This Week’s Commentary – April 14, 2007 – Time to Emphasize the Blue Chip Uranium and Silver Stocks

by JDH on April 14, 2007

Well, we had another good week; my portfolio is now up 18.8% on the year, which is good. Not great, but good.

As I look back on the year so far, I see that my “blue chip” stocks have been by biggest winners; my smaller stocks, not so much. If I look at the last two months, and compare the price of various holdings on February 13, and on April 13 (a two month interval), my biggest winners are as follows:

  1. PNP.TO – Pinetree Capital Ltd. – up 54%
  2. MGA.TO – Mega Uranium Ltd. – up 36.5%
  3. DML.TO – Denison Mines Corp – up 22.5%
  4. JNN.V – JNR Resources Inc. – up 21.4%
  5. LAM.TO – Laramide Resources Ltd. – up 20.5%
  6. UUU.V – Urasia Energy Ltd. – up 18.4%
  7. SSO.TO – Silver Standard Resources Inc. – up 11%
  8. FRG.TO – Fronteer Development Group Inc. – up 10.5%

Fortunately my losers were sold quickly, and there were very few losers, so that’s not been a problem. What does this list tell us? It tells us that over the last two months the big winners were solid, established companies, either with production (Denison, Silver Standard, Urasia) or close to it (all the rest). The junior exploration companies are not yet the big winners. Why not? One reason is that I have very few of them in my portfolio. The other reason is that we are still early in this bull market.

The world is finally waking up to this thing called uranium, and as fund managers and conservative investors typically do, they are putting their money in the big companies. Take a look at what’s been happening to our old fried CCO.TO – Cameco Corp. recently):

1 Year Chart
Courtesy of Yahoo! Finance
  Why is no-one concerned that the flood at the Cigar Lake mine is much more serious than management is letting on? Presumably it’s because if you want to buy a “blue chip” uranium producer (even if they aren’t actually producing at the moment at Cigar Lake), Cameco is it.

The break-out happened in March as funds started buying. The RSI on Friday was at 71, so I’m not buying; fundamentally a big flood scares me, regardless of how pretty the chart may look.

My plan is to avoid Cameco for the moment, but perhaps it’s time to ride this wave and allocate more resources to the winners, and less to the speculative juniors. That means I will move to having 70% of my portfolio in my top ten stocks, which will be (%’s indicate % of total portfolio):

  1. FRG.TO – Fronteer Development Group Inc. – 8%
  2. MGA.TO – Mega Uranium Ltd – 8% (uranium, plus exposure in Australia, which we are gambling will get some good news this month)
  3. PAA.TO – Pan American Silver Corp.– 8% (silver is starting a run, so we want exposure)
  4. PDN.TO – Paladin Resources Ltd. – 8% (uranium in Australia); continues to look good, even with their increased offer for Summit; I’ve posted more thoughts about Paladin Resources here;
  5. SSO.TO – Silver Standard Resources Inc. – 8% (silver is poised to run)
  6. DML.TO – Denison Mines Corp – 6%
  7. JNN.V – JNR Resources Inc. – 6%
  8. LAM.TO – Laramide Resources Ltd. – 6% (had a big run, so will increase to 8% on next pullback)
  9. PNP.TO – Pinetree Capital Ltd.– 6% (had a big run, so will increase to 8% on next pullback)
  10. UUU.V – Urasia Energy Ltd. – 6%

Some trimming is in order, so this week I plan to sell AXU.TO – Aurora Energy Resources, Inc. – almost half of the common shares of Aurora are owned by FRG.TO – Fronteer Development Group Inc., so do I need to own Aurora as well? Probably not. I’ve posted the Aurora chart here. I think the time has also come to say good-bye to U.TO – Uranium Participation Corp. It’s had a good run, up 20% since I bought it, but with the big increases in the price of uranium it should have increased faster, so I am reluctantly letting it go.

Am I also a bit worried about GEA.TO – Gold Eagle Mines Ltd.; if it opens lower Monday I plan to sell half of my holdings; my Gold Eagle reasoning, with the chart, is posted here.

By shedding some of my under-performers, I will free up cash to put more on the winners. Even so, I still plan to keep close to a 10% cash position, so I have buying power for other opportunities (or as a cushion against a consolidation).

Thanks for your contributions this week; please continue to post your thoughts on the Buy High Sell Higher Forum, and good luck this week.

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