Buy-High-Sell-Higher.com

Well, we are half way through the year, and it is not a pretty sight.

I was up approximately 10% at the end of each of February, March and April. By the end of May I was down 2%, and now I am down 9.7% on the year. It is not fun to spend half a year working, only to lose almost 10% of my portfolio’s value.

However, I am not yet ready to jump off a bridge. Here’s why:

First, there are no bridges near me, which is good news.

Second, let’s put this in historical perspective. At the end of April, 2006 I was up 50.4% on the year. By the end of June, 2006 I was only up 6.9% on the year. That means that in two months last year I lost 43.5% of the value of my portfolio. 41% of that 43.5%, in other words most of it, came in the month of May.

To repeat, last year my portfolio dropped by 41% in one month.

By the end of August 2006 I was up 19.2%, but by the end of September I was only up 6.1%. Lest we forget, last year was also volatile.

Why I am bringing up such bad news? Simple. By the end of October, I was up 42.2%, by the end of November I was up 72.5%, and by the end of December I was up 94.3% on the year.

Now obviously this year is different than last year. I didn’t have a 50% gain going into the month of May to allow me to weather the storm and still come out in positive territory. I started May only up 10.9%, so obviously a drop of 20.6% over two months will put me down almost 10% on the year.

To put this simply, last year the “spring run off” cost me 43.5%; this year it has cost me 20.6%, less than half as much. Obviously I’m not happy about this, but looking at it historically, I don’t see this as the end of the world. It looks bad day to day, but I have been through this before, and have lived to tell the tale, and profit handsomely.

No bridge jumping today.

(As an interesting sidebar, this has been a very volatile week; we are all waiting for the downside or upside break out to happen. As a result, this was the busiest week for activity and number of hits on the Buy High Sell Higher Forum, so obviously we are all paying close attention to the market’s comings and goings).

Third, I think there are some obvious bargains out there. For example:

CXX.V - Crosshair Exploration & Mining Corp. is looking really good; see my detailed comments, and a chart. Also, TVC.V - Tournigan Gold Corp. is looking like it is at a good buy point.

Fourth, historically, summer is a good time for uranium stocks. Not a great time like the late fall and early winter, but a good time. As mentioned in previous weeks, I plan to buy selected producers or near producers and move towards a fully invested position, and then start taking money off the table later in August.

However, as you can see from my portfolio list below, while some stocks have bottomed, many others are still not at attractive buy levels. I think that means we will have more volatility in the next few weeks, so I will not be fully invested for a few weeks, I assume.

Finally, for all of you non-Canadian readers, Monday is a holiday in Canada. (July 1 is the anniversary of the forming of the Dominion of Canada on July 1, 1867; when I was a kid we called it “Dominion Day”, which is what I still call it, but officially it is now the un-imaginative “Canada Day”). With the American Fourth of July holiday also this week, volumes will be low, but that may make for some volatile swings, which may present some nice buy points.

Happy Dominion Day.

Here my updated portfolio and watch list:

