This Week’s Commentary – February 24, 2007 – Where Bad Stuff is Good Stuff

by JDH on February 24, 2007

Have you ever had one of those days where bad stuff happens, but it turns out it was really good stuff?

On Thursday I took my wife’s computer into the computer shop for repair (it would just hang there when she tried to shut it down. Maybe someday I’ll start a blog about all the bad stuff about Windows, like why can I start my car in 1 second, but it takes two minutes for my computer to boot up, but I digress). When I left the building my car was blocked by an 18-wheeler. I was stuck, and was late for my next meeting. I was not happy. Since I was stuck I got out, went to my trunk to get my lunch, only to discover I left my briefcase (with all my material for my afternoon meetings) at the computer shop. Since I was stuck anyway, I went back in to get it. When I got back, the truck driver apologized for blocking me in, and off we both went. Had he not blocked me in, I would have not realized I had forgotten my briefcase, I would have left, driven 30 minutes to my next meeting, and I would have been quite upset. In hindsight, I’m glad he blocked me in.

My week in stocks was the same. In my Commentary Last Week I laid out a complete reallocation of my portfolio, selling some stocks, downsizing others, buying some new ones, and moving to a virtually fully invested position. Monday went well (the markets were open in Canada, but closed in the US), but Tuesday and Wednesday were down days, which made me question the wisdom of reducing my cash position.

In hindsight, however, those down days were “good stuff”. Just like getting blocked in by a truck, pauses are good; it allowed for a nice base to be built, and as a result Thursday and Friday were great days. At the end of last week my portfolio was up 11.2% for the year; as of today I’m up 17.1%; 6% in one week definitely qualifies as “good stuff”.

Two of the big winners this week were JNN.V – JNR Resources Inc. and DML.TO – Denison Mines Corp. who announced positive drill results at their joint venture. Denison was up almost 9% on the week, and JNR increased by 17.5%. Last week I increased my target portfolio allocation to 6% for Denison and 8% for JNR, which accounts for a good portion of the increase this week. Good stuff.

In other news, the world may be awakening to uranium as an investment. Readers of The Dines Letter know that James Dines continues to be amazed that uranium has increased from $8 per pound to $85 per pound this week (see chart on the right hand margin of this page, which is updated every Monday) and yet the “mass” is not aware of it. That may be slowly changing. As pointed out by Swindle on the Buy High Sell Higher Forum on Thursday morning, Jim Cramer actually mentioned a uranium stock on his Mad Money show on Wednesday night. This is one of the first mentions of uranium as an investment in the main stream electronic media, and it may be one of the first signals that the general public is awakening to uranium as an investment. (One of the stocks he mentioned was FRG.TO – Fronteer Development Group Inc., so I’ve added a Fronteer Development Category to the Forum).

Once the public is aware of it, a top is near, and it’s time to get out. I don’t think the top is here yet, but as I mentioned last week, seasonally this is a great time for uranium, but starting in March (which is only a few days away) I plan to start increasing my cash component each week until I am up to around 50% cash, perhaps more, by the end of March or early in April, which is when the seasonal top typically happens. Mentioning uranium on Mad Money only confirms the wisdom of this strategy.

(For those who are interested, uranium has been mentioned in the media before. For example, Mr. Dines appeared on the Nightly Business Report on PBS on November 3, 2006 and recommended many uranium stocks, including MGA.TO – Mega Uranium Ltd., PNP.TO – Pinetree Capital Corp. and FRG.TO – Fronteer Development Group Inc. As noted in our Forum, analysts from Sprott Securities have also appeared on ROB TV in Canada to recommend uranium stocks. However, Dines and Sprott have been recommending uranium for years, so this is nothing new. Jim Cramer discussing uranium on Mad Money is definitely a new development).

We have also had some interesting discussions over on the Buy High Sell Higher Forum about Dines, his recommendations, and whether or not we should be discussing them in detail. The sticky point is that subscribers to The Dines Letter are paying for that advice, and it’s not fair that as soon as he issues his newsletter, or his Interim Warning Bulletins, that we simply rebroadcast it here. My position is that I do not repeat Dines recommendations. If you want his advice, pay for it.

However, I also make no secret of the fact that, as of the close on Friday, about 75% of the dollar value of my portfolio is invested in stocks Dines has recommended. (Which still means that 25% of my portfolio are stocks I came up with on my own, many of which were suggested by readers of this site). I’m not going to say “Dines just recommended this, start buying”, but if he mentioned it a week ago, all of his subscribers have taken a position, so I’m not opposed to the rest of the world buying to drive up the prices for the rest of us! I take the position that if Dines mentions it on TV, it’s not a secret anymore.

I also don’t follow Dines’ recommended portfolio allocation; I overweight and underweight stocks based on my own thinking, as described Last Week. Of course if you follow what Sprott and Casey recommend, it’s probably true that my portfolio is very similar to their thinking, since there are only so many uranium stocks you can invest in.

My point is this: I started this Blog and the Forum to force me to think about what I’m doing. I’m not a lemming; I don’t follow blindly. I make mistakes, but they are my mistakes, no-one elses. (You can see historically how I’ve done on the the Portfolio Performance page). We should all get information from wherever we can, and then make our own decisions.

There’s lots more to talk about (like I’m glad I bought MAW.V – Mawson Resources Ltd. on Monday) but all of the charts are in uptrends, so let’s leave it at that. Thanks for reading, have a good week, let’s hope for more “good stuff”, and as always feel free to leave a comment by clicking on the comment button below (you have to register to leave a comment, but you can use whatever name you want), or by posting your thoughts on the Buy High Sell Higher Forum.

{ 1 comment… read it below or add one }

john77 February 24, 2007 at 6:15 pm

I agree that it has been a good week overall. I wasn’t very active at all, just letting the previous weeks picks ride out some consolidations. Overall on the year my portfolio is up 18.8%, mostly because of LAM.TO and PDN’s steady gains, both of which make a good chunk of my portfolio. STM.V had good gains this week reaching a high of almost mid-$5, but has since dropped the last two days to $4.94. I was almost certain that it wouldn’t be dropping below 5, but with some luck and at some point the announcement of their JV partner, hopefully we can get a gain worth taking some profit points on.

In retrospect, what I would have done completely differently is taken the 5% I have in cash and put it into either MGA or SXR when they were trading around 6 and 14 respectively. That would have made a good impact.

I think it is too late to add to JNN, and perhaps waiting for a consolidation is good, if it comes.

What are other ppls plans for moving money around this week?