Good News - Bad News

GOOD NEWS

• Great Canadian employment numbers.  Unemployment rate down to 7.6%
• Oil over was over $88, now dipping on the bad news
• Gold over $1,390, now rising on the bad news
• Walter Energy (WLT) finalizes deal for all the shares of Western Coal (WTN)

BAD NEWS

• Huge disappointment in US employment numbers just out seconds ago.  Unemployment rate up to 9.8%
• Big earnings miss by RBC.  Estimate was 1.00 per share, actual .86

Of the above, the market mover will be the US employment figures.  Europe which had been in positive territory tuned down instantly on the news.

Me, I'm real happy with the Walter/Western Coal Deal.  It's been finalized at the previously reported $11.50 per share cash.  The new news is that the alternative to cash is .114 of a Walter share for each Western share.  Walter shares closed in New York yesterday at $105.60. This values the Western Coal shares at $12.03US. 

Is it too soon to say Merry Christmas?

Christmas isn't for a while but it already feels like we got a present.  After coming off the best three months in recent memory the markets continued to climb yesterday.  The TSX began the new month with a  pop of 1.5%.  The DOW jumped 2.2%.  What surprises me the most is that Asia, Europe and US futures are all up overnight.  It actually looks like the rally will continue today.  It's too soon to talk Santa Claus Rally but who knows?

Mixed results from our banks this morning.  CIBC (CM) beats while TD (TD) misses estimates...but still turned in a "weaker" profit of  $994 Million for the quarter.  Not too shabby.  RBC (RY) results tomorrow.

My new coal miner, Western Coal (WTN) rose 6% yesterday but at $10.60, it's still trading below the offered takeover price of $11.50.  It seems the market doesn't believe the deal with Walter Energy (WLT) will close.  Me, I'm on the fence but trying to cover my butt with sell order at $11.05.  I paid $8.05 on November 9.  I'd be happy to take the three bucks and move on rather than wait for takeover thing to play out over the next several months.  I place this order each morning only after checking to see where WTN opens.  I don't want to leave a multi-day order sitting there only to be taken out first thing in the morning on the day when it pops.

Chrysler Bragging?

Saw the prez of Chrysler Canada on BNN this morning.  He was bragging that November sales were up 34% over last year.  Let's see now...34% of nothing is...hmmmm?

Fact is, it looks like the whole auto industry is rocking once again.  Maybe this recovery is for real.

Best Three Months Since???

But for a major downward dip in in November it's been a nice steady climb.  The first peak was on November 8 which was the same date the TSX reached a twenty-six month high.  I reached a new high on the 22nd even though the TSX sagged a bit that day.

I'm up 11.7% YTD.  Of this, 10.1% came in the last three months.  Doing a smig better than the TSX on both counts.

And Now For December...
Out of the blocks like a sprinter this morning.  The TSX is up to new two year high...up 137 to 13,090 forty-five minutes into the trading day.  The DOW is up 194.  WOW!

1035 Days Ago

January 18, 2008.  Three things happened that day;

1. I broke my long standing rule to never sell anything at a loss and bailed on HudBay (HBM) as documented in my post HudBay Minerals - My BIG Mistake.  
2. I promised myself that I'd learn as much as possible about the markets and get the loss back...and not just get it back but get it back into my trading account which is a small portion of my overall portfolio.
3. I made up my mind to never again recommend a stock to family or friends as I had with HudBay.  Fortunately none of them followed up on my recommendation, because, as a group, they are very passive investors who don't have trading accounts.

I bought HudBay on July 11, 2007 at $27.35 and sold on January 18, 2008 at $15.69.  A huge loss at the time.  Not chicken feed today.  Since then, HudBay has been down as low as $2.90. Had I held, this would have wiped out my trading account.

Fast forward to yesterday, 1035 days later.  It's all back!  Yup, as of yesterday's close, my entire HudBay loss has been recovered.

So, how did it happen?  Since selling HudBay I've bought and sold 43 times in my trading account.  Not all different stocks as I've been in and out of a few more than once.  For example, I bought and sold the Gold ETF (XGD) and the Energy ETF (XED) several times. Buying on dips and selling on gains of the underlying commodities.