• AXR.TO - Alexco Resources Corp. - 1% (wait to buy) - It would appear that bottoms were made on May 25 ($5.15), May 30 ($5.15), June 26 ($5.14) and June 27 ($5.15); Alexco closed on Friday at $5.29, but only time will tell if $5.15 is the base; the prudent move would be to wait until it closes over $5.50 so that we have confirmation that the downtrend since the high of $6.69 on February 26 has been broken.
• AQI.TO - Aquiline Resources, Inc.- 1.5% - The year long chart shows an obvious uptrend starting in January, which is more than I can say for many other stocks, so this one is a buy, right now.
• CCO.TO - Cameco Corp. - 0% - I know it’s a blue chip, and I know all of the analysts are raising their targets and recommending it, but I just can’t bring myself to buy a stock where the freakin’ mine is flooded!
• CHX.V - Cash Minerals Ltd. - 2% - it’s beaten down, but looks like a bottom has been reached, so I’m slowly accumulating.
• CXX.V - Crosshair Exploration & Mining Corp. - 2% - looks like it is at a great buy point; see my detailed comments, and a Crosshair chart.
• DML.TO - Denison Mines Corp. - 4% - PRODUCER - they are a producer, but they are on the acquisition trail, which has put down-ward pressure on the stock; I have down-graded it to 6% of the portfolio, and I will keep watching to see if it has put in a solid bottom; no buying until we know that a base has been established.
• EDR.TO - Endeavour Silver Corp. - 2% - silver producer; beaten down recently, but I’m still holding.
• FIU.TO - First Uranium Corp. - 2% - CLOSE TO PRODUCTION - Has pulled back from it’s high; I have been waiting to buy; $12 looks like a good buy point, so I will be putting in some buy orders this week (yes, I know I said that last week, but I still mean it).
• FSY.TO - Forsys Metals Corp. - 4% - ADVANCED EXPLORATION - I do own it, and I like it; I may increase to a 6% weight as it moves up, primarily because I want higher weightings in stocks that are close to production, and therefore slightly less speculative
• FRG.TO - Fronteer Development Group Inc. - 8% - ADVANCED EXPLORATION (through it’s ownership of AXU.TO - Aurora Energy Resources, Inc.); solid near blue chip stock, also appears to be at a good buy point.
• GEM.V - Pele Mountain Resources Inc. - 4%- ADVANCED EXPLORATION - chart looks like a bottom has been reached; good things expected to happen in the future as they get closer to production, so I have started accumulating
• GBU.TO - Gabriel Resources Ltd. - 3% - Gold producer; you can read more details from my notes on June 1
• JNN.V - JNR Resources Inc. - 1% - Last week I said: “It’s been beaten down recently, but appears to have made a bottom, so time to start accumulating; I will be buying more at the $2.60 to $2.70 level, but it’s a junior exploration company, so it won’t be a big component of my portfolio” - it still looks beaten down, and I don’t see a bottom yet, so it’s too early to start buying.
• KRI.TO - Khan Resources Inc. - 2% - CLOSE TO PRODUCTION - I have been watching this one for a long time; it got ahead of itself, but has now pulled back to reasonable levels and has started to rise; they are close to production, which fits in with my revised approach; I don’t yet own it, but plan to put in buy orders around the $4.30 level, which will be confirmation that the down-trend has ended.
• LAM.TO - Laramide Resources - 2%- ADVANCED EXPLORATION (which is why it’s in the portfolio), but it has been beaten down recently, so I have reduced it’s weighting; I will increase in the future once it’s clear that a bottom has been reached.
• MGA.TO - Mega Uranium Ltd. -2% - ADVANCED EXPLORATION (which is why it’s in the portfolio), but it has been beaten down recently, so I have reduced it’s weighting; I will increase in the future once it’s clear that a bottom has been reached (kind of sounds like my LAM.TO - Laramide Resources comments, doesn’t it)?
• PAA.TO - Pan American Silver Corp. - 8% - It’s not clear that a bottom has been reached, so I may be over-weighted on this one, but silver stocks should move up from here, it’s a solid blue chip stock, so I’m holding
• PDN.TO - Paladin Resources Limited - 6% - PRODUCER (at its recently commissioned Langer Heinrich mine in the southern African state of Namibia) - production is not meeting expectations (see Forbes article); the $7.30 level is probably a bottom, so I’m keeping it in my portfolio, and I am only weighting it as high as I am due to it’s producer status.
• PNP.TO - Pinetree Capital Corp. - 4% - Chart looks terrible, hopefully $9 is the bottom; I have downgraded it to 4% of the portfolio, and will increase it’s allocation in my portfolio if circumstances warrant (ie. it starts to go up). At some point our friend Mr. Dines will tell us to back up the track, so until then, I hold.
• PWE.V - Powertech Uranium Corp. - 4% - ADVANCED EXPLORATION I hope a bottom has been reached, so I have started accumulating. Due to it’s advanced exploration status, I will be buying until I get to around 4% of my portfolio (currently only 1%).
• PXP.V - Pitchstone Exploration Ltd. - 1.5% - Junior explorer, I’m holding; an entry point is probably around the $3 level to confirm an upside breakout.
• SMD.V - Strategic Metals Ltd. - 3% - This is one of my non-uranium holdings, but since it has broken downwards through support at 80 cents, I am reducing it’s weighting in my portfolio.
• SLW.TO - Silver Wheaton Corp. - 1.5% (but not yet) - Silver stock, obviously, with good financials; however, the stock is very volatile, so I plan to put in a buy order at $12; if it gets filled, great, if not, I wait
• SSO.TO - Silver Standard Resources, Inc. - 7% - Solid silver stock, long-term holding, has been beaten down but a bottom appears to have been reached, so I’m holding.
• SXR.TO - SXR Uranium One, Inc. - 4% - PRODUCER - They are a producer, but the stock has been declining, so I am under-weighting it until the situation resolves
• TVC.V - Tournigan Gold Corp. - 4% - ADVANCED EXPLORATION - This is a uranium stock, not a gold stock, and the chart looks good, so I’m beginning to accumulate
• UEX.TO - UEX Corp. - 4% - ADVANCED EXPLORATION - Chart looks good, and I want to own companies that are close to production.
• URZ - Uranerz Energy Corp. 2% - CLOSE TO PRODUCTION - Not sure if a bottom has been reached, so I have not started buying yet, but it’s a virtual blue chip company, so I will start accumulating once the bottom becomes more apparent.

