Low P/E or Increasing Production Profile

Discussion in 'Stocks & Derivatives' started by SilverSanchez, Jan 20, 2013.

  1. SilverSanchez

    SilverSanchez Active Member

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    Im in buy mode over the next few weeks,

    Im aiming at producers in the Gold, Silver, Copper, Zinc, Uranium, Oil & Gas spaces

    Im wondering what is the most basic metric to go by

    Low P/E in an environment where commodity is rising in price seems good because no production increase is nessesary for maturing share price - it will just go up to a fairer value

    Or capacity to increase production where the share price is already at a high price/earnings

    Cash on balance sheet is also important to me.

    A handfull of decent options - but limited funds - its a stock picker's market
     
  2. jparrie

    jparrie Member

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    What stocks are you looking at?
     
  3. Silver Frost

    Silver Frost New Member

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    Low P/E is a known and instant result, if it goes your way... But dont listen to me im a pattern chaser. No Platinum? Not a believer or is that because of the lack of stable production enviroment? I believe it is a better prospect than copper if you could find a producer outside of SA.
     
  4. SilverSanchez

    SilverSanchez Active Member

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    TRY, SLR, KCN, STO, EVN, PDN, MAD, SXY, OZL to name a few
    Im also looking for a good platinum producer outside of South Africa if anyone knows any.

    Some I already own, but need to find a home for my cash

    The other option is buy physical silver or commodities etf (ETF Securities Comodity Basket) or Beta Shares Commodity Basket currency hedged)
     
  5. SilverSanchez

    SilverSanchez Active Member

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    So if anyone has any suggestions in these two categories

    Low P/E (under 9)

    Or high production increase capacity

    But both need low debt, and cash in the bank
     
  6. SilverSanchez

    SilverSanchez Active Member

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    Yes exactly, I have 1 that im looking at - but they are not bringing the platinum into production untill 2016 (deposits in Canada)
    Im also already invested in Platina Resources - which is down substantially (50% in the red for me, but im willing to lose that cash if it doesnt work out, so not selling)
     
  7. SilverSanchez

    SilverSanchez Active Member

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    Oh yeah, still looking for a decent asx listed water company if anyone knows of any - prefferably one that is actually making money :)
     
  8. SilverSanchez

    SilverSanchez Active Member

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    Bought some - SLR @ $2.84 and PAN @ 0.53

    Now I have one or two more purchase choices - I need uranium covered in my portfolio and there are no etfs for uranium i know about and Im not 100% sure about Paladin! HOW IRRITATING!
     
  9. MyNamesNotBen

    MyNamesNotBen New Member

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    Have you looked into A-cap resources (ACB) for uranium?
     
  10. SilverSanchez

    SilverSanchez Active Member

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    I have a while ago, I cant remember why I rejected em - i think because they are in Africa, they are only exploring, and/or their share structure is blown out.

    Im not interested in explorers, either developers who have a robust project and the cash to complete it or producers who have a positive margin.
     
  11. SilverSanchez

    SilverSanchez Active Member

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    Does anyone know an asx listed ETF that includes uranium?
     
  12. jparrie

    jparrie Member

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    I have to say that with the possible exception of OZL and maybe KCN, the others strike me as being grossly overvalued. I can think of better places to put my money to work. PAN raises one eybrow, maybe, but it's valuation is in a continual spiral downwards. Not a criticism, just my opinion.
     
  13. SilverSanchez

    SilverSanchez Active Member

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    How do you value something jp?

    Maybe its very different to my way
     
  14. jparrie

    jparrie Member

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    Well briefly, if I want to invest in a stock for the long term or for my Super I want something that has a demonstrated consistent profitability, or return on equity. Then I work out what my required return is for that company, so I need to evaluate risks for first investing at all (as against staying in cash), then the risk investing in that particular company. Most resources stocks are obviously higher risk than others like food retailers etc, so my required rate of return is higher for them by default. This is a very simplistic explanation but the end of the day all this ends up with a price I put on the particular stock price in question.

    It's not rocket science but it does require some statistical analysis, rather than say just looking at low P/E or some other single number. At the same time I do believe that technical analysis does have some merit so I use that to attempt some sort of timing for my purchases, sometimes it works other times it doesn't. As you may know by reading other threads I have subscribed to some 'professional services' purely to see what I'm missing. Most of the time that ends up being nothing.

    So I guess I'm a value investor, dividends are important to me and that's why I wouldn't be interested in most of the stocks you mentioned. That doesn't mean the shares won't go up of course, but over the long term unless they strike gold, so to speak, they won't give me returns like other more proven consistent performers.
     
  15. SilverSanchez

    SilverSanchez Active Member

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    I pretty much agree with you jp, but my goal is slightly different and one or two of my foundational assumptions are different.

    I believe the stock market will outperform the xgd most of this year, but the world economy now has energy prices at a hedge against growth (which will probably increase money velocity causing inflation) - so its better to be too early into commodities than too late.

    My goal is preservation of purchase power, rate of return is secondary for me.
    Real inflation is pretty high and in america its close to exceeding 10% - so a rate of return is only a good measure when you can trust inflation numbers.

    SLR, I believe may be overvalued according to history (or at least fair value), but undervalued compared to projection of growth (multiplied by increasing gold price, minus increased energy/employment/tax costs)

    It is unrealistic to think gold will revert back to $1000US simply because demand is too strong and not enough new gold can be mined at less than $1200US total cost per ounce.
    With increasing economic growth putting upward pressure on energy prices the average gold cost to produce per ounce will push up the gold price slowly but proportionally to average cash costs. Hope this makes sense - im pretty tired and scattered at the moment.

    The things I think are going to do well this year are

    Silver, Copper, Uranium, Oil, Iron, Platinum, Paladium, REEs
    There wont be a lot of money for explorers IMHO so anyone who is producing will benefit and the leverage from just barely making a profit to doubling or trippling prophit will become evident.
     
  16. SilverSanchez

    SilverSanchez Active Member

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    So in summary,

    -There is a ceiling to economic growth - energy and prices paid componant
    -Governments are printing money to try and provide more liquidity to stimulate investment but this is causing more money chasing less commodities = inflation
    -There is a base price of commodities (energy and extraction costs) which will increase with inflation = less production supplying increasing demand = higher commodity prices
     
  17. SilverSanchez

    SilverSanchez Active Member

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    What a day!

    I was buying today - not easy on the stomach!

    But I suspect silver and gold are approaching the bottom support

    30.50 for silver and 1640 for gold (or there abouts) - we'll see if that was wise or not in the next few days.

    Money running out of gold and silver stocks and into the general market, just like in America. ASX200 approaching the 5000 mark - and i believe it will hold above (maybe after a first test pullback) but im pretty bullish on the asx200 - and that will drag the resources higher (believe it or not)
     
  18. SilverSanchez

    SilverSanchez Active Member

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    This weekend I've been having another stomach churning couple of days.
    Im just going through that urge to sell everything and cut my losses and run away..... I'm obviously NOT going to do that, but....

    Thats a good sign, if im feeling like this then perhaps everyone else is as well... and we are that much closer to a bottom (if we havent seen it already).

    So raise your glasses.... "Here's to seeing this afternoons lunch!" :)
     

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