StockBullz.com: Your Daily Stocks Blog

Happy New Year!

Boy I just looked at the time I posted last and it has been almost a full year since my last post. The past year has been a very challenging one for resource stocks but I am very optimistic about 2008.

Oil is over $100, Uranium is bouncing back to $90 but where are our dear share prices?????

In the pits!!! And more than half of Canadian fund managers are predicting drops in the TSX.

But remember folks, monkeys have a better chance of outperforming the TSX than fund managers do, so whatever they say to do, we should be doing the oposite!

So how did I do in 2007 you may ask??

Well here is a little rundown of what I was in:

KXL: Huge gains, I am very satisfied. Stock went up sharply, then down sharply. I started buying when it was flatlining. The stock is now hitting new highs and I still in but with my finger ready to pull the trigger if it drops 10-20% from current levels.

NUX: Was a large holding of mine. Am slowly downsizing but the management team is still great on this dormant stock. Good news will definetely boost this stock very fast. Right now sitting at about two bucks off highs of around 3.50 so it'll be interesting to see how long it will take to run higher.

I just finished reading a tiny little 100 page book by the title of "The Story Behind Canadian Mining Speculation". It was written about 50 years ago by T.H. Mitchell and it should be a must read for any current mining speculator. If you can get your hands on it that is. Try searching for it at your university library because that is where I found this copy. Anyways, here are some great bits of information that I got from the book:

It should be clearly understood by the Canadian investor that the majority of the "penny" stock companies are worthless and always will be worthless. This has been proven time and time again. Yet their stocks have a definite value as a speculative trading medium; in other words, the stocks themselves are not worthless so long as somebody is willing to buy them. Thus, one has to be pessimistic about the possibilities of the companies, yet optimistic about the profit opportunities which their stocks present. And these are the sentiments which guide the professional traders.

MEXICO CITY (Reuters) - For all the talk of the rise of Latin America's left, Mexican presidential hopeful Felipe Calderon could show on Sunday that, while unfashionable, U.S.-style conservatives can still win hearts and minds.

Years of stuttering market reforms under outgoing President Vicente Fox from free trade to a credit card bonanza have taken root among many voters who fear leftists so popular in countries like Venezuela and Bolivia could bring ruin.

Leftist Andres Manuel Lopez Obrador is a slight favorite in Sunday's elections but polls are so close that a win for the Harvard-educated Calderon, promising more foreign investment and pro-business reforms, is a real possibility.

I think that a win for Lopez would make mining executives with properties in Mexico just a little uneasy.

If Lopez got influenced by Chavez, then maybe he would also want to nationalize the mineral properties that are so valuable.

As you can see by the chart above, Silvercorp closed today just below its 30 day Moving Average.

Tomorrow two things can happen: either it breaks out, or it retreats back and continues its spiral down.

I won't try to predict what will happen; reacting to what actually happens is smarter I think.

Gordon recently received the following summary on Silvercorp's progress from Cathy: 

The large American Funds purchase Asian mining stocks from the Hong Kong exchange, while the AMEX mining stocks gets hammered by the hedge funds. This is why we are re-evaluating whether Silvercorp should be listed on the AMEX; in particularly after FNX Mining delisted from the AMEX. We may or may not list on Hong Kong. It will take time to examine the cost benefit as it typically cost in excess of $1.5 million dollars annually to maintain each addition listing. This is attributed to annual listing cost, lawyers, accountants and marketing efforts. There is no point in listing on an exchange unless there will be substantial trading with that listing.

There are a few startling aspects of Silvercorp that investors should evaluate when deciding whether to buy and hold our stock as a solid long term growth investment.

1. Most mining projects takes 20 years to bring a grass root project from exploration into production. According to statistic one in 3,000 exploration projects becomes a mine. Silvercorp brought Ying into production in 20 months; August 2004 start of North American approach exploration to March 2006 award of the mining permit.

2. Most mining projects require +$1 billion, $500 million or $200 million in capital expenditures to initiate mining. Silvercorp is targeting out-to-out capital expenditures of $13.5 million to complete the necessary infrastructure. If Silvercorp chooses, we have the luxury to expense the whole amount in the first year and still make a respectable profit.

3. At current operating costs, if silver went to $2 per ounce, we will still make a profit for our shareholders.

4. We may see strong 3rd and 4th quarters keeping in mind we are in our very 1st quarter of the first year of production. There are three start-up challenges that we must conquer. The concrete paved road must be completed, enough stopes have to be sufficiently prepared for mining and the 600 t/d mill with tailing impoundment must be built. Consequently, much of our energy is focused on just construction itself. However, do not be too surprised if even in the 1st quarter of the first year of production, Silvercorp will yield a profit.

5. Silvercorp's Ying project has consistent bonanza grades throughout the deposit and exceptional low operating costs. The combination is synergistic in yielding lucrative profits.  

6. The demand for silver in China has been growing consistently at a rate of 12% annually while the Chinese GDP growth has been growing on average 8%. China's thirst for metals as I read yesterday, June 20th, in the Financial Times front page, China galvanizes relationship with Africa for their metal resources.

7. We are at the birth of becoming a silver producer as of April 2006, this is the very 1st quarter of the 1st year of production. Please note we will see the financial statement of the 1st quarter around end of August 2006. We will likely see the last exploration year 2005 financial statement within four weeks. Perhaps some of our investor may be proud to reflect years from now how they had invested in Silvercorp at the very start. There is enormous growth potential for Silvercorp. As the company matures into a significant silver producer, there will be many trials and tribulations as we just witnessed with the retracement of metal prices and the investors took a lemming's mentally without consideration for the cemented in fundaments of Silvercorp.

In my passage of providing engineering services to more than a dozen mining operations (not exploration projects), I have never…never seen profit margin like Ying.

I am also enclosing our lasted presentation for your information.

Please note most of what I write is my personal outlook and does not necessary reflect the company's perspective.

In my introduction to Trend Following, I was telling you that a way to judge a stock's trend is to simply see whether the current price is above or below its 30 day moving average.

This is a valid system but there are many other ways to follow trends too.

There is a very useful graph in the Trend Following book which shows the best moving average combinations that have given the best returns when backtested.

The best moving average combination is the 50 day and 110 day moving average combination. This combination produces an outstanding 20-22% average profit per year.

And according to this combination, Silvercorp is still in an uptrend, unlike if it is evaluated solely on a 30 day moving average.

Therefore as long as the 50 day M.A. stays above the 110 day M.A. the stock should keep rising.

As you can see by the chart above, the trend is still down for CUX. My other short candidate YRI is actually still in an uptrend if you use this combination so I might have to cover that for a tiny loss.