As always, please leave your thoughts by posting a comment below, or on the Buy High Sell Higher Forum.

Thanks to all for reading and contributing, and have a profitable week.

Last week I asked for your suggestions on what to buy; thanks to all who presented their thoughts on what stocks to buy on the Buy High Sell Higher Forum.

Based on your thoughts, and my research, here are my thoughts:

First, I believe we have reached the bottom, so now is the time to move towards a fully invested position. Not immediately, but over the next few weeks, since I believe we will look back on early July as a great buying opportunity. This means that for stocks I want to buy, or increase my holdings, I will be putting in below market orders and hope they get filled on dips.

Second, I believe that the best uranium stocks in the near term will be producers, or companies that are close to production. Why? Because a company that will have production 10 years from now, once the price of uranium has backed off from $150 per pound to $50 per pound, is probably not a great long term investment. The companies I want to own are the companies that will be able to take advantage of high prices in the near future (one to three years).

To that end, I took a list of companies that are close to production, which I found at U3O8.biz, and then looked for the companies with the most attractive charts. (Note that U3O8.biz shows PDN.TO - Paladin Resources Limited as not yet being in production, but it is, so we all have to do our own research). In other words, I’m using both fundamental and technical analysis. In addition to wanting a good chart, I also wanted good fundamentals, so some companies near production were knocked off my list. For example, AXU.TO - Aurora Energy Resources, Inc. is a great company, but since it’s largest shareholder is FRG.TO - Fronteer Development Group Inc., which I own, and I see no reason to own both companies.

Third, as pointed out by davidslane in the Buy High Sell Higher Forum, uranium stocks have a small degree of seasonality, tending to peak in late August, late November, mid February and a smaller peak in mid April. They then have bottoms around mid June, mid October, early January, and then the end of February or early March. Obviously these dates are not specific, and the past is no guarantee of the future, so they may not happen. However, that’s why I want to be buying now.

It therefore also seems logical to me to start taking some profits on the big up days in August. If by mid August I am up 30%, I will take 30% of my cash off the table, and look to reinvest it gradually in October and November.

