The Insightful

Why the price of gold really doesn't matter to me

2010-10-11T22:51:00.003+01:00

I've recently come across a couple of articles on the internet in which gold bulls are warned: if real interest rates rise, gold prices will plummet.
It is quite true in theory, but I do not see how central banks or the Fed can choose for QE2 (quantative easing - i.e. increasing the money flow to keep the economy afloat) combined with historically low interest rates to then suddenly raise interest rates at a later stage to fight inflation.
Inflation will be high in the coming years, no doubt about that. But raising interest rates is something you can only do if the economy is no longer in dire straits. In this respect, central banks worldwide are in a stale mate situation. Japan is the best example of this. Low economic growth, a fast decreasing working population, rising unemployment rates, troubled pension funds and structurally low interest rates that simply cannot be raised.
To therefore talk about the potential price of gold in the coming years is absolute nonsense, because if gold is worth $10,000 in 2012, what does that even mean if purchasing power of the dollar has decreased substantially because of QE2?? Indeed: it means nothing at all. The only constant factor is gold and it would be more correct to actually measure the value of a currency in ounces of gold.
I fail to see governments with long-term visions about all this. At present most governments seem to be more occupied with preservation of the current system rather than implementing true reforms. The world is at a major turning point in history as anticonception and improved economies worldwide have led to historically low birth rates which means that in the 21st century the growth of the world population will come to an end. This is serious, because all our models have always been counting on growth. Growth of the economy, growth of populations and working populations especially. Pension funds will not be able to 'price in' inflation corrections anymore and more and more of the elderly will be in trouble in the coming decades if reform does not happen quickly. Europe and Japan are the worst cases in this respect with their low birth rates and ageing populations.
So what do governments do? They focus on getting women to work full-time, which again leads them to postpone or even cancel their decisions to have babies! What's left then? Immigration. European governments are trying to attract more and more immigrants, especially from exotic countries which then leads to social tensions because of their assimilation issues in European societies. And all these problems are created to ensure that we can hold on to what we have: a system of a declining working population paying for ever-increasing groups of unemployed and retired people.
What does this all mean for gold? All currencies that the world has ever seen have collapsed because of man's greed and gold has always been the most reliable preservation of capital. Gold plays a role in the Bible, in the Koran, in Hinduism, is considered sacred in Buddhism and goes back all the way to Greek mythology. So will I be worried if interest rates suddenly rise? No. Gold is in my vault and it will stay in my vault.

Golden Hope - a healthy correction

2010-09-26T20:59:00.005+01:00

I know it is a terrible thing to say, but I saw the drop coming. I was looking at Golden Hope Mines last Tuesday and just like with one of my other stocks Tradewinds Ventures (TWD), the stock was way outside the bollinger bands in the weekly chart. The EMA-9 line crosses at around 0.65 and that to me seemed to be where one could have expected to see a correction heading. Unfortunately, I did cash in on my TWD stocks but not on GNH, wrong choice so far! Let's not forget that GNH gained 400% in a period of four months. We're now very close to the 38.2% fibonacci at 0.67 which should serve at least as an intermediate support level. I am not worried but then I am never too worried about single stocks because I do not put all my eggs into one basket (helps me sleep at night). Watch the orange line (EMA-9) for the time being. This chart quite nicely shows that we had a similar situation happening from 0.74 back to 0.50, also very close to the 38.2% fibonacci level. These are quite healthy corrections for such rapidly rising stocks and are nothing to worry about. Such corrections should not necessarily be seen as a negative interpretation of last week's news. Sometimes there are just some big parties waiting to take some temporary profits and I have to give it them, it was a good time to let the stock cool down. For now, considering that selling happened at such substantial volumes, it seems wise to be cautious. If a bearish cross occurs in the MACD, we may see a further correction. Other signals are not necessarily as bearish as the MACD would be: the RSI and slow stoch in the weekly have not seen overbought levels since end of June this year. Most importantly, I keep a close eye on the RSI. Provided that this indicator does not dip below the May low, the longer term uptrend is still intact. All other factors equal, we are still looking at a major buying opportunity here.

Man doesn't need God...

2008-10-03T19:27:00.001+01:00

...to punish him for his greed, for man is perfectly capable of punishing himself.

Don't - don't - don't believe the hype!

2008-08-29T17:23:00.004+01:00

Earlier this month I drove down to Brussels, Belgium, to buy some Krugerrands. I could have bought them in my home country, The Netherlands, but I found the premiums at local dealers outrageous. In Brussels, I found a dealer that only asked a couple of euros above the spot price, which came down to a 1.5% premium. At that time, it was already surprising that at every local dealer, premiums were over 5% for 1oz Krugerrands. And taking a day off from work, spending a full day travelling to Brussels, a distance of 220kms (about 135 miles), and EUR 60 on fuel was certainly worth the difference.

Now, with the spot price in euros pretty much similar to the price at the time I bought the coins, the Krugerrands can only be bought at crazy premiums on top of the spot price. Now, at my favourite dealer in Brussels, the bid price is even higher than the spot price.

According to Bloomberg, the reason for that is that Rand Refinery, the producer of Krugerrands, just received a Swiss order for Krugerrands of an abnormal size. It now appears that no Krugerrands will be available at Rand Refinery until the 3rd of September.

I went to Rand Refinery's website and saw that the premiums charged for large amounts (50+) 1oz Krugerrands went upto 5%! And that will get a retail margin on top of it.

The trend we are now seeing is that there is a clear decoupling of physical gold prices and paper gold prices. Whilst it is suspected that large financials are selling their gold, demand for physical gold remains high and is even increasing at current prices. This results in rising premiums and many times in dealers having to refuse coin sales. A simple google search will lead you to websites of many bullion dealers around the world, where you can check what the difference is between bid & ask. Spreads have become enormous and at many websites, you will see that stocks are depleted. The situation with silver is quite similar or possibly even worse.

So, in other words, if you read about the metals boom/bust-scenarios and about the gold price targets that most analysts have suddenly reduced to well-below $700, stop worrying. Don't take any risks and buy physical gold or silver, rather than paper. We're approaching times when almost anyone will want to buy your coins or bars. And let's not forget that mining companies do not produce paper gold. This means that that at some stage we will have to include the current premiums that are charged for physical gold into the valuations of the already undervalued mining sector.

What we do for money and how we fail to see the signals

2008-08-20T21:55:00.008+01:00

The first eight months of the year are almost behind us and with 99% certainty we can say that 2008 will not be positively remembered for anything except maybe for the Beijing Olympics. Although even that event has had some nasty controversies surrounding it, such as the Tibet situation, Phelps' victory over Cavic, two disqualifications on the 200 metres and the alleged doping use of heptathlon silver medalist Lyudmila Blonska. I wouldn't be surprised if some Jamaican heads are next on the chopping block (every winner is considered suspicious these days).
There is certainly a link between the Olympics, today's political issues and today's economic issues. All have something to do with two things: power and money. Nowadays, being a good sport just doesn't count anymore. The more money & power dominate life, the more you'll see vile games being played.
To see what roles money and power play in the arena of foreign politics, one only needs to read recent cover stories on Georgia. Georgia is important because it's the United States' only way left to get oil and gas out of the Caspian. The EU would never even think of training Georgian soldiers as Russia could simply retaliate by shutting down gas pipelines, leaving two thirds of Europe in darkness.
Many believe that those who have the energy sources will have the power in the years to come. Russia is well aware of this and so is the US. For many decades, the US have increased their power through its dollar hegemony, through eliminating the gold standard and through maintaining close ties with the net exporters of fossil fuels. Although that last part hasn't always been very successful, considering the somewhat fragile relationships with Russia, Venezuela and Iran.
Similar to Governments, companies have done a lot for money and power as well. As a marketeer, I always believed that becoming a world leader in your company's playing field should never be a target 'an sich'. It is a daft and empty target that says nothing about how financially successful your company is or about what you have actually contributed to society. Nowadays, have exactly that in mind: growing at any cost. Companies that grow into new markets and new geographies through endless takeovers always remind me of those guys at school that were usually the best at sports but with the lowest grades in anything other than sports.
Takeovers of companies has for many companies become a target by itself. And the preferred takeover targets are often competitors, because they are the quickest way to grow market share. First of all, I think it should be a rule to never take over a competitor as integration is often impossible and corporate cultures are usually not compatible. But also for the simple fact that these kinds of takeovers usually go hand-in-hand with mass layoffs. The airline industry is a good example of that.
Companies have become bigger and bigger and thereby slower to respond to changing environments. Current fuel prices have pretty much single-handedly eliminated half the world's airlines. Most have been swallowed by competitors, who gave a different meaning to the word synergies. Synergy used to be a positive word, describing how the outcome of a system is greater than the sum of its parts. Beautifully said, but I don't think the ancient Greeks had mass layoffs in mind when they invented the word synergy.
Having said that, I do greatly respect companies who have clear long-term business strategies that are not simply focused on absolute power, but at the added value that products and services should offer customers and how society as a whole will benefit. It's hard to find such companies these days. Even companies created to help people in financing their mortgages to provide them a home for their families have completely forgotten their raison-d'etre. I am obviously referring to Fannie Mae and Freddie Mac, Government-sponsored entities (GSEs) that were supposed to support home ownership and rental housing. Being listed companies, they had shareholders to report to and these shareholders were interested in one thing only: money. They wanted money and they wanted it fast. The mortgage industry as a whole has become so focused on 'quick wins' that its greed destroyed itself, a bit like a dog chasing its own tail and then eating it.
We are clearly being sent a message that the greed and materialism of this world is not the right way, but blinded by our own greed, we fail to see the signals. And so, history repeats itself in a funny way. In the first half of the 20th Century, two world wars and an economic depression were the signals that we received. Now, we have once again forgotten what greed and military world hegemony did to all major world powers ever since man started writing down history.
Keepin all this in mind, I am clearly taking a defensive standpoint when it comes to my investment decisions. I recently bought gold coins with some of my savings and I only short financials and indices and buy junior companies that I believe in. As I mentioned, the bigger companies get, the more they lose their ability to quickly respond to changes. And more than ever, we are now in a rapidly changing environment, that requires us to think about issues we never really needed to think about. We need to reconsider the bank(s) that we store our savings at. We may need to reconsider the vehicle that we use for transportation and possibly even the company that we work for.
If I may repeat: our savings aren't safe. Our pension schemes aren't safe. Our houses aren't safe and our jobs aren't safe. And still, too many people are denying the signals that we are getting. People are still borrowing money from their banks to invest in companies that are screaming to be bailed out by tax payers. All this once again proves that a pair of eyes may allow us to read, a pair of ears may allow us to listen, but we really need a brain to see.

