1970s.
Aggressive investors could consider putting some money into small gold mines with the potential to add sharply to reserves.
Put most of your gold money into the tried and true, either our ETF or the precious metals investments presented in the table. These are the four largest mines located in North America that are currently producing precious metals and turning a profit. We're adding one of them, Barrick Gold (ABX), to Growth Portfolio, bringing our gold weighting to between 4 and 5 percent.
The three other mines also merit consideration. Coeur D'Alene (CDE) is the world's largest producing silver mine, and while it has less upside than Apex Silver (Fast Track), it is a more conservative investment that will be the surest beneficiary of an uptrend in silver. Gold and silver have tracked each other closely over the ages, and while the advantage goes to gold, during the periods of speculative zeal for precious metals, such as the late 1970s, silver can sometimes outperform.
Newmont Mining (NEM), though ceding first place in gold production to Barrick, is still a leading gold producer with a solid production profile and superb management. It, too, will be a sure beneficiary of rising gold prices.
The most aggressive stock on our list is Glamis Gold (GLG). With its recent acquisition of a major mine, Western Silver, Glamis is positioned for growth in both gold and silver production for several years at least. The risk is that Glamis will stumble trying to develop Western's assets. But it's a risk worth taking, in that successful development of Western will catapult Glamis into being the fastest-growing significant gold and silver producer in the world."
THE GRANVILLE MARKET LETTER
P.O. Drawer 413006, Kansas City, MO 64141.
1 year, 46 issues, $250.
Joseph Granville: "A chart of Avino Silver & Gold Mines (OTC BB: ASGMF $3.40) shows the key breakout from a long flat base in early 2002. Technically there is nothing to stop the rise until reaching its major objective of $8.00 which may even be reached this year based on current expanding momentum. In any case, stock is an assured doubler. The silver play is especially important here. Buy.
I like the chart on Sabina Silver (SBB.V $1.30) here otherwise the stock would not be recommended. Stock scored very bullish double top breakout at 1.55 in late February on a sharp volume spike which technically legitimized how bullish the breakout was. Very bear term rise to 180 is probably days away with 3.00 within a year. Place stop loss at 1.35. Sabina silver a Buy."
INTERINVEST REVIEW & OUTLOOK
P.O. Box 51462, Boston, MA 02205.
Monthly, 1 year, $125.
Dr. Hans Black: "The world of precious metal equities has not emulated gold's upward trend, however, as quite a few of the senior stocks - Newmont comes to mind - have enjoyed sizable pullbacks from their early January highs (from which we have managed to profit nevertheless).
We advise continued accumulation of companies with excellent production profiles or emerging production profiles, as these are surely the sectors that will be much higher in the months and years ahead. Over the medium term we continue to like Eldorado, Cambior, and particularly Southwestern Resources. We would also recommend Orvana and Gabriel Resources on any further pullbacks."
INSIIDE TRACK
P.O. Box 2252, Naperville, IL 60567.
Monthly, 1 year, $249.
Overview for long-term investors
Eric Hadik: "Stock Indices - Stock indices are completing what could be the final phase of a 3+-year uptrend. A top in April 2006 is possible.
Interest Rates - (opposite of Bond direction) - Long-term neutral-to-down trend consolidating. However, a final low in long-term rates could stretch into late-2006.
Gold & Silver - long-term uptrends in Gold & Silver remain intact. A pullback into May is possible.
Dollar - Long-term trend down & projected to continue into 2008/2009. An intervening 12-18 month rebound is intact and could stretch into September 2006.
Crude Oil - Long-term trend up but consolidating. A spike high in April 2006 is possible.
Commodities - Long-term trend up; Expected to see a top in Feb. 2006 - exactly 7 years from the Feb. 1999 low. A multi-month correction was expected and is intact."
The Elliott Wave FINANCIAL FORECAST
P.O. Box 1618, Gainesville, GA 30503.
Monthly, 1 year, $228.
Classic set up for a reversal
Peter Kendall: "Gold's decline from $585.00 to $540.20 (basis June) traced out three waves, which made it a countertrend move. The rally since $540.20 should carry gold toward the next psychological resistance surrounding the $600 level. Silver remains in the "wild spike" discussed in previous issues. With the 10-day average of Market Vane's Bullish Consensus at an all-time record high 90.1%, there are scant few left who have not already turned bullish on silver. This is the classic set up for a reversal, which, based on the current surge, is likely to result in a violent decline immediately after the top."
