28 February 2007

An early March update...

Another month closed and it is therefore time for another update on my favourite stocks. Even though my stock picks are only up 3.5%, so far they do outperform pretty much every index around the world!
DateFundPurchaseCurrentROI%Target
18Dec2006Aareal Bank35.50 35.40 -0.3% 44.40
13Dec2006 ABN Amro 24.10 28.00 +16.2% 28.00
16Feb2007 Ahold 7.97 7.56 -5.1% 10.00
16Nov2006 Banco Pastor 14.15 16.85 +19.1% 18.00
27Nov2006 Capitalia 7.00 6.62 -5.4% 8.50
19Feb2007 Companhia Vale $35.90 $34.10 -5.6% $55.00
12Jan2007 Crystallex $3.12 $3.04 -2.6% $6.00
24Jan2007 DRDGold $0.83 $0.80 -6.0% $1.10
21Dec2006 Fiat Group 14.50 17.79 +22.7% 19.33
12Jan2007 Gold Reserve $3.94 $4.46 +13.5% $12.00
10Dec2006 Hagemeyer 3.64 3.58 -1.6% 5.00
16Dec2006 Iberia 2.81 3.30 +17.4% 3.30
28Nov2006 Ormonde Mining 0.24 0.19 -20.8% 0.40
7Dec2006 Rhodia 2.60 2.65 +1.9% 3.20
30Nov2006 SolarWorld 46.10 54.58 +18.4% 69.12
2Dec2006 Vallourec 204.00 187.33 -8.2% 250.00
+3.5%
All stocks in euro unless mentioned otherwise. Stocks in bold have been sold as target price has been reached.

27 February 2007

Markets plunge; metals join in on the fun

It is now 11pm Amsterdam time and what we have whitnessed today is not something we see every day. I bought two puts on the Dutch AEX index on Friday and sold them today, after which I bought one single put 490 (March series) later on the day at a lower price: Eur 1.85. Certainy not a big investment, but then I do not hold an impressive track record with options. I therefore tend to be very careful when trading with options. Closing price of my put was Eur 3.40 with an AEX some ten points below yesterday's close. After European equity markets closed, we whitnessed the American indices being slaughtered, taking commodities along. I got worried about my mining stocks as the mining sector is among the hardest hit of all sectors today. Thankfully, someone posted some comments by Jim Sinclair, who had already said the following - one day before this slaughterfest: "At first the equity market breaks would bring in temporary sellers of gold. However, quite quickly thereafter and most certainly when the US Dollar also gets hit, gold will steady and start its move to all the Angels." Thanks for those words of hope and wisdom, Mr Jim Sinclair. As for tomorrow, I will watch the indices closely and I will specifically watch the RSI level of the AEX, which will be critical. If the RSI in the daychart breaks through 40, we are seeing a bull market turn into a bear market. Good luck to all and don't panic.

26 February 2007

Enter DRDGold, Exit Gold Reserve

The past few months have been very good for my portfolio. With a ROI of 62% since September, it's certainly been the best five months ever. But the months from April until September were not particularly good, which has once again taught me a lesson about the importance of timing - even in a secular bull market. Today, I decided to sell GRZ at $4.87 (purchased at $4.05; it is still in my list of stock picks for the long run) and use the money to benefit from the improved technical picture of DROOY. In addition to the technical picture, the fudamental picture looks brighter, too. DRDGold subsidiary Emperor Mines announced on Friday that it saw a significant increase in its mineral reserves at its Porgera Mine. A statement on the update of DRD Gold's reserves can be expected in the near future. As far as I can see, this is the first significantly positive news in years after having seen the stock plummet to a price below one Dollar. I added DROOY todat at $0.87. Price target remains $1.10 for 2007, which I hope to see in the first quarter of 2007 on rising metals prices.

23 February 2007

Target price reached for ABN Amro

I am pleased to report that ABN Amro reached its price target of EUR 28 yesterday on rumours of the company being split up, followed on earlier rumours of the company being merged or even taken over by Italy's Unicredito. As mentioned in my posting on 13th of December, there's a lot going on in the European banking industry and it needs to be watched very closely. For now, I think ABN Amro has limited upside potential and is sufficiently valued, knowing that the rise is mainly caused by speculations about the company's future. I would certainly wait for a correction until buying this fund again. On my list of stock picks, ABN Amro will be 'clicked' at EUR 28.

19 February 2007

Brazilian mining giant CVRD still undervalued

Companhia Vale do Rio Doce (CVRD) is one of the big three in iron ore and, together with BHP Biliton and Rio Tinto, makes up about 70% of global iron ore exports. The Brazilian mining giant is a little less diversified than its counterparts, but through last year's takeover of Canadian nickel miner Inco the company has actually become a more attractive player in the sector. Not much needs to be said about this company: turnover rose from 225% from 2001 to 2005, whilst net income went op 276%. EPS growth has been really impressive until today and this is not expected to change with metals prices currently booming. Being a firm believer in a metals boom, I expect prices for all metals to go higher and earnings growth should therefore continue to be admirable. A further diversification won't hurt either. Part of the company's strategy is to invest in aluminium, copper, nickel & coal, whilst at the same time aiming to grow its logistics business. With expected 2007 earnings per share of around US$3.60, CVRD now trades at a fwd p/e of 10. Keeping in mind that the mining craze will add fuel to the valuations of companies throughout the global mining sector, p/e ratios of 15 would still be modest for 2007. This means that a price target for 2007 of US$55 is -in my humble opinion- certainly realistic. This leaves a 50% upside potential for CVRD from its current price of US$35.90. CVRD will therefore be added to my list of stock picks.