The other side of the South Ossetia war

2008-08-13T20:02:00.006+01:00

Many of us have been looking forward to the Olympics for some time and spend as much time as possible watching sport that we usually wouldn't be watching. Since the Chinese have a fetish for numbers, they decided to start off on the 8th of the 8th in 2008. Because eight is a lucky number.
Not for everyone. It was exactly that day that the Russians decided to stop the killings of hundreds, possibly thousands of South Ossetians and 15 Russian peacekeepers. Georgian troops started the conflict on the 1st of August and South Ossetians fled into Russian territory. On the 5th of August, Russia warned Georgia that if the killings would continue, it would take necessary action. Georgia cleverly offered a ceasefire, whilst continuing the killings. Russia did the expected and sent its troops into South Ossetia to restore the order.
Until that time, there was hardly any mention of the killings in South Ossetia. This changed when Russia got involved. The Russian invasion was all over the news and suddenly competed with the Beijing Olympics. Russia was the bad guy once again as it wanted to rebuild the former Soviet empire.
Many sources see things differently. Israeli intelligence source DebkaFile mentioned: Last year, the Georgian president commissioned from private Israeli security firms several hundred military advisers, estimated at up to 1,000, to train the Georgian armed forces in commando, air, sea, armored and artillery combat tactics. They also offer instruction on military intelligence and security for the central regime. Tbilisi also purchased weapons, intelligence and electronic warfare systems from Israel.
Russian newspaper Pravda stated that USA and Ukraine are partly responsible for the conflict as they supplied sniper armaments to Georgia.
Georgian President Saakashvili now claims that the US underestimated the Russian threat and that "the reputation that America has gained since the Cold War is going to hell right now". Saakashvili is clearly stirring things up and mentions that the US should now involve the West in the conflict, probably meaning Europe. This man is obviously trying the start a WW-III and all we can do is that the EU will have enough people opposing military action against Russia (and Iran, but that's a different story). But since France assumed EU Presidency, President Sarkozy is certainly taking an approach quite different from his US counterpart: dialogue.
Although Western media - exceptions are hard to find - show Russia once again as the aggressor and Georgia as the victim, an increasing number of people seem to point the finger at Georgia, including former Georgian President Eduard Shevardnadze, former Russian President Mikhail Gorbachev and an American who happened to whitness the killings in South Ossetia.
In the end, it's all about oil again. The Baku-Tbilisi-Ceyhan pipeline, transporting Caspian oil to the Mediterranean is certainly a hot item as the West has become a structural oil importer and the former Soviet Union being a net oil exporter. Quite similar to Iraq and Iran.
For those who really want to hear or read both sides of the story, keep an eye on Russia Today and Infowars, in addition to your usual Western media.

Junior miners: market manipulation or just underperformers?

2008-08-04T20:06:00.001+01:00

The precious metals rally that ended in May 2006 was a very good time for almost any investment in mining, whether it was the AMEX Gold Bugs Index (HUI),the Philadelphia Gold and Silver Sector Index (XAU) or junior mining companies. But after that rally, something changed. After the spot gold price reached $730 in May 2006, there was a correction period that was followed by a rally to $1,030. Another correction followed and the gold price seems to near a bottom at the current levels around $900, still up roughly 24% from its May 2006 high.
The HUI-index has now fallen to a level just below the May 2006 high at 390. The XAU Index also seems to flirt with the support level around 160, which once again corresponds with the highest level reached in May 2006. The fact that these indices underperformed the precious metals price by more than 20% is already pretty shocking, but the picture becomes even darker when studying junior miners. The benchmark indices for Junior Mining companies, the FSO Index (see www.financialsense.com) which consists of 40 junior mining companies, is down almost 30% from its May 2006 high! Charts from Frank Barbera on a.m. website even show that the FSO/XAU ratio actually more than halved since the first quarter of 2007.
But what causes this severe underperformance of junior miners compared with large caps and with precious metals prices in particular? Some say that market manipulation is to blame. Market manipulation is one of those terms that always appears when precious metals or related stocks perform badly. The question is whether market manipulation is really that unrealistic. Let's take a closer look at some mining funds in Nunavut Territory in the North of Canada.
Nunavut was established in 1999 and is thereby the youngest Canadian province. Nunavut Territory is extremely rich in natural resources and as such offers great potential for various industries, including mining, fishing and tourism. As soon as precious metals prices started to rise, the (junior) miners in Nunavut saw their share prices rise along with the precious metals rally. Some of the companies that benefited were Cumberland Resources, Miramar Mining and WMC Resources.
One thing that those four Nunavut-plays have in common is that they were all taken over by large cap mining companies, that continue to look for Nunavut miners. In 2005, shareholders of Australian mining company WMC Resources had two potential buyers outbidding eachother. Eventually, the winning bid was made by BHP Billiton at A$7.85 per share, significantly higher than Xstrata's A$7.00 per share offer. This was a significant premium over the A$5.00 share price before the battle started. UBS Securities however rated the company in a valuation range of well over A$10 per share.
Cumberland Resources was acquired by Agnico-Eagle Mines in 2007 and did well. The company's shareholders received $7.48, roughly a 25% premium over the share price before the acquisition was announced. Shareholders who bought their shares two years prior to the deal would have easily made 400% return on investment.
Miramar Mining was bought by Newmont Mining this year for C$6.25 per share or a 23% premium over the price before the announcement. Those who bought Miramar shares two years prior to the deal made 84%, still not bad, but certainly a good deal for the buyer.
All above-mentioned deals may be 'good deals' for the buyer, but they are certainly not bad deals for the sellers. This is a situation that could now easily change. With junior mining shares having hit rock bottom, a 50% premium is still hardly something to cheer about for investors who saw their shares drop more than 50%.
Some of the Nunavut miners that are still independent seem almost guaranteed takeover targets, but the question is whether it's really worth it. Some deals outside Nunavut show a pretty scary picture. For instance, Aurelian Resources received sell recommendations with a price targets as low as C$1.40 in addition to a tsunami of negative rumours about Ecuadorian Government's mining laws. You have to ask yourself why all the bad news and downgrades are not affecting Kinross Gold Corp's judgment of Aurelian (still considered attractive at a share price well over C$8). The latest rumour is the Ecuadorian Government possibly bidding for Aurelian, which is the reason why the share price is still well-below the offer. This scenario is just another way to scare off investors, quite similar to news coverage of the the Venezuelan mining laws affecting Gold Reserve and Crystallex. So far, it's all rumours and one has to wonder whether these countries are really going to create a tremendous job loss and harm relations with any foreign company operating locally, or whether it's all one big Jim Cramer-esque conspiracy.
Geopolitical risks however do not apply to the Nunavut miners, but market manipulation may be as applicable to junior miners as it is to the producing miners in 'less politically-stable" countries. Fact of the matter is that takeover candidates are no longer by definition the desired stocks to hold. One of those takeover candidates is the junior (partly-)Nunavut play Trade Winds Ventures.
Trade Winds Ventures had a high in 2004 of C$1.65. It then fell back to the current five-year low of C$0.13. And what's really changed since then? Momentum, that's really all I can think of. In their Detour Lake project (Ontario) alone, they have 800K ounces of indicated resources and 1.5M ounces of inferred resources. In addition to that, Trade Winds have projects in Nunavut, China and in B.C. The company has an institutional share holder base, C$2.8M cash and has a market cap of only C$10M!
And this is just one example of a ridiculously cheap junior miner. There are so many players out there with ridiculous market capitalisations. The only thing you have to accept is that there is no guarantee that your investment will go down further in the short term. Whatever you do, don't sell. In the long run, the true value of these companies will emerge. For now, all we can do is hope that no one will take them over at a 30% or even 50% premium, for there is so much more potential in these junior miners. As for my disclosure: I hold no shares in Trade Winds Ventures, but I will buy on Tuesday the 5th as soon as Canada is open again.
Good luck to all.

Bearish times ahead - be cautious

2007-09-07T21:41:00.000+01:00

Usually I try to come up with some analyses of undervalued stocks every now and then. I haven't posted anything during the past few weeks and I must admit that my perception of the market has recently changed. Before much of the subprime woes were dominating the news, I was still of the opinion that the major US indices would go up much further than 14,000 based on the simple fact that the Fed would keep printing more and more money. This would not specifically be good news for stocks, but it would certainly lead money to lose its value and that usually helps share prices to appreciate. I think there is no better example of this than the Zimbabwe stock exchange. But as I mentioned, my perception changed. I am not very bullish anymore, in fact, I am bearish. The subprime problems have certainly put the train in motion. Mortgage lenders are to a great extent responsible for the situation we're in now. They are directly or indirectly responsible for making lending more difficult, for rising interbank rates, for falling housing prices and to some extent for the (coming) drop in consumer spending. The same goes for credit card companies. I have always had my thoughts about capitalist countries where possessions are bought on credit. The only thing I will ever buy on credit is a house and I will never pay more for a house than five times my household income. American home owners now face situations that will wake them up. The American Dream was never meant to be bought with borrowed money, was it? Taking your borrowed money to the stock market is asking for trouble as well. This is where the Yen carry trade kicks in. We already saw this year that at times when the Dollar/Yen dropped, so did stock markets and so did for instance precious metals. This situation is slightly different now. The Yen has strengthened again since its June peak and this has certainly not helped the American and European indices, but precious metals prices are suddenly flourishing. Gold broke out of its sideways range and seems to be starting a new bull run. Silver may be behind, but gold's little brother will probably catch up in the coming months. From this point in time, I expect risk to be priced into stocks again. I have to admit that it continues to surprise me when I watch CNBC and hear analysts say that Apple is a steal at 37 times earnings. It continues to surprise me that analysts are advising to buy 'tech', since 'tech' is where the growth will be in the coming years. I strongly disagree. If you ask me, the only potential growth sectors will be mining, energy and base materials. Not because demand for oil, gold or steel will go up, but because both the Euro and the US Dollar are losing value. The Central Banks' capital injections haven't helped in this respect and they will soon be caught in a stagflation spiral (i.e. a stagnating economy in combination with high inflation rates). Add to this the recent 'Al Qaeda trades', where unknown parties have been buying huge quantities of out-the-money put options, both in Europe and on Wall Street, and we have a very dark and cloudy scenario. As if that's not enough, we are also in a Puetz Window (the days in between a full moon and a solar eclipse), which has historically been the likeliest time for stock market crashes. Last Friday, we could already see that all this uncertainty has led investors to buy precious metals as well as the Japanese Yen. These are also the positions that I am in today: I am short EUR/JPY, long silver, long mining companies and I hold puts and put spreads on major indices. Not because I am convinced that we will get a crash like we had in 1987, but because I am convinced that there are very weak times ahead of us. I am also convinced that stock valuations today are not what they were one year ago. With a possible recession coming up, the potential end of the carry trade period, the increased difficulty to attract money and the consequential drop in M&A activity, a stock valued at 37 times earnings is really not that cheap anymore.