THE MONEYPAPER
555 Theodore Fremd Ave., Ste. B-103, Rye, NY 10580.
Monthly, 1 year, $108.
PNM Resources should be
appealing to conservative investors
Robert Briechle: "PNM Resources, Inc. (PNM) is in the energy business, generating and selling electricity and natural gas. Electricity is sold to retail customers in New Mexico, as well as to third parties. Gas services include the distribution of natural gas to both sales-service and transportation-service customers. In addition, the company provides energy and technology-related services. As of mid-2005, PNM was serving 725,000 electricity customers in Texas and New Mexico and 471,000 natural gas customers in New Mexico. Electricity is generated via coal (70%), nuclear power (28%), and gas/petroleum (2%) The company is headquartered in Albuquerque, NM.
Happily for a utility, the region is experiencing an annual growth rate of about 2.2% per year, which is calling for increases in generating capacity. This augurs well for earnings and dividend growth going forward, and indeed, the prospect for 10% annualized dividend growth for the decade ahead is a possibility.
The shares have been pummeled recently because of problems with one of the generating units (pipe vibrations in the cooling system of a nuclear reactor), but these appear to be on their way to resolution. The addition of new generating capacity is in the works, partly the result of the purchase of a 305-megawatt power plant in Texas. And boosts in gas and electric rates in the state for 2007 and 2008 are anticipated.
All of this suggests that an upturn in the share price is increasingly likely, and the shares currently provide an excellent entry opportunity.
This is a utility and the shares offer stability with good (for a utility) price-appreciation potential, but with the constraints of the growth rate in the firm's geographic market - as is typical of the growth rate in the firm's geographic market - as is typical of any utility-and the regulatory agreement needed to secure rate increases. PNM shares, then would be most appealing to investors with a strong conservative bent."
THE MORGAN REPORT
21307 Buckeye Lake Ln., Colbert, WA 99005.
Monthly, 1 year, $149.
Minco Silver has sprinted
fresh out of the gate
Sean Rakhimov: "Minco Silver has been around for a couple of years. Most of that time it was a non-trading subsidiary of Minco Mining (TSX: MMM, AMEX: MMK) - the parent company focused on gold. About six months ago Minco Silver was spun-off into a separate entity listed on the Toronto Exchange. It has sprinted fresh out of the gate with share price more than doubling in a matter of weeks.
It was in such a great demand that market valuation temporarily surpassed that of its parent company, which we pointed out for you at the time. It is also noting that aside from Minco Mining, which is the largest shareholder, Silver Standard (TSX: SSO, Nasdaq: SSRI) owns about 10% of the company. Parallels with Silver Standard do not end there. According to president & CEO, Ken Cai, the company's strategy includes a substantial increase of silver resources in the ground.
Presently the company is focused on its Fuwan Silver Project, located in southeastern China, within one-hour drive from a major industrial city of Guangzhou and nearby Hong Kong. MSV reports a 43-101 compliant inferred resources of 129.5 M ounces of silver from this property. Ken Cai believes that the current strike length of 1.5 km can be extended to 6 km, which could have the potential to substantially increase the resources.
Mineralization consists of relatively shallow (less than 1,000 meters deep), multiple, almost-horizontal layers sandwiched one on top of another. Current 10,000 m drill program has two objectives: to complete required amount of in-fill drilling with a view to upgrade the quality of known resources as well as step-out holes to test for extension of strike length as noted above. Unlike most other silver dominant deposits, which often host a combination of silver-gold, silver-lead-zinc, silver copper, etc., mineralization at Fuwan is relatively "pure" with small amounts of other minerals. That is a good predisposition, meaning no metallurgical challenges are expected.
With silver making new multi-decade highs almost daily, silver stocks have been on fire. Silver is overbought and has been that way for months now. If silver corrects, it may lead to a sharp correction in shares of silver companies. That may or may not happen, but if it does, it gives us an excellent opportunity. Longer term we would be comfortable with Minco Silver as a speculation, especially given that management is looking to aggressively grow the company. However, those with a short-term investment objective should be looking for a suitable entry point."
|
