This Week’s Commentary – Time to Buy

by JDH on July 14, 2007

Well, it was a good week. My portfolio was up, the markets were up, all is good.

Last week I said that “I like to own stocks that are going up, and right now (for the last few months), most uranium stocks are not going up. So what to do? The answer is obvious: buy stocks that are going up.” I then went on to comment that some good candidates for purchase included Google, Appale, RIM, and Amazon.

The crowd’s reaction over on the Buy High Sell Higher Forum was quick and decisive, and can be paraphrased as follows:

“The fact that you want to look somewhere other than resource stocks is proof that the consolidation is over, and now is the time to buy. We are still in a uranium bull market; this is a normal consolidation; we have seen it all before. At these levels many of these stocks have the potential to double or more. It is unlikely that from these levels stocks like Apple and Google will double. Therefore, invest where you have the greatest chance of a large gain.”

I took that advice, sold my Apple (at a profit), and did not bother to invest in any of the others.

Did I make the right choice? Time will tell, but here’s the results for this week:

My portfolio – up 4.5% this week.

What does this prove? It proves that in a bull market, any idiot can buy anything and it will go up! There were 359 new highs on the NYSE yesterday. That’s pretty good for a Friday the 13th.Google, Appale, RIM, and Amazon all made new highs this week.

Now what?

My reading of the charts of Google, Apple, RIM, and Amazon tell me they are in very high territory. They have had a good run, and are due for a pullback, so this week, I’m not touching them.

What I am buying are the mining shares that have a good chance for explosive upticks.

Last week I said that “I think there are uranium stocks that may be ending their consolidations, and may have favorable drilling results to announce over the summer (stocks like JNN.V – JNR Resources Inc. and PXP.V – Pitchstone Exploration Ltd. come to mind), but they are not yet going up, so I have not yet started to fill my boots.” JNR and Pitchstone both had a good week, so I am adding to my positions. IEC.V – International Enexco Ltd. started to break out this week, but it ran quickly and may have a pullback this week; I like it, and I own it.

Most of the other stocks in the portfolio had a good week, and I plan to continue to add to positions for the balance of the month. I am currently 9% in cash, and I plan to deploy that cash as the month goes on. We have three factors going for us:

First, the market as a whole is going up, with New York and Toronto in new high territory. A rising tide lifts all ships (or, as I said above, any idiot can buy anything and it will go up).

Second, we are entering the seasonally strong summer period; if the past two or three years are any indication, July and August are good months to own uranium stocks. Profit taking will probably be the strategy at the end of the summer, but not yet.

Third, I have emphasized in the portfolio companies that are actually drilling this summer. Drilling means drilling results; if they are positive, many of these stocks could double or more. Based on my research (which consisted of punching the ticker symbols into Google Finance, and then reading the resulting press releases), which is probably not complete, the following companies are drilling NOW:

As of this past week I know own all of these. Some of them will double. Some may crash if they don’t have drilling success. However, with many stocks in the baskets, the big winners should out-weigh the small losers.

Finally, I picked up another stock this week: URZ – Uranerz Energy Corp. They are close to production, and are a “close to blue chip” company, but they had some bad press this week, and have been beaten down.


As the chart shows, in the past when the Money Flow Index (MFI) and MACD and RSI have fallen to these levels (see the green lines) it is usually a good buy point. Uranerz is also almost down to it’s 200 Day Moving Average, which is also a strong support level. You can read the full Uranerz discussion. Production costs under $30 per pound, they have a mining method that avoids milling, so it sure looks good.

The drop has been accelerated by a less than flattering article in Forbes:

“Over nine months, shares of Uranerz Energy, a uranium company with offices in Casper, Wyo. and Vancouver, B.C., have gone up 283% to a recent $5.10, producing a $222 million market cap. Since its founding in 1999 as Carleton Ventures, the firm hasn’t sold any minerals or generated any revenue. In 2005 it took its present name, once used by a European exploration outfit. Uranerz says it is pursuing mining opportunities in Canada, Wyoming and Mongolia, but the firm might be stretched a bit thin; only five full-time workers are on the payroll. Boss Glenn Catchpole says he hopes to begin production by late 2010. Uranerz states in fresh filings that it “has not presently determined” if anything it has is “economically recoverable.” –William P. Barrett ” (emphasis added by JDH)

Apparently the lads over at the Motley Fool don’t like it either:

“Animal spirits have driven the price of uranium miners, and particularly speculative junior explorers like Uranerz, through the roof. We need to see a more significant correction to really reverse the flow of those speculative juices. Let’s be clear — we still haven’t seen anything remotely like a correction in the uranium price, which is up nearly 13-fold over the course of its 47-month uninterrupted rise. ….

“This rather indiscriminate recent selling is a promising start, but I’d suggest you look for real panic to send the momentum crowd packing, if you’re looking for an entry point. Only when uranium shares come to be avoided like radioactive waste will I abandon my observer status and pick up shares of one of several near-term producers I’ve got my eye on.” (emphasis added by JDH)

So let me get this straight, Fools: Uranerz has fallen from $7.50 on April 16, 2007 to $4.42 on July 11, and we need to see a more significant correction????? I happen to believe that a 42% drop is a correction, and now is the time to buy.

It is possible that the shorts are playing with this one in advance of options expiry this Friday (since this is one of only a very few uranium stocks that have options). This one is beaten down too far, so I started buying on Friday, and will add to positions on further weakness.

I think the next four weeks will be great, so be patient, be close to fully invested, and let’s see what happens.

As always, please leave your thoughts by posting a comment below, or on the Buy High Sell Higher Forum.

Thanks to all for reading and contributing, and have a profitable week.

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