Time to start shopping again...?

2007-08-16T19:40:00.000+01:00

I am sure that the past weeks have been disastrous for many investors as very few had seen this drop (and its timing) in the stock markets coming. Even those who did saw it coming may not have expected it to be this fierce. I think I may include myself in that last category. With the lion share of my portfolio invested in American stocks and a long gold position, this week has certainly been one that I do not wish to experience a second time. My long position in gold has been liquidated and I was too early to close my short position on the Dutch AEX index, which generally follows the US indices.
Now is the time to sit and think about what steps to take. Do I sell my shares, waiting for further drops? Do I move extra money into my trading account? Do I sit and wait until the bottom is there, knowing that current valuations are ludicrously low? This is probably a choice that many private investors are now thinking of and their decision partly determines the future course of the markets.
Let's have a look at the signs that we're getting. The move that we've seen since the year-highs was fiercely downward, then sideways, then fiercely downward again. Corrections like these are never ended with a sideways move. They always end after a last fierce sell-off, followed by a quick rise. The first downward move was mainly caused by financials that were (or were not) affected by the subprime woes. The second downward move, the one that we're in now, is not caused by financials - even though all newspapers, television stations and websites will tell you that investors are selling on subprime fears. And the financial sector is the only one that is going up again! The main sectors that are now hit are services, basic materials and to a lesser extent the energy sector. These are the sectors that had not yet had serious sell-offs and investors are now simply taking profits, based on fear or emotions if you like. In addition to that, the carry trade has its effect as well, which has affected precious metals prices as well.
All this means that you're now able to buy dividend cannons like Southern Copper at a p/e below 10, a growth company like Companhia Vale at a p/e of 9 and Freeport-McMoran at a p/e of 8.4. And these are not companies that have performed badly so far this year! This Thursday's sell-offs also mean that telecom stocks are reasonably priced again, even though this is not one of my favourite sectors. It means you can buy Apple at $112, where hardly anything's changed since everyone wanted the stock at $140. (I personally continue to think that it's crazy to pay over 30 x earnings for any company, unless it's a junior company with great prospects, but I seem to be the only one)
All I can say is that today we are one step closer to a turnaround, which doesn't necessarily mean that 12500 was the bottom for the Dow. There may be a further drop, but I am pretty confident that we will not see a drop as fierce as the one we've seen this Thursday. Profit has now been taken in the sectors that are fundamentally the strongest sectors and these best-performing sectors are the last ones to get hit.
From this I can conclude that the bottom is near. I will therefore not sell any of my stocks and wait for better times to come, however painful this may be. The only thing one can do is write some calls or buy some puts, just in case we haven't seen the bottom yet. I still think the precious metals are the sector to be in and especially gold. I will therefore look for a new long position in gold, once again with a stoploss. To all investors who felt the way I felt this week, hold on tight, start shopping again, but whatever you do, don't be the last one selling. After all the economy can't be that bad, because my fiancee's still out there shopping for shoes as if nothing changed this week...
Disclaimer: The author has no position in any of the above-mentioned stocks.

North American Galvanizing: buy 'on the dip'

2007-08-07T20:33:00.000+01:00

Earlier this year, in March to be more precise, a company called North American Galvanizing and Coatings (NGA) caught my eye. NGA is a company that uses zinc for its galvanizing processes. As a result of the growing zinc prices, the company had booked impressive revenue growth as well as earnings growth. I added NGA to my list of stock picks at a price of $5.18 and closed that position at $12.06 in May. After that, the stock went up a bit further and then had a 3:2 reverse stock split before it fell down all the way to its current price of $5.75. I can imagine this stock has been quite a pain for those that have held this stock all the way from its peak in May. But the fundamentals don't lie: NGA saw its sales double in two years and its EPS increase tenfold in two years. And the story continues as the first halfyear results showed net earnings that were 80% higher than last year at $0.36 per share. Fact is that NGA trades at a P/E of 10.7 with, I repeat 80% EPS growth over the first halfyear! Technically, the stock shows a bearish picture. I would expect the RSI to bottom out anywhere around 40 in the weekchart in order for the stock to stay in its bull range. Keeping in mind the long term uptrend that zinc prices show, I will add NGA to my list of stock picks at a price of $5.75 with a $10.00 price target for mid 2008, based on the earnings growth reported in the first halfyear and the company's continued impressive growth.
The author had no position in NGA at the time of writing.

Long gold again with $700 coming close?

2007-07-30T19:34:00.000+01:00

After this month's changes in my mining portfolio, I have now decided that it's the right time to invest in precious metals again. I already bought (speculatively) DRDGold at $0.78 and after the 10:1 reverse split, the stock kept going down. I consider $6.50 a critical level and decided to sell once that level was broken. At $6.42 my sell order was executed, while the stock ended above $6.50 again. I am still quite convinced that DRDGold will manage to get its act together, but I am also certain that it is not the best stock for short term profits. Instead, I took a long position in gold at $662, knowing that there should be some support at $660 (being 61.8% retracement level), which was successfully tested and spot gold moved up to $665 today. Should gold move below $660, there is a high likelihood of a full retracement to $640 which for me would be a very bearish sign and possibly a reason to liquidate all my positions in precious metals and certainly a reason to reduce the mining share in my portfolio. But, being the positive-minded chap that I am, I added a position in Taseko Mines Limited (TGB). I actually bought back shares in TGB. Previously, I bought TGB at $2.30 and sold at minor profits as there was little news to move the stock up. Now the situation is a lot more fruitful. The company is one of the very few AMEX-listed precious metals miners that actually makes money. Taseko has successfully positioned itself as a copper & gold miner and has a good cash position with a positive cashflow. Taseko's Prosperity and Harmony mines alone should account for some 7.5 mio ounces of proven & probable gold reserves, which already makes the company's USD 600M market capitalisation look reasonable. Add to that the company's young & producing Gibraltar copper mine and you have a clearly undervalued stock, despite its recent rise. This stock will go through the roofs in two or three years from now as the Prosperity mine will get closer to production. I think we have a winner.
The author bought TGB at $4.60 and closed his position in DROOD at $6.42.

Portfolio shake-up

2007-07-24T19:16:00.000+01:00

The past months I have been busy trying to diversify to a certain degree. This was highly necessary as a great part of my portfolio was in mining stocks. I usually do not buy the very risky junior miners - which does lower my risk profile - but having to great a share in mining makes your portfolio very volatile. I sold Yamana Gold earlier this month at USD 12.65 as the technical picture started to become a bit more cloudy. This was followed by the announcement of a proposed threeway deal with Northern Orion and Meridian Gold, which made the stock drop to the lowest close of this year at USD 11.12. Among my current mining favourites are still Endeavour Silver Corp and uranium miner Uranerz. These will stay in my portfolio, whilst other miners I may sell off in the coming months. Aurizon Mines (AZK) may be added to this. I sold AZK last week at $3.90 as I expected there to be some resistance around that level. I might buy back at a later stage. I sold EGO last week at $4.80. To replace these miners, I am specifically looking out for alternative energy stocks. One of my favourites is still the slugglishly moving Evergreen Solar, which I believe is suffering from a temporary correction in a multi-year uptrend to be followed by a higher peak - well past the previous high of USD 17.50. I bought this stock in February of this year around current levels. Before that, I benefited of the 2005/2006 uptrend from USD 8.60 to USD 15.00. Even though this month I sold Beacon Power Corp at USD 1.50 (bought at USD 0.89), it is certainly not my idea to all of a sudden neglect this stock. I was purely safeguarding some profits and plan to get on the Beacon train again at lower levels. The excitement surrounding Beacon Power Corp is triggered by growing interest for the company's flywheel technology, which I believe will further grow from this point. However, the current hype cannot be argumented by numbers. Beacon Power is still not making any money and therefore any gains are purely based on prophecies. I do believe in this company, but it will take some time until earnings reports can justify a USD 1.50 share price. I will continue to keep an eye on the technical picture and will buy when much of the excitement has evaporated. At the same time, I am looking at Fuelcell; a company that produces fuel cell power plants that are ideal for the replacement of 'dirty energy' and thereby help reduce emissions. With a number of customers ranging from hospitals and universities to utility companies and manufacturing plants, the fuelcell technology is gaining popularity across industries. To come back to the mining industry, I added DRD Gold (now changed into ticker code DROOD) at $0.78 because of improving technical indicators. DRD Gold remains a very uncertain share to invest in. I see it purely as a speculative buy and I watch the technical indicators very closely to determine whether to buy or to sell. Investors seem to be a bit cautious because of the management change. Looking at the first quarter, the main issue for DRD is that the reserves are there, but the production is not. There have been too many hiccups in the past few years and even this first quarter showed a drop in production, both in Australasian and South African mining operations. On the positive side, I consider the Argonaut project to certainly have very high potential. A positive response to the Prospecting Right Application of the company's Argonaut project may be applauded. Once again, I still consider this stock a speculative one. Not a good basis for a stable portfolio but like my earlier purchases of GRZ and KRY, speculative buys are not always bad buys! Finally, with regard to the indices, I am currently short AEX and short S&P. 1520 will be a critical level for the S&P as will 550 for the AEX. Later this year, I plan to move some of my investments from North America to Europe as I see better growth prospects for European companies. The author holds long positions in EXK, URZ, ESLR and DROOD at the time of writing.

