Pinetree – Does It Smell Fishy?

by JDH on December 28, 2006

I notice that PNP.TO – Pinetree Capital Corp. closed on December 28 at $18.60, which equals the intra-day high for the year hit on November 8. Since this website is call “buy-high-sell-higher”, and since Pinetree has just closed at a new high after a volatile period of consolidation, is Pinetree now a buy?

Technically it looks good, but what about fundamentally?

On December 28 a reader of this blog, Fabe W, responding to my article about taking profits asked the question:

“What do you make of the Pinetree situation? If there’s something dodgy there, does it cast a cloud over Mega as well?” (He is asking the question because, as of September 30, Pinetree owns about 5% of the outstanding shares of MGA.TO – Mega Uranium Ltd.)

We all know that the OSC is investigating Sheldon Inwentash, Pinetree’s chief executive, for manipulative trading and insider trading (you can read more at the National Post). The OSC does not launch a huge number of manipulative trading investigations each year. I have no inside knowledge, but it is reasonable to assume that they would only launch an investigation after a period of surveillance (so that they can catch you with your hand in the cookie jar).

We also know that James Dines of The Dines Letter is a huge supporter of this company. Is he too close to the company? Wouldn’t most advisors recommend that you sell a company under investigation, rather than advising subscribers to “back up the truck” and buy more? Does this smell fishy?

I’m interested in your thoughts. Is this fishy? Should we be worried that Dines can move the market on these stocks? Or, since both Pinetree and Mega are making new highs, we shouldn’t worry about it? Feel free to post your comments below, or post them on the new Buy High Sell Higher Forum (which I just started today, and have yet to figure out exactly how it works).

{ 6 comments… read them below or add one }

Fabe W December 28, 2006 at 11:45 pm

My usual inclination in these situations is to get out, especially if you can do so without loss, on the basis that there’s usually no smoke without fire. Yes, Pinetree may be a splendid vehicle and all that, but is the relative outperformance sufficient to justify what must now be a higher level of risk?

Mega may also be a problem given that Inwentash is CEO there too.

There are plenty of other fish in the sea.

Having said all which, there is still the greed factor. Maybe Pinetree and Mega will be the superstars in what seems to be an impending new leg of uranium bull market. Can I bear to be left out? Will I be gnashing my teeth later if I sell now?

fin December 29, 2006 at 1:21 am

I don’t think it matters as much that Pinetree has a 5% stake in MGA–the problem is that Iwentash is the CEO of both co’s. You make a great point about the investigation–the do tend to gather info before clamping down.
The gnashing teeth syndrome might very well come into play–I was bummed a bit to have sold when I heard the news of the investigation. But long term, over multiple plays, you have to remind yourself that the safer the better when it comes to hyped companies, especially when you smell smoke. In that respect, I have no regrets. There are so many other great companies with both honest and skilled management. TXM SXR PXP, LAM have been mentioned here …I took my holdings from MGA, sold at 50% profit, and put them into LAM–also a play for the Australian change in policy. They’ll be in production sooner anyway, and about half the valuation of MGA.

Vulture boy December 29, 2006 at 9:59 am



eljefeford December 30, 2006 at 1:02 pm

I’ve owned both mega and pinetree long enough to have made a considerable profit. I’m bailing out till the dust settles from the investigation. I firmly believe that where there is smoke there is fire. I love the Dines newsletter but you have to remember he is heavily invested (I’m sure) in both companies. I’m going to take my profits and look elsewhere.

Trailbraker December 30, 2006 at 3:25 pm

I received the JDL “Interim Warning Bulletin” advising everyone to “back up the truck” for PNP shares before the PNP press release. In it Dines mentions that it is very unusual for him to send out an IWB one day before the newsletter comes out. His reasoning is that PNP which “has had numerous Pullbacks all the way up”, has had a “pullback”. This begs the question: So what’s so urgent? He then mentions that “questions about two of their (PNP’s) securities, neither of which are in our Recommended Lists, do not concern us materially” .
Now here’s the problem. How did he know about the “two securities” (actually two companies owned by PNP, I believe) before the press release. And the press release specifically said that Inwentash and the company (PNP) were subjects of the investigation. JD just sorta left that out. Add to that what can be read into the bizarre reaction of the the stock price that day and this is more than just ‘fishy”. I sold my holdings of PNP and MGA the next day and put them into PDN and LV. No regrets.

JDH December 30, 2006 at 7:18 pm

I share your skepticism, but I don’t agree with your conclusion. Pinetree issued a press
before the markets opened on December 4, and the press release mentioned the two companies owned by Pinetree that were being investigated (Treat Systems and Brownstone Ventures); that’s how Dines, and everyone else, knew about it.

However, I do agree with your comment that Dines “sorta left out” the fact that Inwentash and the Pinetree were the subjects of the OSC investigation; that should have been disclosed by Dines to his readers.

In Dines defence, Pinetree made a new high on Friday, so no-one seems too worried about it. I am doing some detailed research on insider trading and Pinetree, and I plan to post something on this blog on Tuesday morning with my findings.

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