ASX Futures.. The SPI

Isn't it incredible?  POG is down, base metal prices are down, DJ is down,  AUD is down a bit... and the SPI is up 25 points.  This of course is bull.  It will rise and then crumble.  The USA lawmakers are pure politicians with brinksmanship to the fore.  There is a Mexican standoff but that won't last.  Obama has just been elected the President and is not about to dictated by the Republicans.

ABZ

In the midst of a slaughter, I have one stock that rose 20% today.  This one had gone up and then down since I bought after a Proactive Investors Forum in Sept 2012.

Like many stocks that I buy, you think it should do well after reading their presentations.  The CEO gave very good argument why the company is worth a lot more, at least in the near future.  Yet, the market has its own assessment and worse still, its own sentiment and illogical trend.

However, once big boys are interested, then the real valuation comes to the fore.  Today, ABZ has opened its data room for 6 big boys to view and have taken them to visit their sites.  Once again, another Aussie stock is going on the cheap.  Crazy for Chinese companies not to make a move on many stocks listed on the ASX.

POG

Another big tumble.  When it falls massively, the only people who can manipulate the price like that are Central Banks selling their hoards.  Some hope to buy back when it is cheaper...  Smaller holders of gold can move it but do not usually have enough to keep the plunge going.

Hence, I am expecting my portfolios to fall further today  :-(

CDU

Ah... Isn't it nice?  You go looking for water to process your processing plant, and you discover more copper while you were drilling!

I last bought CDU after the SPP was cancelled.  The price $4.14 was below the SPP price.  Of course, there was also good news but the market didn't like the placement nor the SPP.  I didn't care what the market thought.  Currently, the share price is at $4.45.  But the 3 small top-up parcels before that were at $4.60 to $4.81.

Bank shares

With the current 4-Pillar policy for the banking industry... do not get rid of your bank shares.  Society abhors the banks making large absolute profits.  Yet, for stability of the financial system, you need profitable banks.  In relative terms, bank profit is not exorbitant.  If you are worth many billions, you should be generating billions in profit.

This week, I have been getting dividends from ANZ and WBC.  I have discarded NAB more than a year ago after years of dismal performance.  I have also discarded merchant banks like Macquarie.  But of the banks that I keep, I have been delighted with the dividend.  I cancelled all my DRPs because it is very difficult to keep track of capital cost and eventually capital gains.

Today, I put a buy on JIN.  My wife does not like gambling stock but I am investing not for social reasons.  This stock is growing and expanding into the Americas.  And I received my first dividend from it recently.  How delightful ,too!  Rapid expansion is not always good news.  But software expansion is cheaper....

Stocks that have plummeted... but do not warrant it

When the POG climbs, gold stocks do not jump.  But when the converse occurs, the market takes an axe to the price of gold stocks.  Massive movement in the POG is not the result of long term balance between supply and demand.  POG has remained above USD$1600 per oz for a long time now, with ephemeral dips before that.

Hence, I am watching stocks in my failing portfolio that have been sold off for no good reasons.  There are several.  AZH, ABU, CRC, DRA, ERM, GOR, NYO, VKA, AUC.  If the POG lifts, I am ready to top up if the share price remains in the doldrum.  None of these stocks have produced bad announcements yet the market is punishing them for being... in the gold sector, even if producing gold like DRA.

I moved my ABU buy price to 3.7c (from 4.1c) and it fell to 3.9c.

WCL

According to The Australian, the PetroChina is prepared to pay 52c per share for WCL and the board is looking at the offer.  Yet, on the market, it is going for 42c.  So I topped up today.  Am I wrong?

I have bought at over 75c with my first tranche in 2007.  In subsequent years, I have topped up at lower prices including rights and new offer at 25c.  So I am at about 45c average.  If a Chinese company is prepared to pay over 50c, I would be happy but I expect a bidding war to break out.

ABU

The price of gold crashed by more than USD$30 per oz last night.  So I changed my buy price for ABU.  A lot of my stocks are still very profitable at USD$1500 per oz.  So I still don't understand why the share price of gold stocks are falling.

BDR just poured their first 9kg gold bar but its share price is not going ballistic.  As long as it makes good profit and hopefully, pays dividends, then I would be happy.  ABU is still a long way from being a producer.

AGO

The management remained very optimistic when Fe ore price was falling.  Nobody believes.  Neither did I.  The market ignores POG but follows the price of iron ore and coal passionately.

I didn't buy any more AGO because the logic is and still there.  When Fe ore price falls, so will the profit.  But now the Fe ore price is rising so AGO is becoming much more valuable.  I have no regret but it is nice to see what was once GIR, is now very profitable for me again!  When it was takeover, I sold a lot of my holdings at over $3.

ABU

ABU is an enigma.  How does a stock that keeps generating good announcements, gets marked down further and further?

Who cares!  I had put in a bid at 4.4c but it expired just before it dropped to 4.4c.  So now I put in a bid for 4.1c and I hope to collect some from people who wants to sell.

BPT

I have always thought this is a good stock to keep.  But for a long time, I was disappointed with the share price performance.  However, I kept my faith about the management.  And in spite of the management informing the market of better financial forecast, the market does not want to listen.

So today, it announces another oil production site in Central Australia and the market grudgingly advance the share price a bit.  I have already indulged in 10 parcels at least, between 2 portfolio, last 2 in March and April 2012 bought at $1.40 and $1.53

POG

The amplitude has not been as large but POG has now rebound upwards.  Lots of experts are predicting a rise to USD$1900 per oz... yet gold stocks are languishing.