Eldorado Gold sees Turkish mine shut down

2007-07-12T21:57:00.000+01:00

It came to me as a complete shock, seeing one of my favourite mines down 30% on Thursday. A Turkish court had apparently ordered the shut down of Eldorado Gold's cash cow, the Kisladag mine, responsible for 60% of the company's gold production in 2006. According to Eldorado, the final decision by the court is still pending "on the appeal of a lower court order in favour of the company confirming the legality and validity of the Mine's Environmental Impact Assessment". The closure will be implemented in about 30 days. To clarify things, the company planned a conference call on Thursday evening and I was all ears. During the conference call, CEO Paul Wright was talking of a group of people whose only interest was to discourage mining in the country. He did not know the name of that group and he did not go into details on the specificalities of the court case. Last year, there was a problem with cyanide poisoning of villagers, which means that high levels of cyanide were found in villagers' blood. This was a result of the sodium cyanide heap leach method that was used by Eldorado during trial production and that presumably has been used until now. From what I found, the Environment Impact Assessment was initially accepted in 2003, but was later found incorrect by doctors and scientists and challenged in court by villagers, combined through a group called "Elele" (hand in hand). In addition to the cyanide poisoning, there were also reports of levels of arsenic in local drinking water. I can imagine if this all has been proven correct, that there are serious issues. Unfortunately, nothing was said about all this during the call. Problems with people opposing to the use of cyanide in the Kisladag region have been known since 1999, at the company did exploratory work. The first mining company that used cyanide in Turkey was Newmont Mining at its Ovacik mine in 2001. The mine was sold in 2005 to Turkish printing and mining company Koza Davetiye. The reason then given for the sale was the divestment of non-core assets. However, the Ovacik mine was - like the Kisladag mine - given bad publicity by Greenpeace and fought by locals in court, despite the company's approvals from Turkish Government. It sounds to me that this may be the start of something bad. According to Eldorado Gold's CEO, the decision that has been made was not supported by legal proof. But opposition against the use of cyanide in the local mining industry is clearly nothing new in Turkey. Maybe Newmont was not to keen on bad publicity either? I am however forced to review my position in Eldorado as the bad publicity is certainly not going to do the company any good and these environmental issues are usually not solved overnight.
At the time of writing, the author had a long position in the above-mentioned stock.

An early June update...

2007-06-04T19:01:00.000+01:00

My "stockpicks fund" showed only minor gains the past month as mining companies had a difficult time. The gold price struggled and fell 6% to 652, while only Capitalia benefited from M&A news. June should be a better month for mining companies (GRZ, KRY, DROOY, CVRD, ORM.L), which should help my virtual fund to further outpace most global stock markets.

Date	Fund	Purchase	Current	ROI%	Target
18Dec2006	Aareal Bank	35.50	38.50	+8.5%	44.40
13Dec2006	ABN Amro*	24.10	28.00	+16.2%	28.00
16Feb2007	Ahold	7.97	9.21	+15.6%	10.00
16Nov2006	Banco Pastor*	14.15	18.00	+27.2%	18.00
27Nov2006	Capitalia	7.00	7.60	+8.6%	8.50
19Feb2007	Companhia Vale	$35.90	$47.02	+31.0%	$55.00
12Jan2007	Crystallex	$3.12	$4.55	+45.8%	$6.00
24Jan2007	DRDGold	$0.83	$0.85	+2.4%	$1.10
21Dec2006	Fiat Group	14.50	21.47	+48.1%	19.33
12Jan2007	Gold Reserve	$3.94	$5.70	+44.7%	$12.00
10Dec2006	Hagemeyer	3.64	3.63	-0.3%	5.00
16Dec2006	Iberia*	2.81	3.30	+17.4%	3.30
10Mar2007	North Am. Galvanising*	5.18	12.06	+132.8%	8.00
28Nov2006	Ormonde Mining	0.24	0.16	-33.3%	0.40
7Dec2006	Rhodia	2.60	3.07	+18.1%	3.20
30Nov2006	SolarWorld	46.10	65.65	+42.4%	69.12
25May2007	Tsakos Energy Nav.	$63.50	$64.23	+1.1%	$90.00
2Dec2006	Vallourec	204.00	234.89	+15.1%	250.00
				+25.5%

All stocks in euro unless mentioned otherwise. Stocks marked (*) have been sold as target price has been reached.

Tsakos: An undervalued shipping giant

2007-05-25T19:17:00.000+01:00

The maritime sector is hot. It's been hot for a couple of years now, but as world trade continues to grow, profits continue to grow. Greek shipping giant Tsakos Energy Navigation Ltd (NYSE:TNP) now has 53 tankers, out of which 23 ice-class tankers. True, there might not be much ice in Greek waters, but there certainly is a growing demand for ice-class tankers in Northern waters. Especially North and East of Russia at least for the coming ten years the demand for ships to transport oil & oil products will grow substantially. With an average vessel age of five years and a bit, Tsakos Energy Navigation (TEN) certainly is well-equipped for this period of growth. With a fleet that's more than doubled in five years and with net income having increased fifty times, one might argue that TEN is already too far in its growth cycle. But the opposite is true. Let's have a look at the stock's valuation. At a current share price of USD 63.50, TEN trades at a little over six times last year's earnings. This is already very low compared to the industry average of 16, but especially when considering that its 5-year EPS growth rate is almost double that of the industry, one has to come to the conclusion that this is a chance of a lifetime. Critics are sceptical as ice class tonnage has increased rapidly during the past five years and some are afraid of overtonnage. Charter rates are therefore expected to be somewhat lower in the coming years until supply and demand are in balance again. It must be said though that TEN has built up a reputation of being one of the leaders in ice-class and also of knowing how to keep costs under control. I think that the fears are overrated and that at the current valuation, the potential rewards outweigh the company's risk profile and I therefore consider this stock a very attractive one. I add Tsakos Energy Navigation to my list of stock picks at a price of USD 63.50 with a one-year price target of USD 90.
At the time of writing, the author did not have a position in the above-mentioned stock.

Target price reached for Banco Pastor

2007-05-08T18:21:00.000+01:00

As mentioned in one of my earlier postings, Spanish banking group Banco Pastor is a small yet ambitious one. In November 2006, I decided to add Banco Pastor to my list of stock picks at the price of EUR 14.15, with a target price of EUR 18. This target has now been reached less than six months later, though I continue to be impressed with the bank's results. In the first quarter of 2007, the group's earnings went up 31% whilst the amount of new clients went up 20%. The company's progress has to be admired and even though I still consider Banco Pastor a takeover target amidst the European banking consolidation, I must admit that the Spanish banking group is everything but cheap. After all, ABN Amro is currently for sale at 14x earnings, whereas Banco Pastor is valued at 30x earnings. Hence, I think it is wise to close this position at exactly the price targeted, leaving us with a gross ROI of some 27%.
The author had no position in Banco Pastor at the time of writing.

An early May update...

2007-05-03T19:04:00.000+01:00

It's really going somewhere now. I must admit that I am quite pleased with my stock pick performance so far this year. Obviously a record high for many stock exchanges helps, so we have to wait and see how these stocks perform during worse times. For the time being, I plan to hold Fiat as mentioned in my April posting, but I consider NGA 'sold' at 12.06.

Date	Fund	Purchase	Current	ROI%	Target
18Dec2006	Aareal Bank	35.50	39.01	+9.9%	44.40
13Dec2006	ABN Amro	24.10	28.00	+16.2%	28.00
16Feb2007	Ahold	7.97	9.88	+24.0%	10.00
16Nov2006	Banco Pastor	14.15	17.54	+24.0%	18.00
27Nov2006	Capitalia	7.00	6.94	-0.9%	8.50
19Feb2007	Companhia Vale	$35.90	$42.61	+18.7%	$55.00
12Jan2007	Crystallex	$3.12	$3.98	+27.6%	$6.00
24Jan2007	DRDGold	$0.83	$0.86	+3.6%	$1.10
21Dec2006	Fiat Group	14.50	21.77	+50.1%	19.33
12Jan2007	Gold Reserve	$3.94	$7.25	+84.0%	$12.00
10Dec2006	Hagemeyer	3.64	3.49	-4.1%	5.00
16Dec2006	Iberia	2.81	3.30	+17.4%	3.30
10Mar2007	North Am. Galvanising	5.18	12.06	+132.8%	8.00
28Nov2006	Ormonde Mining	0.24	0.16	-33.3%	0.40
7Dec2006	Rhodia	2.60	3.00	+15.4%	3.20
30Nov2006	SolarWorld	46.10	58.65	+27.2%	69.12
2Dec2006	Vallourec	204.00	204.28	+0.1%	250.00
				+24.3%

All stocks in euro unless mentioned otherwise. Stocks in bold have been sold as target price has been reached.

Something not so financial, or is it?