15 February 2007

Dutch grocer Ahold poised for better times

Now and then, you run into these shares that many investors tend to stay away from. Ahold is certainly one of those. After the creative bookkeeping scandal that came to light in 2003, it's taken the grocer some years to shake off the general lack of confidence. And in fact, Ahold is still trying to gain confidence. In the past three years, Ahold has underformed the AEX by a whopping 20% and this is not purely due to poor earnings growth. It cannot be denied that sales in the United States are staying behind. But it becomes more and more likely for Ahold to dispose of its North-American operations and this might offer shareholders some extra pennies. In spite of the poorly performing US operations, the figures don't lie. Ahold trades at a p/e half that of its industry peers. Earnings for 2008 are expected to grow significantly, despite of overseas operations staying behind. Worst case scenario, Ahold trades at a forward p/e of 10 (assuming EPS of 0.80 in 2008) and is thereby still undervalued. Add to that the earlier-mentioned increasing likelihood of Ahold disposing of its overseas operations rather quickly and there you have your 'buy-advice'. OK, I am not Moberg, but maybe one day he will read this and take my advice into account. Divest your American operations and focus on growing countries. Focus on Central and Eastern Europe, invest in new EU countries and try to gain some experience in Asia by acquiring small operations in a country like India. It should be no rocket science that a company needs to invest in growing countries, not in mature markets. Once this underperforming asset is lost, investors will start to regain there faith in the stock. Mr Moberg, I am at your disposal if you need my advice. For now, I assume a price target of EUR 10 for end 2007, based on the likely disposal of US operations in combination with the current low p/e ratio. Ahold currently trades at EUR 7.97.

Iberia target price reached

Two months ago, I mentioned that Iberia Lineas de Aereas de EspaƱa SA, Iberia in short, was undervalued and that the company's turnaround would be rewarded shortly. The price target of EUR 3.30 has now been reached and I think the stock is sufficiently valued at a forward p/e of 18 (assuming the median estimate EPS of 0.18, which I think should be feasible). Iberia presented a significantly improved load factor over 2006 and shows good results on long haul flights whilst domestic flights have been reduced substantially. Iberia expects the more profitable long haul flights to make up 42% of total revenues, versus 32% in 2004. This will happen at the cost of domestic flights, with medium haul flights expecting to be stable. Impressively, the gap with Air France on long haul flights from Europe to Latin America widens and it is more and more likely that its target of a 23% market share is going to be met. Considering all the above and especially keeping in mind the forward p/e of 18 based on current estimates, I would advise to hold the stock with the previous price target of EUR 3.30 as a stoploss.

11 February 2007

Venezuela miners up as gold gains momentum

The column I wrote last month on GRZ and KRY seems well-timed. Both mining companies with a great exposure to Venezuelan political influences, have seen their share prices drop very rapidly in 2006, after having performed relatively well in the first four months of 2006. Now that gold is busy breaking through its old resistance at $660, cheap mining companies seem to attract some interested investors again. Gold Reserve Inc (GRZ) has gained more than 50% since its low on 29 January. Not surprisingly, Crystallex International Corp (KRY) took a bit longer to get moving. In the end, GRZ was much cheaper than KRY at the time of my previous writing and as expected, the gains that GRZ has booked are much more substantial. However, it needs to be mentioned that there is still no update on the Government of Venezuela regarding the issuance of mining permits to foreign companies. This means that the recent gains in both stock prices are mostly due to a rising gold price and can partly be attributed to the stocks simply being undervalued. The permits are still pending, but fact is that the Government of Venezuela does not have enough know-how to completely take over operations from foreign mining companies. Knowing this and knowing that the permits are said to be in the administrative phase (and therefore the last phase), investors shouldn't have to wait too long until gains start to reach triple digit figures.
Disclosure: Joey Keasberry currently holds a long position in GRZ.

02 February 2007

Early February update on stock tips

DateFundPurchaseCurrentROI%Target
18Dec2006Aareal Bank35.50 36.62 +3.2% 44.40
13Dec2006 ABN Amro 24.10 24.66 +2.3% 28.00
16Nov2006 Banco Pastor 14.15 16.11 +13.9% 18.00
27Nov2006 Capitalia 7.00 6.90 -1.4% 8.50
12Jan2007 Crystallex $3.12 $2.92 -6.4% $6.00
24Jan2007 DRDGold $0.83 $0.85 +2.4% $1.10
21Dec2006 Fiat Group 14.50 17.00 +17.2% 19.33
12Jan2007 Gold Reserve $3.94 $4.58 +16.2% $12.00
10Dec2006 Hagemeyer 3.64 3.71 +1.9% 5.00
16Dec2006 Iberia 2.81 3.12 +11.0% 3.30
28Nov2006 Ormonde Mining 0.24 0.19 -20.8% 0.40
7Dec2006 Rhodia 2.60 2.88 +10.8% 3.20
30Nov2006 SolarWorld 46.10 61.75 +33.9% 69.12
2Dec2006 Vallourec 204.00 201.80 -1.1% 250.00
+5.9%
All stocks in euro unless mentioned otherwise.