Dines sells Pinetree! That’s Amazing!

by JDH on March 31, 2011

The most amazing thing happened last week, which I am only reporting this week for reasons that will be described below. What happened: James Dines of The Dines Letter actually had a sell signal! Even more amazing, the sell signal was on PNP.TO – Pinetree Capital Ltd. ! Allow me to explain.

I have nothing against Mr. Dines. In fact, I think his greatest skill is in identifying trends early. He’s advocated investing in gold for decades, and he has proven to be correct. He was correct to get into the internet stocks, and uranium stocks, and rare earth stocks when he did. His subscribers have no doubt made many millions of dollars from his recommendations over the years.

My problem with his approach is that he occasionally appears to “fall in love” with a stock, and not sell it when it needs to be sold. I’m not sure if that’s just a natural tendency that we investors have (I know I’m guilty of not taking profits quickly enough), or if it’s a more nefarious problem (such as he’s “in bed” with management, and doesn’t want to sell until he’s gotten out himself). Regardless of his motivations, there is one glaring example of this tendency that I have written about many times before. Here are some examples of my previous thoughts on this subject:

I can’t pass up the opportunity to quote James Dines from yesterday’s The Dines Letter. He spends most of the letter explaining that markets go up and down, so even if markets go down for a few years that’s no reason to sell. Here’s the classic quote:

“Our recommendation of PNP.TO – Pinetree Capital Ltd. at 0.795 cents (Cdn) subsequently rose 1,931% to $16.15 (Cdn) nearly two-thousand percent in only 17 months, such that a $10,000 investment would have risen to $203,145.”

Unfortunately he didn’t finish the thought, which should have gone something like:

“Ever since that peak I have had a Buy recommendation on Pinetree. I even moved it from my speculative list to my “good grade, moderate risk” portfolio. As of today it is trading at $1.82 (Cdn), so if you had followed my advice and bought it at $16.15, you would have lost 89%, such that an investment of $200,000 at that time would be worth $22,538 today.”

Even better, there’s a letter to the editor in this edition from some guy who spends the first 20 lines of his letter praising Mr. Dines, but then asks why one would continue to hold a stock that adds no value to the companies it invests in (Pinetree is basically just a venture capital firm), has no technical indicators to recommend buying, and has no truly great assets.

Dines then spends have a page explaining that yes, some companies go down, but if their investments start paying off, it will go up. He ends with the classic “You have lost nothing if you own the stock and the price fluctuates.”

Yeah, I guess that’s true. But if you had sold a few dollars ago, the money could have been redeployed and earning you money. It’s called opportunity cost, and it is real.

Oh well, I haven’t owned Pinetree for a long time, so it’s all academic to me at this point.

So why am I making this comments now? Two reasons:

First, I waited a week or two after Mr. Dines first gave his sell recommendation, to give any subscribers of his that still own the stock the chance to sell it. I’m not arrogant enough to believe that my thoughts carry any weight, but I am not in the habit of repeating recommendations from other people. If you want to know what James Dines thinks, subscribe to his newsletter. You won’t read his recommendations, or anyone else’s, regurgitated here.

Second, however, I do note that on March 15 PNP.TO – Pinetree Capital Ltd. did trade as low as $2.57, which is obviously a far cry from the peak, and exactly where it was trading last November. I still maintain that a technician with proper stop losses would have sold this stock a long time ago.

Am I bitter?

Not at all. I actually have a lot of respect for Mr. Dines. He has made a lot more money in this game than I ever will, and until I’ve written this blog for 50 consecutive years I’m in no position to criticize.

He writes a newsletter. It’s our job to read it, think about it, and make your own decisions. If you or I lose money, it’s our fault and no-one else’s. Even Dines himself says repeatedly that the decision to sell is up to us, and you should take profits off the table all the way up, so presumably anyone who followed his advice on PNP.TO – Pinetree Capital Ltd. was selling all the way up, so whatever shares they had left to sell this month were essentially “free”, the original cost recovered long ago.

I just think it’s amusing that he finally decided to sell.

But that’s just me……..

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