2007-05-03T18:29:00.000+01:00

It's been a while again, but I hope these long periods of absence won't happen too often anymore this year. I had a three-week holiday in Indonesia, which ended up being everything but a holiday. It was a period of family visits, my fiancee being from Indonesia, and a period of preparations for our wedding due early 2008 on Java. Usually, this site is a place for financial blogs and everything linked to the financial world, but there really is more in life than finance. Hence, I am sharing with you our findings in earthquake stricken Yogyakarta. The quake took place in May 2006, almost a year ago as we took our handycam and some money from ourselves, my family and some really great friends to the epicentre in Bantul. This was one of the villages around Yogyakarta where many of my fiancee's relatives live or lived. Upon arrival, we were shocked to see in what state the houses where. Most houses had not been rebuilt or only partly. The people living in these villages are generally humble people with little materialistic desire. All they need is a house, food and clothing to be happy. All home owners were informed by their Local Government that they were entitled to 45 mio rupiah (EUR 3,600). Yet most people haven't received a penny up until this day. That by itself is quite shocking, having to live without a roof or without any help of your Government, even medical help, for eleven months. But what is more shocking was that there were actually beautiful houses rebuilt in those villages. More beautiful than ever before. We couldn't help but ask around who these people were that built those beautiful houses there. The answer shocked us even more than the sights when we arrived that day. We were told that these houses were owned by Muslim villagers who lost their houses as well. These houses had apparently been funded by local Government aid and by donations from certain Muslim countries. Unfortunately, my fiancee's family happens to be Catholic. May I just say that when we in the Netherlands donate money, we do not discriminate on religion, skin colour, age or gender. We give money to victims in general. Shocking, but certainly an eye opener.

Fiat target price reached for the year, but holding on...

2007-04-04T15:46:00.000+01:00

Just a short post to say that Fiat's one year target price of EUR 19.33 has been reached, but since this is a stock that - as mentioned in my previous post on the company - is supposed to double in three years, I will not cash in on this one. Still too much upward potential, in my opinion. Keep following this one! As I write, gold has broken through the 667 resistance and the picture for the miners looks much brighter now as well. All & all, it sounds like a good time to take a holiday.

An early April update...

2007-04-02T18:23:00.000+01:00

It's been a volatile month with crashes here and there, followed by serious gains. As described in my previous posting, there's also a lot of M&A activity going on among my stock picks. Time for another update on my favourite stocks. One month ago, my stock picks were only up 3.5%, but now the gains are more colourful.

Date	Fund	Purchase	Current	ROI%	Target
18Dec2006	Aareal Bank	35.50	36.34	+2.4%	44.40
13Dec2006	ABN Amro	24.10	28.00	+16.2%	28.00
16Feb2007	Ahold	7.97	8.80	+10.4%	10.00
16Nov2006	Banco Pastor	14.15	17.10	+20.8%	18.00
27Nov2006	Capitalia	7.00	6.78	-3.1%	8.50
19Feb2007	Companhia Vale	$35.90	$37.15	+3.5%	$55.00
12Jan2007	Crystallex	$3.12	$3.92	+25.6%	$6.00
24Jan2007	DRDGold	$0.83	$0.70	-15.7%	$1.10
21Dec2006	Fiat Group	14.50	18.87	+30.1%	19.33
12Jan2007	Gold Reserve	$3.94	$6.57	+66.8%	$12.00
10Dec2006	Hagemeyer	3.64	3.58	-1.6%	5.00
16Dec2006	Iberia	2.81	3.30	+17.4%	3.30
10Mar2007	North Am. Galvanising	5.18	5.36	+3.5%	8.00
28Nov2006	Ormonde Mining	0.24	0.18	-25.0%	0.40
7Dec2006	Rhodia	2.60	2.83	+8.8%	3.20
30Nov2006	SolarWorld	46.10	58.06	+25.9%	69.12
2Dec2006	Vallourec	204.00	195.48	-4.2%	250.00
				+10.7%

All stocks in euro unless mentioned otherwise. Stocks in bold have been sold as target price has been reached.

Mergers, acquisitions & rumours

2007-03-28T18:38:00.000+01:00

It's good to be back after having travelled for business for more than two weeks. During my absence, a lot has happened to certain funds that I discussed some time ago. Especially news on ABN Amro, Iberia, Gold Reserve Inc, Crystallex, Beacon Power Corp and Ahold is worth mentioning. First of all, I indicated last year that ABN Amro would certainly be subject of takeover talks as the banking industry consolidation in Europe would start to take off. Earlier this year, it was rumoured (on advice of certain shareholders) that ABN Amro could be split up, unlocking value for the shareholders themselves. This was later denied by CEO Rijkman Groenink, who stated that this would certainly not be the preferred option. Then came rumours of a merger with Barclay's Bank, possibly creating Europe's second largest bank after HSBC. This rumour actually seems more than just a rumour and has a reasonable chance of success. The share price went up quickly from EUR 27 to EUR 32 and might even go a bit higher as a deal gets closer. This jump will however not influence the performance of my list of stock picks I had cashed ABN Amro at EUR 28. Then there were takeover talks regarding Spanish airline company Iberia. It was rumoured that Lufthansa was willing to pay EUR 3.90 and that several other groups were interested in buying Iberia, including British Airways and Texas Pacific Group. Iberia was on my list of stock picks but was taken off when its price target of EUR 3.30 had been reached. In January this year, I wrote about Gold Reserve Inc and Crystallex having great potential based on the high likelihood of obtaining permits from the Venezuelan Government as well as the low valuations of both shares. On Wednesday, both shares jumped, but are still very far from reaching price targets set for this year. Now that the major risk of not being able to obtain permits has been eliminated, I see no reason for the low valuations of both shares and it should therefore be expected that both shares will rise further, supported by higher prices for precious metals. Beacon Power Corp rose from USD 0.82 to USD 1.02 last Thursday on news of a successful outcome of its flywheel technology field trial tests. This should be seen as a significant milestone towards further growth of the company's sales. In my opinion, this development stage company has some serious potential that most investors have yet to find out about. The stock has dropped back to USD 0.83 after its rise but has now continued its upward move and may be expected to come up with further good news on its technology in the near future. Finally, Ahold has moved up from EUR 7.50 to EUR 8.50 this month on the expected sale of US Foodservice and Tops Supermarkets in combination with the grocer's low valuation. In addition to that, there were some rumours of Ahold being a potential acquisition target. So I am happy to see that most of my predictions seem to be coming true sooner or later. My list of stock picks may not be as successful as my 'mining fund', but 10% ROI in three months (on average) isn't bad at all, is it?

Bullish on zinc? Mining stocks aren't the only option.

2007-03-10T04:04:00.000+01:00

I hadn't expected to get the opportunity to post during my absence, but I had some spare time in the morning here in Kuala Lumpur and decided to go online in my hotel room. Upon checking the performance of the basic materials sector, I came across a remarkable company this morning. North American Galvanizing Company (AMEX:NGA) caught my eye as it is not a mining company (which I would typically be looking for). It is a company that use zinc for its galvanisation processes. As a result of growing zinc prices, the company has booked tremendous growth in the past years. Its sales more than doubled in two years and EPS are ten times what they were two years ago. And all this is down to higher prices for zinc. Even though this may not be your most logical stock pick, zinc bulls might want to think again. NGA trades at a P/E of 8.9 and is therefore much cheaper and a lower-risk option than most mining companies, whilst the effects of rising zinc prices on sales are quite similar. Technically, the stock also shows a positive outlook. The downward trend of the RSI in the weekly chart has been broken with support around 40, which means that the stock might be bottoming now in a longer-term bull trend. Considering the company's growth in the past four years, this is a very affordable stock. Keeping in mind the bright outlook for zinc prices, I will add NGA t my list of stock picks at a price of $5.18 with an $8.00 price target for end 2007.

Two weeks of absence...

2007-03-08T11:34:00.000+01:00

Tonight I will be travelling to Asia for business and I will be away for two weeks. Chances that I will be able to find the time to post some words are minimal and therefore you are likely to see two weeks of silence. However, I will be back in time to provide you with an end of March update on my favourite stock picks, my 'green picks' and my 'mining picks'. Knowing that I might not always be able to trade in the coming two weeks, I had to rearrange my portfolio a little bit. As such, I sold Euro Ressources at a loss (1.05 (1.23)) and Yamana Gold at a profit (14.35 (9.78)). I bought BCON at $0.89, URZ at $4.48, ELR at $9.73, ORM.IE at EUR 0.185 and RNO at $3.27. I kept all my other mines in my portfolio as well as my long position in gold with an automated stoploss at $624. This might seem somewhat risky, but I am confident that gold has bottomed and that from here the direction will be upward. One thing you might have noticed is that I am adding alternative energy stocks to my portfolio. I was a previous holder of ESLR and I am still a great fan of this solar energy company. Thankfully, I sold at $15 previously and had the chance to get in at a much lower price. I expect the previous high to be taken out in 2007, but more about this when I return. Till we meet again!

A new virtual alternative energy fund is born

2007-03-02T21:00:00.000+01:00

Everyone always aims to find the hypes in the global stock markets. In the eighties, Japan was hot. In the nineties, you had to have tech stocks. Then came metals & mining and several others have passed that may have not been as significant, but were certainly worth the money. When reading financial websites, there's one sector that keeps coming back: alternative energy. It's no secret to anyone on this planet that something needs to happen about the way we pollute the environment and our atmosphere by consuming more and more energy per capita. Emissions are a big issue, ethanol is so hot that there are actually fears of grain, corn, soy & sugar becoming too expensive for third world countries. Friends and family members might already start selling you fuel savings pills and even your little village grocer starts selling LED bulbs. Clean & green is hot and it wil remain hot for years to come, if the stock market experts are right. Well, I'm gonna take that challenge and give you five alternative energy stocks. Let's see if they can outperform my stock pick portfolio or even my mining portfolio. Here's the first five (I might add more in a while) : Evergreen Solar (ESLR - US$9.46), Beacon Power (BCON - US$0.90), Pacific Ethanol (PEIX - US$15.40), Distributed Energy Systems (DESC - US$2.89) and SolarWorld (SWV.DE - EUR 57.57). Now let's see how sunny the future is for these green stocks. Investing in these companies almost makes you feel as if you're doing something good for Mother Earth!

An early March update...

2007-02-28T19:56:00.000+01:00

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!

Date	Fund	Purchase	Current	ROI%	Target
18Dec2006	Aareal Bank	35.50	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.

Markets plunge; metals join in on the fun

2007-02-27T22:57:00.000+01:00

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.

Enter DRDGold, Exit Gold Reserve

2007-02-26T20:06:00.000+01:00

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.

Target price reached for ABN Amro

2007-02-23T11:18:00.000+01:00

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.

