Tag - Nem

It's NewsletterAdvisors.com Weekly day and this week we're chatting with our good friend Bryan Bottarelli of Bottarelli Research. 

Every time we pull up a chair with trading expert Bryan Bottarelli, he's sharing with us some of his most successful - and profitable - trading strategies. Today is no exception.  

IAN: Hi again Bryan. The big story this week was the major recovery in the U.S. markets - but you've recently told your readers that there's an even more important story that's being grossly under-reported by the U.S. media. Can you share this information with us? 

BRYAN: In my view, the recent developments from the G8 meetings in Italy represent the most grossly under-reported story of the year. As you probably know, the "Group of Eight" includes the eight leading economic countries on the planet: Canada, France, Germany, Italy, Japan, Russia, the United Kingdom, and the United States.

If you've been paying close attention to comments from China and Russia, then you know that virtually every non-Western powerhouse is becoming more and more serious about producing an alternative global currency. That's why the future of the U.S. dollar was a primary topic debated at the G8 summit.

Now Get This: Russian President Dmitry Medvedev (who has been outspoken in his desire to displace the dollar as the world's dominant reserve currency) unveiled new "eurodollar" coins that he described as the "United Future World Currency." These new coins were presented to all the G8 leaders attending the summit, and it left no question about Russia's intention to launch an alternative currency. 

We all know that China and Russia are both concerned about the plight of the U.S. dollar. Since China owns one trillion U.S. dollars, they're walking a very fine line. On one hand, China wants to protect the value of their current investment. But going forward, they also want exposure into a new currency that's not directly tied to the financial decisions being made in the United States.  

I admit, this topic could be debated from many different angles.  
But here's the bottom line... 

According to Medvedev, the only way to end the endless arguments over the role of central banks - and to maintain consistent pricing without having to run complex valuation ratios on every currency - is to coin a new global currency backed entirely by gold or silver. Using gold as a global constant, you simply sit back and let the free markets dictate value. That way, you'll have one unified currency without any ratios, mathematical models, or wild fluctuations. Given the events of the latest global financial crisis, it's clear that today's financial situation has made currencies entirely too complicated. Therefore, Medvedev is now pushing the most powerful nations in the world to put gold back into circulation. If this occurs, you better believe that gold prices will soar. 

Not only that, but there's now talk in Washington about a second U.S. stimulus package. If this comes to fruition, the inflation versus deflation debate will dramatically shift towards one side. And of course, rising inflation makes a very bullish case for gold. That's why I'm currently recommending my readers to over-weight gold in their portfolios.  

And if that's not enough, recent comments from Vice President Joe Biden (which came on Thursday, July 16th) should be all it takes to convince you to add gold to your portfolio. Speaking at an AARP town hall meeting, Biden said that unless the Democrat-supported health care plan becomes law, the nation will go bankrupt. Not only that, but Biden also said that the only way to avoid this fate is for the U.S. government to spend more money. Yes, you read that correctly. His direct quote reads like this: 

"We're going to go bankrupt as a nation. Now, people when I say that look at me and say, 'What are you talking about, Joe? You're telling me we have to go spend money to keep from going bankrupt?' The answer is yes, that's what I'm telling you." 
IAN: In many respects, what's happening in California right now could just be the beginning of things to come. Given everything that you've described above, what's the best investment play right now? What are you recommending to your readers? 
BRYAN: When you combine the recent developments at the G8 meeting, talk of a second U.S. stimulus package, and the recent comments from the Vice President, my best advice is three-fold. First, be sure that you own metals exposure. Second, diversify your investment portfolio by adding international exposure. And third, own a position that'll strengthen when the U.S. Dollar begins to fall. I have a specific recommendation for each point, which I'll outline for you below.  

PLAY #1: Own Metals Exposure 

This play comes in the form of the Market Vectors Gold Miners ETF (GDX - NYSE), which I consider the best all-encompassing metals play your money can buy. The GDX tracks the performance of the AMEX Gold Miners index, which invests at least 80% of its total assets in companies involved in the gold mining industry. By owning the GDX, you get exposure to major metals companies like Agnico Eagle Mines (AEM - NYSE), Barrick Gold (ABX - NYSE), Goldcorp (GG - NYSE), and Newmont Mining (NEM - NYSE). Without question, this is the very best way to own all of these major metals companies using one liquid and simple to follow basket.  

PLAY #2: Diversify Your Investment Portfolio By Adding International Exposure 

The second play comes in the form of the iShares MSCI Brazil Index (EWZ - NYSE). You probably don't realize this, but over the last 5 years, the best performing fund (rated #1 overall by Barron's) is the iShares MSCI Brazil Index with a 32.74% return. It beat out China, gold, value and growth, technology, small-cap funds, you name it. And guess what? Brazil is just getting started. Under Brazil's president Luiz Inacio Lula da Silva, the country's average monthly salary has climbed 22% since 2003. This means that the country's lower-class citizens are becoming active consumers. When a country's population collectively and simultaneously increases their economic position, that's when you see the most powerful growth. By owning the EWZ, you can not only diversify away from the United States, but you can also profit from Brazil's powerful growth.  