So, what am I holding, or planning to buy? Here’s the list:

• AXR.TO - Alexco Resources Corp. - 1% - MACD and RSI have declined to favorable levels; upturn appears to be happening; some exposure in the silver market is a good idea; I own it, and I’m holding.
• AQI.TO - Aquiline Resources, Inc.- 1.5% - The stock has fallen from around $12 to $10.26 in the last few weeks, and the RSI has fallen to $54.29; I don’t own it yet, but I plan to put in a buy order at $10 and start buying, since we are getting close to the time where some money needs to go into some precious metals plays.
• CCO.TO - Cameco Corp. - 0% - I know it’s a blue chip, and I know all of the analysts are raising their targets and recommending it, but I just can’t bring myself to buy a stock where the freakin’ mine is flooded!
• CHX.V - Cash Minerals Ltd. - 2% - it’s beaten down, but looks like a bottom has been reached, so I started nibbling this week.
• CXX.V - Crosshair Exploration & Mining Corp. - 2% - looks like it has finally broken out; I will start nibbling; see further comments in the Forum.
• DML.TO - Denison Mines Corp. - 9% - PRODUCER - sold uptrend, good RSI and MACD levels; this is a good, solid producer; I like it.
• EDR.TO - Endeavour Silver Corp. - 2% - silver producer; beaten down recently, but I’m still holding.
• FIU.TO - First Uranium Corp. - 2% - CLOSE TO PRODUCTION - Has pulled back from it’s high; I have been waiting to buy; $12 looks like a good buy point, so I will be putting in some buy orders this week
• FSY.TO - Forsys Metals Corp. - 4% - ADVANCED EXPLORATION - I do own it, and I like it; I may increase to a 6% weight as it moves up, primarily because I want higher weightings in stocks that are close to production, and therefore slightly less speculative
• FRG.TO - Fronteer Development Group Inc. - 8% - ADVANCED EXPLORATION (through it’s ownership of AXU.TO - Aurora Energy Resources, Inc.); solid near blue chip stock, also appears to be at a good buy point.
• GEM.V - Pele Mountain Resources Inc. - 4%- ADVANCED EXPLORATION - chart looks like a bottom has been reached; good things expected to happen in the future as they get closer to production, so I have started accumulating
• GBU.TO - Gabriel Resources Ltd. - 3% - Gold producer; you can read more details from my notes on June 1
• JNN.V - JNR Resources Inc. - 1% - It’s been beaten down recently, but appears to have made a bottom, so time to start accumulating; I will be buying more at the $2.60 to $2.70 level, but it’s a junior exploration company, so it won’t be a big component of my portfolio
• KRI.TO - Khan Resources Inc. - 2% - CLOSE TO PRODUCTION - I have been watching this one for a long time; it got ahead of itself, but has now pulled back to reasonable levels and has started to rise; they are close to production, which fits in with my revised approach; I don’t yet own it, but plan to put in buy orders around the $4.30 level.
• LAM.TO - Laramide Resources - 2%- ADVANCED EXPLORATION (which is why it’s in the portfolio), but it has been beaten down recently, so I have reduced it’s weighting; I will increase in the future once it’s clear that a bottom has been reached.
• MGA.TO - Mega Uranium Ltd. -2% - ADVANCED EXPLORATION (which is why it’s in the portfolio), but it has been beaten down recently, so I have reduced it’s weighting; I will increase in the future once it’s clear that a bottom has been reached (kind of sounds like my LAM.TO - Laramide Resources comments, doesn’t it)?
• PAA.TO - Pan American Silver Corp. - 8% - Bottom reached, silver stocks should move up from here, it’s a solid blue chip stock, so I’m holding
• PDN.TO - Paladin Resources Limited - 6% - PRODUCER (at its recently commissioned Langer Heinrich mine in the southern African state of Namibia) - production is not meeting expectations (see Forbes article); the $7.50 level is probably a bottom, so I’m keeping it in my portfolio, and I am only weighting it as high as I am due to it’s producer status.
• PNP.TO - Pinetree Capital Corp. - 4% - Chart looks terrible, although it’s possible that $10 could be a bottom; I have downgraded it to 4% of the portfolio, and will increase it’s allocation in my portfolio if circumstances warrant (ie. it starts to go up).
• PWE.V - Powertech Uranium Corp. - 4% - ADVANCED EXPLORATION Bottom reached around $2.50, so I have started accumulating. Due to it’s advanced exploration status, I will be buying until I get to around 4% of my portfolio (currently only 1%).
• PXP.V - Pitchstone Exploration Ltd. - 1.5% - Junior explorer, I’m holding; an entry point is probably around the $3 level.
• SMD.V - Strategic Metals Ltd. - 3% - This is one of my non-uranium holdings, but since it has broken downwards through support at 80 cents, I am reducing it’s weighting in my portfolio.
• SLW.TO - Silver Wheaton Corp. - 1.5% (but not yet) - Silver stock, obviously, with good financials; however, the stock is very volatile, so I plan to put in a buy order at $12; if it gets filled, great, if not, I wait
• SSO.TO - Silver Standard Resources, Inc. - 7% - Solid silver stock, long-term holding, has been beaten down but a bottom appears to have been reached, so I’m holding.
• SXR.TO - SXR Uranium One, Inc. - 4% - PRODUCER - They are a producer, but the stock has been declining, so I am under-weighting it until the situation resolves
• TVC.V - Tournigan Gold Corp. - 4% - ADVANCED EXPLORATION - This is a uranium stock, not a gold stock, and the chart looks good, so I’m beginning to accumulate
• UEX.TO - UEX Corp. - 4% - ADVANCED EXPLORATION - Chart looks good, and I want to own companies that are close to production.
• URZ - Uranerz Energy Corp. 2% - CLOSE TO PRODUCTION - Good looking chart, a virtual blue chip company, so I will start accumulating.