Brazilian mining giant CVRD still undervalued

2007-02-19T20:12:00.000+01:00

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.

Dutch grocer Ahold poised for better times

2007-02-15T19:50:00.000+01:00

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

2007-02-15T19:14:00.000+01:00

Two months ago, I mentioned that Iberia Lineas de Aereas de España 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.

Venezuela miners up as gold gains momentum

2007-02-11T17:58:00.000+01:00

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.

Early February update on stock tips

2007-02-02T12:09:00.000+01:00

Date	Fund	Purchase	Current	ROI%	Target
18Dec2006	Aareal Bank	35.50	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.

DRDGold: Time to take a chance

2007-01-24T20:32:00.000+01:00

A little while ago, I wrote a column on DRDGold and mentioned that I put DRDGold on my watchlist. Main reason for this was that the South African mining company had seen so much going wrong in one year, that it had to turn at a certain moment. All production halts and small disasters should now be priced into the stock and I am therefore writing a couple more lines now. Basically, I feel that DRDGold has almost bottomed out now and a chance can be taken to buy at the current prince of USD 0.83. There is quite a lot of support around USD 0.75 and stoplosses can therefore be placed below that level. In my opinion, it is just a matter of time until better news arrives and the technical picture looks sound enough to buy. Speculative buy with a price target of USD 1.10 in the first half of 2007.

Two speculative gold plays

2007-01-12T21:59:00.000+01:00

Within the mining industry as well as in the oil & gas industry, geopolitical risks are becoming more and more influential on share prices. This became quite clear this week when Chavez mentioned in a speech that all that was once privatised should be nationalised again. He specifically mentioned his desire to re-nationalise CANTV (Compañia Anonima Nacional Telefonos de Venezuela). The share price (NYSE:VNT) plunged as a result and took many other funds with it. Among these were certain mining funds that have at least part of their operations in Venezuela, including Crystallex International Corp (AMEX:KRY) and Gold Reserve Inc. (AMEX:GRZ). The risk in the mining sector was already priced into these two companies' shares last year when GRZ dropped from its April peak of USD 9.58 to USD 3.96 two months later. The same happened with KRY, which fell from USD 6.07 to USD 2.84, also in two months' time. Not helped by gold moving sideways for a period of eight months since its April peak, both stocks are now not far from where they were in June last year. The problem is clearly not their reserves. Both companies share prices are way too low if you take all proven & probable reserves into account. For only one reason: geopolitical fears. Crystallex issuing a press release to eliminate investor fears after Chavez' speech this week did not help the share price and was completely ignored. The Government of Venezuela has previously even confirmed that the present contract will be honoured by both parties, i.e. Chavez & Crystallex. The financial world now seems to neglect the 13.6 mio ounces of proven & probable reserves that Crystallex holds. With a market capitalisation of USD 785 mio, the market cap per ounce ration lies at USD 58. For comparison's sake, this is less than one tenth of that of Kinross Gold (NYSE:KGC) and Bema (NYSE:BGO). Gold Reserve has an estimated 10.1 mio ounces of gold and 1,290 mio ounces of copper at its major project Las Brisas in Venezuela, which means that it has an even more ridiculous market capitalisation per ounce of USD 11.30! And even though GRZ has a similar agreement with the Venezuelan Government, this too was ignored by investors. Then there is also a bilateral treaty that offers some protection to Canadian companies in case of nationalisations. So all and all, we can say that the risks are to a great extent priced into the stocks and there is a great possibility that the stocks moved down too much on the news and that fears have been overrated. Would, in my humble opinion, these companies have had all their operations in politically stable countries, both share prices would have been at least 300% higher based on their reserves. It's a simple calculation. The only thing to rate is the risk and will always be a subjective rating. But the potential rewards certainly outweigh the risks and I therefore recommend both stocks as buy candidates. My preference however goes to Gold Reserve Inc for a number of reasons, of which the market capitalisation per ounce is the most obvious one. Do however still keep the risk in mind and therefore consider this a speculative buy. I would set price targets for this year at USD 6 for Crystallex and at USD 12 for Gold Reserve Inc.

Silver: the chance of a lifetime

2007-01-08T21:15:00.000+01:00

Lately, we've seen precious metals take a serious dive. The start of the year has certainly not been good for those who have put their money in mining companies, including the undersigned. Gold looked destined to surpass its previous peak at USD 650, but failed to do so and lost 6%. Its usually more volatile 'little brother' silver had showed a sluggish performance since early December and has now lost another 9% since the start of 2007. Knowing that silver is widely expected to be the best performing metal in the coming years -simply based on the laws of supply & demand- I myself have been looking to diversify and invest part of my money in this metal. Let's have a look at the below chart: This chart is the price of one oz of gold divided by the price of one oz of silver. What the chart shows is that around 1 December at USD 150 and with the RSI showing that silver was overbought compared to gold, the latter was the better option to buy. However, now we are at a stage where the RSI has fallen below 40, showing a good chance to buy silver. The same happened early October, when silver started to move up from USD 10.80 to USD 14! Silver itself looks quite good as well with the RSI showing a slight oversold status in the March 07 future chart. To summarise: silver has stayed behind gold since early December and silver itself currently shows an oversold status. Hence, enough reasons for me to take a long position in silver today at USD 12.05.

Predictions...

2007-01-02T18:50:00.000+01:00

First of all a very happy New Year to all readers. I have taken a short holiday to do some work in the house and will be following the exchanges a bit more closely again as of today. At the end of each year, there are usually quite a couple of stock competitions online, of which I would like to mention my picks. The first one is the annual mining competition at golddrivers, where you choose ten junior mining stocks that will make up your portfolio for the year to come. I've selected ten interesting mines, some of which are currently in my 'real' portfolio, too. These are the following:

Franklin Mining Inc (FMNJ.PK)
Canadian Arrow Mines Ltd (CRO.V)
Odin Mining & Exploration Ltd (ODN.V)
Consolidated Gold Win Ventures (CGW.V)
Canasil Resources Ltd (CLZ.V)
Noront Resources Ltd (NOT.V)
Silver Wheaton Corp (SLW.TO)
Yamana Gold Inc (AUY)
Searchgold Resources Inc (RSG.V)
Exeter Resource Corp (XRC.V)

There is a second mining competition that is very interesting two follow, which you can find at www.edelmetaal-info.nl. In this competition, five mines must be selected. Hence, I selected from the above top 10 numbers 3, 4, 5, 6 and 9 (in bold). The third competition is one that I've set up end 2005, but which has now been taken over by Dr Money. This is a competition where you are to select your favourite five Dutch stocks. I'm very thankful that Philippe helped me last year, as it was simply too time consuming to keep the competition up-to-date. Now of course I would like to thank DrMoney for organising the DFT Top5 Competition 2007. My top five Dutch stocks for 2007 are the following:

ABN Amro
Aegon
Hagemeyer
Qurius
TNT Post

The first two I have selected based on their potential roles in the consolidation of European financials. I selected Hagemeyer based on my previous posting, Qurius based on a successful turnaround towards profitability (I might cover this pennystock shortly) and TNT Post based on its attractive p/e. Last year, I ended in the top five. Now I am going for the big price! Finally, I would like to wish everyone a lot of luck & wisdom for 2007. May all your wishes come true and may your trading account grow substantially! Update: In my top 10 list for golddrivers.com, I changed Taseko and Rubicon into Silver Wheaton and Exeter Resource Corp. The competition will commence on January 15th.

Fiat Group share price to double within three years?

2006-12-21T11:43:00.000+01:00

I cannot hide the fact that I've always had a love for Italian cars. Whereas colleagues tend to go for Volvos, BMWs or Audis, I have always driven Italian cars and I am not planning to change. In December 2005, I recall having mentioned that three car makers I considered good to have in one's portfolio: Toyota because of it's strong position in the US market and innovation in green technologies (which I think have a great future in this industry), Tata Motors because of its position in the Indian market - which is a real growth market - and Fiat, for the simple reason that the company seems to crawl out of its financial pit. Whilst Fiat only launched a couple of interesting new models in 2006, the Sedici, the Alfa Romeo Spider and the Alfa Romeo 159 Sportwagon and the New Ducato, 2007 looks much more promising. With the launch of the Fiat Bravo, Linea and 500 next to the Alfa Romeo 159 Crosswagon, the 8C Competizione and the New Scudo being planned, 2007 is certainly going to be a critical year in the company's latest business plan, presented last November. The four-year plan included predictions on the number of worldwide car registrations. Lancia is expected to be the fastest growing brand in the Fiat Group, but needless to mention that the bulk of the Group's growth comes from the Fiat brand, which already makes up some 70% of the Group's car registrations. The key figure is the expected growth of 65% in worldwide Fiat Group car registrations, which I would say is at the least ambitious. This growth is expected to come mainly from China & India (2010/2006 =+825%), Russia (to 130k units from scratch), Turkey (+91%) and Western Europe (+43%). It is no secret that the car industry is very volatile, with high fluctuations in market shares. This explains why a 43% growth in Western Europe may actually be feasible as it only represents a market share increase from 8% to 11%. Knowing that Fiat holds quite a strong position in many of its key growth markets, growth should certainly be very healthy in the coming years. The above is reflected in the company's financial targets: Group revenues are to increase by 7.6% y/o/y. As if that is not enough, EBITDA is expected to increase from Eur 3.6bn in 2005 to Eur 8.6bn in 2010! This means an increase of 139%! Now, this is all very nice and very ambitious but these are simply targets set by the company itself and give no reason to believe that these targets are actually going to be met. But the thing that does give me confidence is the fact that the financial improvements made in 2005 and 2006 are to be admired, especially when it comes to improvements of the bottomline. Today, Fiat S.p.A. trades at Eur 14.50. I am of the opinion that the Fiat share price could double in three years (certainly beats putting the money in your bank account), even if actual results are somewhat shy of current targets. EPS should reach at least Eur 2.50 in 2010.

Will Aareal Bank AG exceed its targets again in 2007?