PLAY #3: Own a Position That'll Strengthen When The U.S. Dollar Falls 

The third play comes in the form of the Currency Shares Canadian Dollar Trust (FXC - NYSE), which tracks the price performance of the Canadian dollar. Since Canada's countryside is so rich in metals, their currency is backed by one of the strongest gold/silver deposits on earth. This will offer the Canadian dollar strength that's not enjoyed by the U.S. dollar. Plus, since Canada does not suffer from the same financial troubles as the United States, their currency looks to be a solid out-performer for the remainder of the year.  

IAN: Great suggestions Bryan. Thanks for taking the time to share your picks with us. Before closing, I noticed that you recently alerted your readers to a "politically bullish catalyst" that looked intriguing (and quite profitable). Can you share this investment idea with us as well?  

BRYAN:  As you probably know, the U.S. House of Representatives recently passed landmark legislation by a very narrow vote (219-212). This legislation, which is supported by President Obama, is intended to create an energy-efficient economy by cutting greenhouse gas emissions 17% by 2020 and 80% by the end of the century. 
By creating a parallel financial system with a carbon-based currency, this new climate legislation would certainly raise energy prices. Everyone from small farmers to nuclear energy companies would be forced to re-evaluate their place in this newly created "carbon economy." Now I admit, it's still unclear what the ultimate impact of this legislation will be. And remember, this is still a very hot-button bill that needs 60 votes to pass through the Senate. But the bottom line is this: In one way or another, some type of carbon bill will eventually get passed, and the end result will not be favorable for power plants, factories, and refineries. They'll be the groups that feel the first impact. 

But on the flipside, the obvious winners will be the utility companies that are currently incorporating solar, wind, geothermal, and nuclear power. After all, they're positioned best to prosper in the new carbon economy. That's why I recently recommended a company called FPL Group (FPL - NYSE).  

FPL Group generates, transmits, and sells electric energy to 4.5 million residential, commercial, and industrial customers in Florida. On the surface, they appear like your run of the mill utility company. But a deeper look reveals that unlike a typical utility company, FPL produces their electricity using a combination of natural gas, wind, nuclear, and hydro power. As you'll see, this unique mix will be the trigger that fuels a continued upward move in FPL over the next six months. 

From a valuation basis, FPL's income statement shows trailing three month revenues of $16.68 billion, which amounts to $41.61 in revenue per share. With year-over-year quarterly revenue growth of 7.99%, and year-over-year quarterly earnings growth of 46.20%, it's clear that FPL has shrugged off the threat of an ongoing recession to enjoy a strong financial position. Throw in a forward annual dividend yield of 3.30%, and FPL has all the makings of a steady and stable upside performer. 

That's why FPL now finds itself sitting pretty. Not only will they side-step future cost increases (which cut into profitability), but they're actually in position to receive billions of federal stimulus dollars to further expand their carbon-neutral energy sources. As a result, FPL is a stock that I expect to continue moving higher for the remainder of the year.

Thanks Bryan for another great interview and some truly outstanding trading recommendations. I plan to follow up on these myself.  
Byran has a great track record going and if you have a few minutes, I suggest you check out the information below.

What you've just read is a small sampling of the kind of investment information Bryan sends out to his Bottarelli Research members on a daily basis. If you would like to become part of Bryan's elite trading group, then I highly recommend that you check out his trading service today. I've worked closely with Bryan in the past, and I give him our full endorsement. When it comes to trading, he's truly an incredible talent - and that's why I feel that every Daily Profit readers should learn more about Bottarelli Research. All the membership details are contained in Bryan's special membership letter at the link below, so check it out now!  

http://www.bottarelliresearch.com/options/offer/4OW6S5OYOA/ 

Small-cap stocks remained higher into mid-session, supported by gains in gold stocks, banks and homebuilders but the rise was taking place on fairly light volume and in the shadow of Tuesday’s big collapse. At 12:27 p.m. ET, the Russell 2000 (NYSE:IWM) was up 3.29, or 0.74 at 449.06.

Investors continue to sit on their hands waiting for news out of Washington, as hearings on the first tranche of TARP spending take place. In addition, lawmakers still have to piece together the House and Senate versions of the stimulus bill to present to President Obama for signing. And of course, the biggie is to see whether or not the Administration can mount some type of spin control off the disastrous market response to the Treasury Department’s rollout of the bank bail out plan Tuesday.

