Proof That I am Crazy?

In my commentary on Saturday I said the following:

My plan for the week is to nibble at some of the uranium stocks that I like, increase my Apple holdings on dips, and buy some Google and Amazon.What do you think? Am I crazy to be putting some money outside of the mining arena? Or is this appropriate diversification? Did I pick the right stocks to diversify into?

The verdict is in: I am crazy.

Your comments, from the Buy High Sell Higher Forum, can best be summarized as follows:

From dangor2: Nobody wants any part of the Iphone and it’s only partly the pricetag.  I travel in a fairly well to do circle in Business in NYC.  Is this enough to be a statistical sample?  I don’t know but I’m not touching it.  RIMM is even worse because everybody and their mother (yes, even Mom) has a Blackberry.  There may be 50 points of upside for all I know.  But I bet there is 50 points of downside too.  Let’s compare that to JNR Resources.  Could it lose 25% of its market value.  Absolutely.  Could it go up 500% from here.  Absolutely.  That seems like a much better risk/reward scenario to me. 

I disagree that the iPhone from Apple is a bad bet, but I agree that we should be buying stocks that have the best chance of an upside, and obviously JNN.V – JNR Resources Inc. has a much better chance of doubling than does Apple.

From davidslane: As for JDH’s plan, I must ask the question, what economic conditions does he foresee ahead over the next few quarters which will allow him to sell his stock shares of Apple, Google, Amazon and RIMM to a greater fool. and I think the big mania buying sprees (re: greater fools buying) has not even begun for uranium, gold and silver.  I say we’re still in inning 6 for uranium and inning 3 for gold and silver.  Yes we’ll have ups and downs, but this trend will take a few more years to play out, not weeks or months.  Take profits, buy more on pull backs and be patient into 2010.

From silver: This week JDH comments on buying GOOG …etc is a sign that we have reached the end of this correction in Uranium stocks, and it is the time to buy Uranium stocks NOW.

Ouch, but true. Presumably lots of uranium investors are like me: impatient for profits, so willing to bail. That probably is the sign of a bottom.

So, what to do?

Well, buy stocks that will go up, and have the greatest chance of big gains. Which ones are those? Probably not the stocks where uranium is already in production, because the high price of uranium is already factored into the share price. Probably not the stocks where exploration has not yet started, because they won’t come on stream soon enough to be of any value.

That leaves uranium stocks where they are not currently in production, but they are at the advanced drilling stage and therefore are likely to have announcements of increases in reserves in the next year. Who’s drilling?

Well, I did some research. I went to u3o8.biz and made a list of all of the companies labeled as Advanced Exploration or Junior Exploration. From that list I eliminated some of the stocks that are in unfavorable parts of the world, and focused instead on the ones I am familiar with. I then went to Google Finance and looked up each company, and read their recent press releases (which are nicely presented when you search for the name of the company). From the headlines in the press releases it is relatively easy to see who has announced their drilling programs for this year. Here is the list I came up with of companies that are drilling NOW:

• CHX.V – Cash Minerals Ltd. – drilling in the Yukon.
• CXX.V – Crosshair Exploration & Mining Corp. – drilling in Labrador.
• FSY.TO – Forsys Metals Corp. – drilling in Namibia; in fact, they just announced results today
• FRG.TO – Fronteer Development Group Inc. – (drilling through it’s ownership of AXU.TO – Aurora Energy Resources, Inc.)
• GEM.V – Pele Mountain Resources Inc. – drilling in Ontario
• HAT.V – Hathor Exploration Ltd. – drilling in Saskatchewan
• IEC.V – International Inexco Ltd. – drilling in Saskatchewan (sorry, I don’t know anything about this one)
• JNN.V – JNR Resources Inc. – drilling in Saskatchewan (drilling a lot, actually)
• KRI.TO – Khan Resources Inc. – drilling in Mongolia
• PXP.V – Pitchstone Exploration Ltd.– drilling in Saskatchewan
• TXM.V – Triex Minerals Corp. – drilling in Saskatchewan (sorry, I don’t know anything about this one)
• TVC.V – Tournigan Gold Corp. – drilling a lot in Slovakia and the United States (this is a uranium play, despite it’s name)
• UEX.TO – UEX Corp. – Drilling, although I can’t find specific details.
• URC.V – Uracan Resources Ltd. – Drilling in Quebec

My list is probably incomplete, so if there are others, please let me know. Also, my list ignores the big players that are already in production or close to production. They are already in the portfolio, and should go up, they just won’t have the same upside potential.

I already own a number of these stocks. As for the rest, it appears to me that diversification probably suggests that some money be placed into many of these.

Again, they will not comprise 100% of my portfolio, but a few well placed dollars should produce some great results once the drilling results become known.

You have all convinced me that patience is a virtue, we are now into a seasonally favorable time for uranium stocks, so I will pick my spots and not abandon them just yet.

If you think I am “flip-flopping” and that is proof that I am crazy, post a comment below, or on the Buy High Sell Higher Forum.

Thanks to all for your detailed thoughts over the weekend; it is appreciated. (And for the record, no, I did not buy any Google, Amazon, or RIM, and I sold my few Apple shares this morning, at a profit).