2006-12-18T13:04:00.000+01:00

I just cannot stop mentioning it and thankfully, I am not the only one mentioning it: buy banks, buy banks, buy banks for 2007! After having covered Capitalia, Banco Pastor and ABN Amro, I think it is about time to give my opinion on some of Germany's banks. There are two banks that I particularly like: Aareal Bank AG and Commerzbank, for the simple reason that I am impressed with there EPS growth scenarios. I willl focus on Aareal Bank, which is a real estate bank that seems to be doing very well. After Aareal Bank achieved its full-year new business target of Eur 7 bio already in the first nine months of 2006, it decided to raise the target to Eur 8 bio for 2006, of which 89% comes from Europe. In order to diversify geographically, a new office is planned in Shanghai, which will open up the Asian market, in addition to its growing presence in USA. Its portfolio is well-spread and revenues are received from residential housing, offices, retail, hotels and logistics. Aareal Bank is certainly on the right track when it comes to Non-Performing Loans, with these NPLs being down from 10.7% of its portfolio in 2004 to an estimated 3.1% in 2006. With this impressive improvement, the company has gained a lot of credibility with investors. And when studying its other targets for 2006, whether talking about RoE, Operating Profit or loan loss provisions, all targets are destined to be met. Coming back to EPS growth, this is quite a story: whereas EPS is around 2.21 this year, the sale of property by Interhotel Gruppe (in which Aareal Bank owns a 33% stake) should boost EPS to over Eur 4.00 in 2007. For 2008, the EPS is expected to be Eur 3.00 - 3.50, which should justify a share price of around Eur 42 next year, but if targets are exceeded in 2007 as was done this year, there could be much more lying ahead of us. Aareal Bank is also a potential prey as the real estate industry becomes an increasingly hot target for M&A-mania, as seen in today's takeover of Realogy. To summarise, I believe that a target of 25% above today's Eur 35.50 is feasible in 2007.

Iberia's credible business model

2006-12-16T19:15:00.000+01:00

Sometimes you come across these companies which you almost instantly develop a feeling of admiration for, simply because of their business model. One of those companies for me is Iberia. Iberia Lineas Aereas de Espana S.A. - as it's officially called - has had three difficult years, with competition getting stronger and stronger, especially on domestic and medium haul flights. Competition on medium haul flights (read: flights within Europe to or from Madrid) mainly comes from low cost carriers and Air France/KLM. Especially the low cost carriers are gaining market share rapidly and this has slightly eroded Iberia's market share as well as its margins. A similar thing is happening in the domestic market where SpanAir aims for market leadership in 2009 and high speed train operator AVE will also offer strong competition. In that situation, there are two things you can do: become a price fighter and see margins erode further with at best a stable market share or shift your focus to other markets. Well, Iberia has chosen to do both. The Spanish airline company has decided to increase its focus on long haul and aims to make Madrid the number one hub for flights to and from South America. The past two years, it has been rather successful and saw its position improve into taking over market leadership on Madrid to South America flights from Air France/KLM. Moving up from a current 18.7% towards a 23% market share in 2008 is considered 'feasible', despite tough competition from low-cost AirMadrid as well as Aerolineas Argentinas. In addition to improving its market share on these Atlantic flights, Iberia is also helped by an improving economic situation in South America, which leads to a healthy increase in air traffic. At the same time, Iberia set up its own low cost airline company 'ClickAir' in February this year. Another factor one should take into account is fuel prices. The expectation for fuel prices in 2007 is certainly more favourable than the 2006 situation, which should have a positive effect on corporate earnings. The company's plans to focus on profitability before topline growth - through an increase in business class tickets and self check-in and savings in personnel cost - should create some extra shareholder value. This has led analysts to be very positive about EPS estimates for 2007, which are expected to double. Now one could say that the stock is not undervalued at this time, which is probably true. But against this, the strategy of changing its corporate focus whilst improving profitability is one that certainly seems to pay off. I would therefore still recommend this stock at its current price of Eur 2.81, strongly influenced by its credible business model as well as by recent strong rumours on Lufthansa interests in Iberia. Update: Businessweek reports that AirMadrid has just seen its licence suspended by Spain's Civil Aviation authority, leaving thousands of passengers stranded.

ABN Amro's role in the consolidation of European banks

2006-12-13T18:26:00.000+01:00

Let's talk banks again today. Not because I am so greatly fascinated by banks, but simply because there's something going on in this industry. After having covered Banco Pastor and Capitalia last month, I'd like to add some more general thoughts today, in particular on Dutch bank ABN Amro. The banking industry, and more specifically the European banking industry, is one that is very fragmented and awaits -in my humble opinion- a major consolidation in the years to come. This is the major reason why I think 2007 is going to be the year that is going to blow some dust off of these financials. This view is backed up by a report by Deloitte (PDF!), which compares the European banking industry with the American banking industry before a consolidation took place. Then there is the fact that Dutch banks generally have quite attractive (I would almost say 'competitive') P/E-ratios. For instance, ABN Amro is valued at 10.7 x earnings, ING Group at 9.8 and Fortis at 9.5 even. If you compare these valuations to those of their European peers, it becomes clear that there is somewhat of a discount. Dutch banks are also on the move. They are eyeing new markets and the best example of this was ABN Amro's acquisition of Banco Antonveneta, which may have opened up the Italian banking market for other European (or even American) players. There is certainly no consolidation needed in this industry in the Netherlands. The combined assets of country's five biggest banks made up 84% of total Dutch banks' assets. This is quite the opposite of Spain, where the five biggest banks made up 44% of total Spanish banks' assets, UK (33%), Italy (27%) and especially Germany (22%). But that does not mean that ABN Amro is not a potential prey for foreign banking groups, as was pointed out by rumours lifting ABN Amro's share price 3% today to Eur 24.10. CEO Rijkman Groenink has always maintained his view that ABN Amro is for sale if the right price is offered. However, the likelihood of ABN Amro being swallowed by a bigger fish is in my opinion quite low and I therefore tend to speculate that it will rather be the one playing its own strong role in the industry's consolidation. And this could be a reason why this bank is attractive, as shown in latest figures on the integration of Banco Antonveneta. Synergies appeared to be much higher than initially expected and restructuring costs much lower. The operating efficiency ratio of ABN Amro may have been higher than that of Antonveneta before the acquisition, but the deal was easy to justify: a similar package of banking services costs an Italian customer an average Eur 250/yr, compared to an average Eur 45/yr for Dutch banks' customers. Also, the customer satisfaction rate in the Italian banking industry is around 15% versus some 85% in the Dutch banking industry*. After seeking the right preys and after getting the required experience in restructuring and integrating these targets, the acquiring parties may be the ones thriving in the years to come. There is great potential in streamlining the diverse natures of Europe's banking industries and knowing that the one who moves first is often the one who is most successful, I would say that ABN Amro has a lot in store in the coming three years. Antonveneta might just be the start of a beautiful story. * 2004, KPMG research report 'Banking Beyond Borders'

Strong earnings growth may boost Hagemeyer

2006-12-10T16:52:00.000+01:00

This is the first time I am covering a stock that has a Netherlands listing. Usually I tend to look abroad to find nice opportunities, but this one I just cannot miss out on. Hagemeyer N.V. is a Dutch B2B distribution services group that provides its products and services to electrical contractors and installers in the commercial and industrial market, as well as to industrial users. The company has seen three years of severe financial misery, after serious operational disruption in USA, UK and Germany. But the recovery is there, with net losses having improved from Eur 318 mio in 2003 to Eur 141 mio in 2004 and Eur 58 mio in 2005. A simple extrapolation here wouldn't be far from the truth: Hagemeyer will be profitable again this year. Based on the current share price of Eur 3.58, the forward P/E (2007) is at 10.5 about half of the sector average, whilst there is certainly room for some positive surprises in the coming year. EPS is expected to be at least 50% higher than this year's earnings, which means that we may expect a share price that reflects this strong growth. It must be said that Hagemeyer's Q3 revenues were somewhat below expectations (9.1% vs the 11.5% consensus) and that the company is vulnerable to a weakening US Dollar, but the extent to which the share price has taken a hit since Spring this year is not at all justifiable. Especially if you consider that the company still plans to achieve revenues of Eur 6 bln this year (+7.2% over 2005), with 6% revenue growth expected for the coming years. CEO Rudi de Becker certainly made a change since he joined the company in 2004 and in my opinion Hagemeyer still has a long way to go, but I certainly have regained confidence in the company's management. Based on its strong expected earnings growth combined with revenue growth, I see at least a price target of Eur 5.00 for 2007.

The promising turnaround of Rhodia

2006-12-07T18:50:00.000+01:00

French chemical giant Rhodia SA is one of those companies that many investors might not feel much affinity with, based on the sectors it operates in. Its products are among others used in coatings, tyres, pharmaceuticals, cigarette filters and fragrances, but can simply be divided into three groups: 'application chemistry', 'specialty materials & services' and 'fine chemicals'. The first two groups are the main ones and together make up almost 90% of the company's sales value (2005) of Eur 4.5B. Total group turnover decreased for years and years and the share price fell from Eur 30 in 1998 to an absolute low of Eur 1.16 in 2004. But the turnaround is there, with positive earnings expected for this year The forward P/E in 2007 (17.0) is well below sector average (25.3) with impressive results booked in downsizing headcount and growth in sales & EBITDA. If Rhodia continues to perform well in 2007 and if estimates are met, a share price increase of 50% should be possible. 2006 Was also the year for Rhodia to restructure some of its BU's, where a new BU Energy Services has been created, focusing on the ever-hot item 'greenhouse gas emissions' and a more efficient structure has been built. At a current price of Eur 2.60 (NYSE:RHA - USD 3.39), the stock is close to being overbought in both day and weekchart, but with an expected EPS growth from 0.03 currently to anywhere in a range from 0.15 to 0.25 in 2007, Rhodia is destined to be among Europe's star performers in the chemical industry. Rhodia is listed in Paris (Eur 2.60) and at the NYSE (USD 3.39).