The big question facing market watchers so far today is whether or not the rise is simply a dead cat bounce from hot money shorts booking profits from Tuesday’s swoon, or if there are legitimate buyers coming in to find bargains and beaten down shares. Light volume and limited ranges tilt the answer toward the dead cat side of the ledger, but it is comforting to see that the Russell held above the late January lows despite a breach from the Dow.

As for sector activity, gold bugs were a happy lot today; gold futures were up over 3% to four-month highs, the Gold and Silver Index was up 7.5% at midday, small-cap gold stock Golden Star Resources Ltd. (AMEX:GSS) built on morning gains to climb 12.5% and big-cap group leader Newmont Mining Corp. (NYSE:NEM) rose 8.4%.

Real estate services shares, homebuilders, insurance brokers and photo product companies were also doing well so far today, sharing the spotlight with diverse financial services firms, regional banks and asset management specialists.

That’s not to say that everything was peaches and cream today; constructional material firms, paper products companies, industrial real estate investment trusts, footwear companies, gas utilities and oil exploration firms were all on the losing side of the ledger. Energy stocks gave back morning gains to slip into the red as crude oil prices slipped off the highs following weekly inventory data that showed a . . .

Small-cap stocks plunged as investors engaged in a “buy-the-rumor, sell-the-fact” response to the official rollout of the bank bailout plan. After Treasury Secretary Timothy Geithner served up details on the rescue strategy stocks swooned, safe-haven flows abounded and credit default swaps widened as the hand-wringing began in earnest. At 12:22 p.m. ET, the Russell 2000 (NYSE:IWM) was down 13.40, or 2.89%, at 454.40.

Bank and financial stocks have been in rally mode in recent days in anticipation that the government would swoop in, stave off nationalization of banks, clean out bloodied balance sheets and clear the way for lending to flow freely. However, now that the plan has been unveiled, a realization that this process won’t necessarily be easy appears to have taken over investor confidence. The KBW Banking Index slumped nearly 10% at mid-session, while financial stocks in general paced the selling rout.

Bank of America Corp. (NYSE:BAC) tumbled some 14% after the Geithner press event, while Citigroup Inc. (NYSE:C) was off 10%. Regional banks, which had been a star performer on Monday, were the worst performing S&P group so far today. Small-cap bank Fifth Third Bancorp (Nasdaq:FITB) was down 16% while Zions Bancorporation (Nasdaq:ZION) was off 11%.

Outside of the Treasury market, gold stocks were about the only safe spot to park money in the wake of the bank slide move. The Gold and Silver Index was up 1.3%. Small-cap gold stock Novagold Resources Inc. (AMEX:NG) was up 4.6% at midday, while large-cap group leader Newmont Mining Corp. (NYSE:NEM) was up 1%.

Energy stocks took a dive as well, giving back morning gains amid worries that the bank plan could not provide a quick economic recovery and help restore demand for energy products. Crude oil futures slipped back below $40 a barrel, . . .

It might not top the hype of the California gold rush of 1849, but the recent run-up in the price of gold has had many investors giving gold and other precious metals a second look. The share prices of many gold miners have consistently been hitting new highs in recent weeks as the price of gold edged toward $1,000 per ounce, a level that was topped on Thursday.

One small cap that is set to profit from these rising prices is Western Goldfields Inc. (AMEX: WGW). At a market cap of $488 million, the company has seen its stock price surge 109% over the course of the past year. Currently headquartered in Toronto, the company was incorporated as the Bismarck Mining Company in 1924. It changed its name in 2002 and went through a corporate restructuring in 2006.

Today it has a seasoned management team that includes executives that have come from other big name gold mining companies such Barrick Gold Corp. (NYSE: ABX) and Kinross Gold Corp. (NYSE: KGC). Officers and directors of the company own approximately 4.5% of its outstanding common shares.

The chief asset of Western Goldfields is its Mesquite mine, located in Imperial County, Calif. and operated between 1985 to 2001 under several different companies including Newmont Mining Corporation (NYSE: NEM). In 2001, the mine was closed due to low gold prices and the estimated costs of expanding the mine, but Western Goldfields acquired the mine from Newmont in 2003 and has since worked to bring it back into production.

As of Dec. 31, measured and indicated resources of the mine were approximately 4.3 million ounces. The mine was brought into production in January and the company is now forecasting full-year production of 155,000 to 165,000 ounces for 2008. Western estimates that the mine has a 12-year useful life. With the mine now up and running, the company will likely be able to shift its focus to other potential opportunities such as expanding into other parts of the southern United States, and possibly Canada and Mexico.