For those of you who like stats:

67.5% of the portfolio is in uranium, 22.5% is in gold and silver, and 3% is in base metals, and 5.5% is in cash.

Of the uranium portion, 13% is in producers, 12% are close to production, 32.8% are at the advanced exploration stage, and 9.7% are junior producers (so these numbers total 67.5%).

For those who are keeping score, 66.5% of the portfolio are in stocks that are recommended by Mr. Dines, and The Dines Letter, although some of them were being discussed here before they went on his recommended lists.

Does this allocation make sense?

Time will tell; I’m sure you will all give me your thoughts by posting a comment below, or on the Buy High Sell Higher Forum.

Thanks to all for reading and contributing, and have a profitable week.

The first quarter of 2007 has now ended, and I am satisfied to report that my portfolio is up 11% on the year. If I can maintain this pace I will gain 44% for the year, which is satisfactory, although not as impressive as the 94% I gained last year. Given that we have already had one correction this year, I’m satisfied with where I’m at.

What mistakes have I made so far this year? Well, as discussed in my March 17 commentary, I wanted to diversify out of the pure uranium stocks, and also pick up some junior stocks for purely speculative purposes, on the theory that if the uranium and base metals markets keep increasing, it will be the juniors that become take-over targets. I picked four stocks, all owned by PNP.TO - Pinetree Capital Corp., on the basis that they have already done the research on which juniors are good candidates for capital appreciation. My four picks were:

• GU.V - Global Uranium Corp.
• INI.V - Independent Nickel Corp.
• KAU.V - Kilgore Minerals Ltd.
• TOE.V - Tri Origin Exploration Ltd.

How did I do? Not great. Global Uranium tanked just before I bought it, and kept dropping after I bought it. Independent Nickel and Tri Origin were also downers. The only winner in the bunch was Kilgore, which announced a merger with Bayswater Uranium. I’m up 12% on Kilgore, so I’m holding it. The other three were losers, so I cut my losses and sold them. Fortunately all four of these stocks were small components of my portfolio (about 1% each), so no serious harm done.

The most interesting stock this quarter, without a doubt, has been PNP.TO - Pinetree Capital Corp. I have written a detailed explanation of my thoughts on Pinetree to explain why I have thinned out my position this week (fortunately before the drop on Friday).

I also took some profits in LAM.TO - Laramide Resources Ltd. since it has had a big run recently.

So, what to do now? I’ve sold my losers, and thinned out my big winners, so now I have 20% of my portfolio in cash. My plan was to keep cash of roughly equivalent to my gain on the year, on theory that as the portfolio increases I will take profits. Since I’m up 11% on the year, I’m not as invested as I would like to be. Should I just start buying to hit some arbitrary cash percentage? No. It’s time to do some thinking.