DRD Gold's stockpiles of misfortune

2006-12-05T20:33:00.000+01:00

DRDGold Limited, a once very succesful South African mining company which had a share price peak of USD 50 in 1980, might need some four leaf clovers. Today's announcement that the company will restructure its 79%-held subsidiary Emperor Mines after the Australian company shut its Vatukoula gold mine in Fiji, saying it was no longer economically viable to continue operations, was certainly not the first bad sign this year. A fire at its South African Blijvooruitzicht gold mine led the company to halt production, leaving investors worried. Just prior to that, investors swallowed news on a gold production halt at Tolukuma, the Papua New Guinea mine wholly-owned by DRDGold's 79% subsidiary Emperor Mines. In addition to that, there is the uncertainty regarding a new successor for soon to retire CEO Mark Wellesley-Wood as it is a well-known fact that investors are generally not too keen on management instability. All this has led the share price to drop 35% this year and almost 25% in the last month. In the 2006 financial year gold output of its Vatukoula mine decreased by 81% as all sections of the mine were temporarily closed. The Fiji mine was to contribute practically one third (!) to the 2007 output target of the company's subsidiary Emperor Gold. On a more positive note, most of DRDGold's restructuring costs have been made, leading the company to drastically narrow its losses in FY2006. But one should wonder what is left of its new strategy to focus more on its Australasian mines, which leaves only a 20% stake in the Porgera joint-venture and its fully-owned Tolukuma gold mine, both located in Papua New-Guinea. There is certainly a lesson to learn here: investing in mining companies knows many risks other than geopolitical risks or price fluctuations in metals. But it must be said that with so much misfortune, there aren't many risks left for DRDGold. With a share price below one US Dollar (NASDAQ:DROOY), we can only wait until better news comes. For the moment, this is certainly a stock that needs to bottom out, but things can really only get better from here. And that... is the reason for me to start putting this stock on my watchlist as of today. Update: This post has also been supplied as a column in Dutch to edelmetaal-info.

Vallourec and the midas touch of Vincent Bolloré

2006-12-02T16:16:00.000+01:00

Sometimes you can simply buy companies because of the management or because someone specific bought a stake in the company, simply based on the confidence in that management or in that stakeholder. Vincent Bolloré, now worth USD 1.7 bln according to Forbes 500, is one of those people. His career began when he took over the family-owned conglomerate Bolloré, which is active in the maritime industry & cross-border trade with African countries. Then, he took a large stake in French construction group Bouygues, which he left a while later with quite some more money in his pockets. Some two years ago, he decided to buy a stake in Havas, a French advertising group of which he now is President and single largest shareholder after mounting a coup in 2005. Also in that year, he started building a stake in independent British market research group Aegis Group PLC. He has been aiming for a position on the board with his 29% stake, but has not succeeded so far. Whether you like his unorthodox way of buying himself into companies, what he does is usually good for shareholders. A great example of that is the French world leader in seamless steel tubes: Vallourec Group. But Vincent Bolloré having a 7.5% stake and being a member of the board is certainly not the only reason to invest in this company. Vallourec will be included in the CAC40 as of this month and has been known for keeping shareholders extremely happy. German steel producer Salzgitter sold its stake recently and benefited heavily. But growth is not over yet. Vallourec’s first half year net profit rose 214% compared to the previous year and the group expects sales for the second half year to be at least of the same magnitude. Especially encouraging is that the group foresees no slowdown at all in the oil, gas and power segments. Vallourec is currently looking at some acquisitions, especially in Europe, which should bring some more topline growth. Vallourec currently has a P/E of 13.5, below the sector average of 15.1. The current share price is EUR 201 and I would consider a share price target of at least EUR 250 in the first half year of 2007 realistic, concerning the sector strength and the company’s rapid growth in sales and profits.

Solar power revisited...

2006-11-30T19:29:00.000+01:00

One of the most beautiful examples of how a Government can almost single-handedly create an entire industry is Germany. Thanks to the so-called "Feed-in Law" in Germany, customers receive preferential tariffs for solar generated electricity depending on the nature and size of the installation. This, and several other advantages of solar power created by German Government, has led Germany to become the fastest growing photovoltaics (PV) market in the world in 2005. This trend could also be seen on the German stock exchanges, where solar power companies have emerged from the ground like mushrooms. Stocks like SolarWorld AG (FRA:SWV), Ersol Solar Energy AG (FRA:ES6) and Q-Cells AG (FRA:QCE) have all performed very well until 2004, but it was in 2005 and early 2006 when most of these companies saw the stockmarket hype end. Alternative energy lovers quickly moved from solar power to ethanol and uranium and most solar stocks have not gained much since. The reason for this was one underlying question: can solar power become efficient enough without Government aid? And consequently, the question arose whether Government should keep funding the sector. Should fossil fuel costs go up, the efficiency gap decreases and it is expected that the US solar energy market - now considered to be five years behind Germany - would then become much more competitive. Washington-based Solar Energy Industries Association (SEIA) projects that the U.S. will be the world's biggest market, with $25 billion in revenues, within five years. SolarWorld AG could be one of the companies benefiting as it focuses on delivering cost-effective technology for the end-user, helped by its strategy of vertical integration. It now is the second largest integrated solar company in the world, after Sharp. This year, sales should increase 43% to just over EUR 500 million and group profits climbed 319% to EUR 63.3 mio y/o/y in the third quarter only! With such continued strong financial performance, the stock is expected to rise again soon. SolarWorld currently trades at around 21 x earnings, which is significantly below the sector's p/e of 27. Technically, the stock looks ready to go up again and I would consider a 50% increase from its current price of EUR 46.08 realistic in 2007.

Paddy miners: a comparison

2006-11-28T18:58:00.000+01:00

Compared to the Canadian and American stock exchanges, there aren't many mining companies listed in Europe and those that we tend to find easily, are not always very promising. But today, I want to shed my light upon three Irish mining pennystock companies: Ovoca Gold PLC (ISE:OVGL), Ormonde Mining PLC (ISE:ORQ) and Kenmare Resources PLC (ISE:KMR). All three also have a London listing. A small comparison:

First of all, those that are averse to taking any political risks might choose for ORQ, which has all of its mines located in Spain. Au contraire, OVGL has great exposure to Russia and KMR to politically unsafe Mozambique.
Metals-wise, there are also differences. KMR considers the Moma Titanium Minerals project its main asset. OVGL is mainly active in silver through what is said to potentially be the world's highest grade silver mine: Goltsovoye in Northeast Russia. In addition to that, its Kola Peninsula Exploration projects have gold, copper and molybdenum prospects. ORQ mainly operates gold mines in Spain, but also has prospects for copper, silver, tungsten and antimony (increasingly being used in the semiconductor industry) and recently found zinc at its La Zarza project.
Not unimportantly, when are these companies planning to start producing? KMR is certainly closest to production, with long-term potential for significant increases in output. ORQ has two projects in advanced evaluation stage: La Zarza (Au/Cu/Ag) and Salamón (Au) and several other projects in early evaluation stage. OVGL hopes to start producing in Q4 2008, which is partly the reason why the stock is so thinly traded.

Obviously, all three have potential. KMR's biggest plus is that its nearing production, but OVGL holds a very attractive silver development asset and has an experienced management team. ORQ however, clearly has the best mix of assets, but has an exploration risk to go with that. KMR seems best for the short term, while ORQ has my preference for the long-term. OVGL - I would say is the riskiest bet, considering the 'juniority' of its projects. But if you want to become filthy rich, you have to take some risks in the end... ORQ can be considered for buying at the current price of EUR 0.24. Update: This post has also been supplied as a column in Dutch to edelmetaal-info.

Capitalia: the next prey?

2006-11-27T22:29:00.000+01:00

Last year, Dutch bank ABN Amro took over Italy-based Banco Antonveneta. To many investors, this seemed a very risky move as the Italian banking industry is not known to be the easiest one to break into. ABN Amro has certainly experienced this, but succeeded at the end of the day. Banco Antonveneta, being the eight largest banking group in Italy, only holds a 3% market share in the Italian market and should therefore certainly not be considered the end of ABN Amro's Italian ambitions. Keeping in mind the above whilst also considering the 7.7% stake that ABN Amro holds in Rome-based Capitalia Gruppo Bancario (MIB:CAP), the most likely scenario is easy to guess. Reuters also mentions that 'corporate marriage' is high on shareholders' agendas. With net profit expected to rise 27% to EUR 1.4 bln, the bank is certainly expected to perform well, which is also reflected in the share price. To a certain extent, the share price includes an acquisition premium, but this premium did partly evaporate as Banca Intesa and Sanpaolo IMI merged to create Italy's biggest domestic lender and a European top eight bank. ABN Amro focuses on Antonveneta "for the time being", so says ABN Amro CEO Rijkman Groenink. No further comments were given with regard to a potential merger of Antonveneta and Italy's fourth largest bank Capitalia, but the likelihood increases day by day. Speculative buy at a current price of EUR 7.10.

Banco Pastor: a strong focus on shareholder value

2006-11-26T23:06:00.000+01:00

Banco Pastor S.A. (MCE:PAS) is the 7th largest banking group in Spain and may be considered a relatively small, but growing bank. The Group has 48% of its 569 branches in Galicia and 52% spread across Madrid, Catalunya, Levante and Andalucía and has a target of 700 branches in 2008. Banco Pastor expects to double the average shareholder value created by the Ibex35, based on an ROE increase from 13% in 2005 to 19% in 2008. Currently, Banco Pastor is well on schedule and this is certainly reflected in this year's share price growth. After the stock split in June this year, it moved from 10 to well over 14 in five months. Still, enough potential for the coming years. Dividend has been stable at an annual EUR 0.52 per share. Another reason to buy is that this bank considered one of Europe's most likely banks to be taken over, according to NCB. Currently, the fund looks overbought in the daily chart, hence it may be better to wait for a correction. Anywhere below EUR 13 should be a great chance to buy.

Gettin' Started

2006-11-26T13:38:00.000+01:00

Dear reader, You're now looking at the start of something beautiful. I'm gonna be posting a lot of tips here on great ways to make money using international stock exchanges. Mostly, the European exchanges. For one simple reason: it's hard to find good information on European stocks, whereas there are loads and loads of blogs and websites on American stocks. Keep checking as I will be doing my utmost to make this a success. Hopefully with your support! Best regards, Joey Keasberry