I got real lucky a couple of times with takeovers.  I bought Fording Coal Trust (FDG.UN) just days before a hostile takeover offer from Teck Cominco (TCK-A).  Same thing with Canadian Hydro Developers (KHD).  Bought them a week or so before the TransAlta (TA) offer. In both cases I sold as the stock ran up rather than wait for the final takeover in order to take the profit and move on.

Very recently I lucked out again with Western Coal (WTN). Bought it on November 9 at $8.05 and along came Walter Energy (WLT:NY) with an offer of $11.50. Not too shabby for nine days.

Of course, my biggest single gain was my recent double with Scorpio Mining (SPM) as reported in my post Thank You Mr. Brieger!!!

All-in-all, I've beat the TSX by a wide margin over the past 34 months and most of my picks began with BNN and then followed up with research which been mentioned on these pages.  It's been a ride.  Along the way I learned a lot, practiced more patience than I'm used to and had fun doing it.

Good Luck & Happy Investing!

So, you're selling, what are you buying?

That's what friends have been asking since my recent posts about selling Encana (ECA) on September 30 and Research In Motion (RIM) on October 13.

Well, the little birdies have been predicting an upturn for Canadian banks for the past couple of months.  There is a near unanimous consensus that the banks have their troubles behind them and will report strong results for the next several quarters.  Most analysts predict that the banks will begin raising dividends as early as year end.

So, decision made…going to buy the banks.  Which one(s) to buy?  That’s the question.  For the answer I turned to the Interactive Charts of Yahoo! Finance.  I had a look at one year charts for BMO, BNS, CIBC, National and RBC.  Why not TD?  Because I already hold TD and have for some time as mentioned in my post Canadian Banks - Buy 'em and Hold 'em. Why National when it’s not one of the big five? Because it’s often a top pick by BNN analysts and many expect it to outperform the others and be the first to increase dividends.

To the charts I added Technical Indicators for 50, 100 and 200 day simple moving averages. By doing this I discovered that that BMO and RBC were trading at or below their moving averages. On the other hand, BNS, CIBC and National were trading well above which possibly indicates they have already begun the assent to new levels so there may be less upside over the next few months.

Based on this simplistic research, I divided my Encana and RIM money in two and placed buy orders for both BMO and RBC.  On October 13 I bought these two banks.

This week I sold Scorpio Mining (SPM) on Monday and Lundin Mining (LUN) on Tuesday.  As mentioned, Scorpio was my first ever double and I picked up a very nice 37% gain on Lundin. Anxious to keep the money in play I quickly bought Grande Cache Coal (GCE) and Western Coal (WTN).  Why the coal miners?  Again, the little birdies are predicting that the demand for coal will outstrip supply in the next 12 to 18 months as China builds another coal fired something or other every couple of weeks.

I have great hopes for my four new stocks over the next six to twelve months.

IMPORTANT REMINDER
Nothing on this site should ever be considered to be advice, research or a suggestion or invitation to buy or sell any securities. Every investor should do their own research and consult their own finance guy. See full DISCLAIMER.

Thank You Mr. Brieger!!!

THE STORY OF MY FIRST DOUBLE
One day in August of 2009 I was watching BNN.  The analyst du jour was Peter Brieger of GlobeInvest Capital Management.  A guy called in and asked Brieger if he still liked Scorpio Mining (SPM).  It must be his brother who calls every time he's on to ask the question to give him the lead into talking about his favorite stock.

Brieger gave a number of reasons for his belief that the .55 stock would rise to $1.50 to $2.00 over the next eighteen to twenty-four months.  I'd seen Brieger a number of times and believe that he's a fairly conservative guy so it was a bit of a surprise to hear him talking up a small cap miner.  He stated that Scorpio is his largest single holding and he's still adding it to client's accounts.  I figured if it's good enough for him, it's good enough for me.  The price that day was .55.

I had some cash in my trading account having recently been taken out of Royal Bank (RY), so I put in a buy order at .50 good through the end of August and went on vacation.  A couple of weeks later, while snorkeling in Maui, my order was filled and I became the proud owner of Scorpio shares.  Within weeks the price bounced to .75.  Normally I would bail and brag about a 50% gain in less than a month, but I held off.  Brieger's forecast of a share price in the $1.50 to $2.00 range intrigued me.  I've never had a three or four bagger.  Forget three or four, I'd never had a double.