Refining Buy High Sell Higher

I believe it’s time to refine my buy high sell higher approach. In it’s simplest terms, I buy stocks in an up trend, preferably as they are breaking out of a consolidation phase. A new high is a good indication of a break-out, but it’s also likely that that approach misses some of the upside. How to refine this approach? By using the RSI.

The Relative Strength Index (RSI) compares the magnitude of a stock’s recent gains to the magnitude of its recent losses and turns that information into a number that ranges from 0 to 100. (The RSI that I am using should not be confused with other forms of “Relative Strength” rankings, such as the one that appears in Investor’s Business Daily, which is a comparison of this stock to other stocks. Using that indicator a Relative Strength of 80 means the stock out-performed, price wise, 80% of all other common stocks over the last year). Like most true indicators, the RSI only needs one stock to be computed. In order to avoid confusion, many people avoid using the RSI’s full name and just call it “the RSI.” A full description of RSI and other technical indicators can be found at stockcharts.com.

A chart of the RSI shows visually whether or not the stock’s recent gains are larger than it’s recent losses; in other words, whether or not it’s going up or down. Since I like to buy stocks that are going up, this is a good indicator for my investing style.

Stocks typically trade in an RSI of between 30 and 70. Once a stock gets over 70, it’s looking “toppy”. It would appear that a good time to purchase a stock is as it increases over the half-way point, or 50, meaning it’s on the way up. (A review of my three losers above indicates I should have paid attention to the RSI before buying).

So what am I buying?

First, I’m getting back into PXP.V - Pitchstone Exploration Ltd.; I made a mistake selling this one on March 20; you can read the summary of my stupidity here.

Second, I think silver is poised to move higher. Please read my detailed thoughts, and my new silver recommendation: EDR.TO - Endeavour Silver Corp.

Third, I am adding two new stocks: HAT.V - Hathor Exploration Limited and AZM.V - Azimut Exploration, Inc. You can read my full thoughts here. I plan to start buying them on Monday.

What will the next quarter bring? Are we due for the April correction, or is it already over? I don’t know, but a glance at the uranium chart on the right hand side of this page should bring a smile to our faces.

As always, please post your comments at the bottom of this post, or post your thoughts on the Buy High Sell Higher Forum, and good luck this week.

In an effort to diversify away from uranium, and to make money, I’m going to increase the silver stock component of my portfolio. I think silver is poised to move higher. Here’s the chart from kitco silver.

Click to Enlarge

Obviously silver has been trending higher since the low of $9.72 on June 14, 2006, although it is still down from the 20 plus year high of $14.94 reached on May 12, 2006. The current price is $13.32, so a close above $14.94 would be very bullish.

I already own PAA.TO - Pan American Silver Corp. (8% of my portfolio) and SSO.TO - Silver Standard Resources, Inc. (6% of my portfolio), and they have both been good performers. I believe it is now time to start accumulating more silver stocks, for both technical and fundamental reasons (the chart looks good, and silver is in demand).

The stock I have picked to add to my portfolio is EDR.TO - Endeavour Silver Corp. Here’s why:

First, Endeavour Silver Corp. is traded in Toronto, Frankfurt, and the AMEX (EDR : TSX, EJD : FRANKFURT and EXK : AMEX).

Second, it’s a small-cap silver mining company focused on the growth of its silver production, resources and reserves in Mexico. According to their web site, “the expansion plan now underway at the high grade, Guanacevi mines project in Durango should propel Endeavour into the ranks of the top 5 primary silver producers in the world.”

Third, also from their web site, ” Endeavour stands out from other primary silver companies for its high silver grades (+15 oz. per ton), its high silver leverage (+90%), the substantial exploration upside of the Guanacevi mines project (+30 million oz), the potential capacity of the Guanacevi plant and the organic growth potential of these core assets.”

Finally, I like the chart:

The MACD and RSI indicators look good, and despite the recent pullback the up trend lines are still in place.

I have my eye on some other silver stocks as well, so stay tuned for more recommendations as they get to good buy-points.