Gold stocks have been the darlings of the investing world, and for good reason: favorable macroeconomic circumstances have conspired to lift the Philadelphia Gold/Silver Index (XAU) 30% higher in the past year and 300% higher in the past six. Gold stocks, it's fair to say, are in the midst of a secular bull run.

But not every gold issue has a run with the bulls. One notable laggard is Claude Resources Inc. (AMEX: CGR), a Saskatchewan-based gold producer. Claude earns a living from its primary revenue-generating asset, the 100%-owned Seabee gold mine in northern Saskatchewan. The company also owns the Madsen Project, a development gold mine in Red Lake, Ontario, along with lesser oil and natural gas assets in Alberta.  

Claude's stock and trade is gold production, and in this milieu it has disappointed. In 2005, the company expanded mill capacity at the Seabee mine to double production to 75,000 to 100,000 ounces per year. To date, the Seabee mine has fallen far short of expectations: gold production for all of 2007 totaled just 44,322 ounces.

Lackluster financial performance has further exasperated investors. For the nine months ended Sept. 30, 2007, Claude posted revenue of $25.6 million compared to $31.9 million in the year-ago period. The 20% revenue drop produced a $5.2 million loss, which was distributed to shareholders at $0.06 share, compared to a $6.8 million profit, or EPS of $0.09, in 2006. For all of 2007, revenue is expected to post at $31.7 million, resulting in a full-year loss of $0.09 per share.   

The revenue shortfall is the result of a prolonged poor showing at the Seabee mine, where revenue dropped 24% to $18.9 million at Sept. 20, 2007 from $25 million in 2006. The decrease was a result of lower gold sales volume (26,000 ounces in 2007; 36,700 ounces in 2006) offset by a 7% improvement in dollar gold prices realized ($657 in 2007; $600 in 2006). Management attributed lower volume to equipment availability and lower-grade ore.

More recent numbers, though, suggest Claude is beginning to extract itself from its self-imposed pit. In September, the company updated its proven and probable gold reserves at the Seabee mine. Updated mineral reserves now total 984,200 tons and should produce 211,100 gold ounces, a 42% and 44% increase, respectively.

The vast natural riches of Canada remain mostly untapped, whether it’s oil, precious metals or other resources. In response, some of the nation’s best-performing public companies have focused on the exploration, processing and sale of natural resources found not only in Canada, but around the world.

Canadian-based Neo Material Technologies, Inc. (TSE: NEM) has found its place in delivering the rare earth elements that the world needs—with many of them coming from the untapped wealth being unearthed in China. For small-cap investors, Toronto-based Neo Material has remained mostly a hidden gem.

Founded in 1993, Neo Material finds and processes neodymium-iron-boron magnetic powders, rare earths and zirconium-based materials—substances required in many high-technology products ranging from catalytic converters to computers and consumer electronics, to precision motors. Its strength includes firmly holding onto proprietary manufacturing technology that it has successfully protected through the patent process.

Neo Material operates through two business divisions—Magnequench, a former General Motors Corp. (NYSE: GM) spin-off that focuses on magnetic technology, and AMR Performance Materials, which includes a neodymium production facility in Thailand. GM invented neo powder technology in 1982 and founded Magnequench to commercialize it. The two entities combined in 2005 through a reverse takeover of AMR to form the current Neo Material.
 
Neo Material, with some 1,300 employees deployed in 10 countries, was something of a pioneer in China ventures. AMR acquired stakes right out of the gate after its founding in 1993, with two joint ventures in existing rare earth facilities. It launched its neo powder manufacturing facility in Thailand in 1997.

Still looking for a good way to strike gold while investing in it? As gold moves solidly above $700 an ounce amid turbulence in the credit markets and on the back of a weak dollar, you don’t have to be a dyed-in-the-wool goldbug to see some merit in investing in the precious metal.
 
An efficient way to do so would be with shares of Royal Gold Inc. (Nasdaq: RGLD), which bills itself as the world’s leading publicly traded precious metals royalty company. It’s an unusual company with an unusual business strategy. How many companies can you name that have a market cap of $875 million with only $48 million in annual revenue and 14 employees?
 
Royal Gold’s revenue consists of royalty payments based on its interests in mines operated by the world’s leading gold mining companies, making it a relatively pure play on gold. As the company puts it, its sliding-scale royalties provide investors with upside leverage when gold prices rise, as they are now, while providing a floor when gold prices fall.
 
Currently, the company—which traditionally has been based on a single mining complex in Nevada—faces the happy prospect of gold reaching a new 26-year high just as the company’s recent diversification in other mining projects is beginning to pay off with these mines coming on stream.

Neo Material Technologies Inc. (TSX: NEM) a producer, processor and developer of neodymium-iron-boron magnetic powders, rare earths and zirconium based engineered materials and applications, on March 8 announced financial results for its fourth quarter and full year ended Dec. 31, 2006.