Months passed, the shares traded in a range between .55 & .70, seldom touching .75 again.  With my usual impeccable sense of timing I put in a sell order at .75 in March.  Yup, here I was, seven months later, trying to get the same .75 that I could have had months ago.  I renewed my sell order each week for a number of weeks.

On Monday, April 5 I changed the strategy and revised my ask to .90 figuring it was just plain dumb to settle now for what I could have had last September.  Brieger's predictions haunted me. I realized that I had already held for nearly half of his earliest prediction of $1.50 to $2.00 in eighteen months. The following day, the price popped to a high of .85 and closed at .83. At last, I had avoided being taken out on the way up. 

One day later, on Wednesday, greed set in.  Before the markets opened I revised my order to an ask of $1.04 for half my position, calculating that I'd get all my original investment back (including fees) and still hold half the shares for the ride to Brieger's $1.50 to $2.00.  The Wednesday high was .94 and it closed at .88.  Once again, I'd dodged the take out bullet.  Was I finally getting the hang of this?

Well, you gotta know, on Thursday it dropped to .80...but everything else dropped so I wasn't worrying.  I decided to stand fast with the $1.04 ask figuring if it hit .94 on one good day, it would get there again in the near future.  If .94 is possible how far away is $1.04?

On Monday, April 19 the share price jumped over .90.  By 11:00 AM 'Peg time the volume was twice the average daily.  The price was in the .93 to .97 range with a brief pop to .99.  I resisted the temptation to reduce my ask to 1.00 and grab the double.  I stood my ground only to watch it fall off and wander in the .60 to .75 range for the entire summer.

Things heated up in September and Scorpio's share price bounced to the .80 to .90 range. Brieger was on BNN on September 21.  As usual, the very first caller asked if he still loves Scorpio.  As usual his answer was yes.  In fact, he now has a price target of $2.50 to $3.50.  This he calculates as a simple multiple of anticipated earnings.  Once again I placed a sell order at $1.04.

In mid October I revised my sell order and offered all of my Scorpio shares.  Figuring that I'd held for fourteen months I may as well take the double and move on rather than sell half and wait it out any longer.  Last week my sell order expired on Friday and I was busy with other things and did not renew it.  I was heading out early this afternoon and thought I'd check my trading account.  Scorpio had briefly touched .99 this morning.  I placed my usual sell order at $1.04 just before leaving the house.

While I was out my Scorpio shares sold for $1.04 giving me my first ever double.  Yup, fourteen months and three weeks and I doubled my money with Scorpio Mining.  Thank you Mr. Brieger!

ROCKTOBER!

Wow!  Here we are, one month past the historic weakest month of the year, September. October isn't usually a whole lot better as it's the final month of the summer doldrums as described by the Halloween indicator, a term used by some for the theory that the markets generally do better in the months from November to April than in the May to October period. The Sell In May And Go Away crowd supports this theory.

So what happened this past summer?  At the end of April my stuff was up 5.42% for the year. By the end of August it was all gone.  My year to date gain had disappeared.  I sure was feeling like I should have joined the Sell In May And Go Away gang.  Needless to say, I wasn't looking forward to September, the weakest month of the year.

September!  The TSX gained 3.82% while in the US the DOW shot up 7.77%.  And then, along came October.  Pumpkin month saw the TSX gain another 2.49% while the DOW bounced another 3.06%.  While the markets did very well in September and October, I did better.  My stuff shot up 9.19%.  A fantastic two month gain!

On October 8, I triggered my exit strategy by unloading my long held Canadian Resource Fund. That day I simply parked the proceeds in an Interest Fund with the same fund company.  A few days later I transferred it to a Canadian Bond Fund, again, with the same company.  I don't have a crystal ball and I'm not suggesting that resources and commodities are going to fall off the cliff.  What I do know, is that if they do, my Canadian Bond Fund units will be worth the same amount, or more, the day after the meltdown.

Exit Strategy?  Who said anything about an exit strategy?  Well, I think I did...at least I've been gradually introducing  the idea throughout the year.  On May 5 I wrote Who Should(n't) Be In Funds?  This one triggered some interesting response from readers who told stories about finance guys who no longer return calls.  After hearing some of these stories I was compelled to write my July 9 post Why we fell in love with funds.  Do we still love finance guy today?  Finally, my July 16 post A Little More About The Last (Next) Ten Years revealed that in the past ten years the markets were pretty crappy and I suggested that we all need a plan.