When POG moves like a yo-yo, you know something is manipulating it in the short term.  This kind of movement will be ironed out when you look at long term charts.

Would I still invest in gold stocks?  You bet!  My problem is my cash has dried out a lot because I had to exercise my PIROA shares.  Em... PIROA is a gold stock that has multiplied 7X since I bought in several parcels in 2010 and 2011.

Shale acreage in the USA

There are articles in Proactive Investors on Aussie oilies in the USA.  But a lot of them are looking sick from my perspective.  Yet, there is a lot of value to unlock from them.  Even my SSN is looking a little frail.

With more drilling to be done, it is difficult to imagine that the share price can keep drifting downwards... especially if there is liquid hydrocarbon.

BDR NST

It costs a lot to start a mine and there are often a lot of obstacles between successful exploration and marketing the gold produced.  BDR is nearly there with production and NST is already there.

What is nice about NST is the recent share price fall, due to directors selling out, was seen as a lack of confidence by board members.  That could be true but if it keeps producing and keeps finding good veins of gold to mine, you don't need those directors.  The new investor is not necessarily an evil.

In the meantime, I have been spotting some rare success recently with my BDR top-ups, buying when there is good news but fall in share price.

"Foster’s other “buys” for M&A potential are Northern Star (NST) and Beadell Resources (BDR)"

JIN

My wife does not like me to invest in gambling stocks.  I bailed out of Crown casino some time ago but that had nothing to do with conscience.  Chinese government was interfering with casino policies.  But it turned out to be a fizzle and Macau is now the biggest gambling site in the world.

When JIN showed its true colour, I jumped in, to be scolded months later!  This is a forward moving stock with increasing market footprint.  Once it can convince the Yankees and Mexicans, then the Chinese will be the next move.  I just noticed that I received a small dividend recently from JIN!  I shall increase my investment in it... quietly.

Investment strategies

I use very simple logic in my investment strategies.

If the government insists on 4-bank pillar for Australia, then if interest return is lower than dividend of each of the 4 big banks, then invest in the bank itself.  I only got rid of NAB because the management has been crappy.  I still think the other 3 have much better CEOs so I don't sell bank shares.  The only one that I have actively accumulated in the market was WBC.

If the price of a commodity is not plunging, like oil, copper and gold, then it cannot be wrong to invest in miners that produce them.  Yet, the share price of these stocks have been plunging but I cannot understand why.

If the value of a stock holds, and people are settling especially with good news, I would continue to buy.

AKM

Today it released a PFS which showed that this company, net present day value of USD$1.2 to 2.2 billion depending on the tax estimation.

But its market capitalization is worth only AUD$37 million.  You wonder why a Chinese company hasn't taken it over yet.  Maybe because the Mongolians trust the Chinese less than Aussies.  It has the second largest reserve of coking coal in Mongolia.

Bad day anticipated...

The POG plunged overnight and AUD went up.  Yes, the AUD went up after bad balance of trade figures and the interest went down.  That is just ridiculous.  Of course POG was not a supply-demand balance.  It is really a few people playing yo-yo with it.

Consequently, I expect some major downgrade of my portfolio today.  Need more cash to buy!

Gold stocks

It is becoming harder for the smaller gold exploration stocks to find capital to develop.  It is not profitable to have the gold in the ground; it has to be gold in the market.  But it is unbelievable that finance companies would not lend to stocks with more than 3 million ounces of gold in the ground.

Those that had funding and producing or will be producing shortly are doing well.... like BDR.  It also means that when senses return, those tumbling gold stocks are excellent value now.

Banks

If you are an investor in Australian stocks, you would be an absolute fool if you don't put your money into any of the Big Fours.  This a a government-sanctioned finance pillar.  Just remember, if banks do poorly, the economy is doing poorly.  And if banks don't profit, your deposit could disappear.

Hence as I approach retirement, I shall start to shift more of my investments into the banks....  The dividend is better than the interest on deposits.  And there is dividend imputation, too.

TPT

TPT has found a farm-in partner.  Obviously the market is not happy with its choice nor the money that that partner is bringing in.  So there is about a 10% fall in the share price.  The choice and the money paid for the rights to farm-in are very important factors.

Market situation: Losing cred...

Short term, it has been bad.  But valuation of gold stocks has been illogical.  Many years ago, I read an article lamenting the 'demise' of the Johannesburg Stock Exchange.  The POG had been rising yet the capitalization of gold stocks had been plunging. When profitability finally sank into the mentality of the fund managers, they all rushed in like lemmings to buy into profitable gold stocks.  Once the money was parked there, the gold stocks remained high for a while.  That was also a lemming approach as everyone waited for a leading lemming to jump out of the sector and that took a while.

I can't sell out of gold stocks now as they are near the trough (I believe).  Neither can I buy as PIROA options have to be exercised.  It has risen a lot and if I don't convert into ordinary shares, there goes one of my most successful investments.  PIR has a long history with me but the salient point was after selling out completely with a very nice profit, I bought back in again... because directors were buying a lot more shares in the market after a series of bad news.  It meant for me, an omen that things have reversed but the market is not aware why.  Directors don't re-accumulate their shares in bulk without a reason.  So I was the lone lemming... that followed the board.