Another September to Remember!

A year ago tomorrow when the markets defied the long term norm and bounced in September I wrote A September to Remember.  We are told September is historically the worst month of the year.  Well, it happened again.  It's looking like the norm isn't the norm any longer.

This year, the TSX began September at 11,913 and closed at 12,368 for a gain of 3.82%.  South of the border things were even better.  The DOW gained 7.77% while the broader S & P 500 shot up 8.77%.  Wow!

Unfortunately, the gains of September 2009 didn't last long.  The TSX tanked 323 points on October 1 and by month end pretty much all of the September gains had disappeared.

We're off to a much better start this month.  As I write this, the markets have been open for less than 45 minutes and the TSX is up 74.  Additionally, gold, oil and the US markets are all UP!  It's all good....for the moment at least.

As reported on these pages, I made a couple of changes in my trading account in September. On September 2 I bought Research in Motion (RIM) at $46.49.  Since then it's been a rocky road.  It's been as low as $45.40.  Right now it's at $50.90.  After some disappointment with the announcement that the new Blackberry Play Book won't be released until the new year, the investment community seems to be responding to the positive press about this new device. Yesterday I gassed my gas company, Encana (ECA). Even as we approach the heating season I couldn't see hanging onto this company.  Nat gas is just TOO cheap and there's TOO much of it.

Good Luck & Happy Investing!  

A Change In Direction

In my most recent post I briefly outlined a plan to get more aggressive with my trading account. The process begun a few weeks ago with the sale of TransCanada Corporation (TRP) at what was then the 52 week high of $38.16.  This stock had been range bound between $32. & $38. for a whole year.  I was happy to sell my shares at the top of this range.

Now for part two of the plan.  Identify an undervalued stock to add to my portfolio.  Hopefully one with real potential for an upside surge.

Let the research begin.  Not a day goes by, on BNN, without a caller asking the guest analyst for an opinion on Research In Motion (RIM).  This, I learned, is because RIM is presently trading near the bottom of it's 52 week range.  The 52 week low is $44.94 and the high is $94.00.

It seems RIM's troubles stem from the threat of the government of India and few others to shut them down unless they allow government access to their state of the art encryption so as to allow governments to 'listen in' for threats of terrorism.  The Blackberry is supposedly the communicator of choice for terrorists and other criminals.  We know politicians all use them. Coincidence?  Most analysts believe that RIM will negotiate a reasonable settlement on the encryption issue long before being shut down.  Additionally, there is a belief that the Blackberry is not as sexy as Apple's iPhone.  I then learned that this issue is a North American phenomena.  Apparently Blackberry is smart phone of choice for the 18 - 30 crowd in pretty much the rest of the world.  North Americans love all things Apple.

Next stop Stockchase.com   As I've mentioned before, this site capsulizes all the comments made on BNN by the various guest analysts.  In addition to their comments, the share price on that date is listed.

Next I turned to the interactive charts of Yahoo! Finance.  These charts allow customization by adding any number of technical indicators to the chart.  By adding moving average indicators I learned that RIM shares were trading 15% below the 50, 24% below the 100 and 29% below the 200 moving average.

Last stop, the RIM website.  A few highlights from RIM's first quarter financial report;

• Revenue grew 24% over the same quarter last year to $4.24 Billion
• Earning per share increased 41% year over year to $1.38
• Blackberry shipments grew more than 43% over the same quarter last year to 11.2 Million.
• RIM shipped its 100th million Blackberry during the quarter.
• Subscriber base grew 60% over the period year to 46 Million with 4.9 Million accounts added in the quarter.

Satisfied, I bought RIM on September 2 for $46.49.  This is a real change of direction me.  I've kept my stuff all Canadian, all the time but have stayed away from the tech sector.  Since September 2 it's been as high as $46.71 and as low as $45.40.

The short term direction for the RIM share price will be established later today with release of second quart results after the close.  Will I be listening in on the web cast?  You bet.

IMPORTANT REMINDER
Nothing on this site should ever be considered to be advice, research or a suggestion or invitation to buy or sell any securities. Every investor should do their own research and consult their own finance guy. See full DISCLAIMER.