by Travis Johnson, Stock Gumshoe | August 17, 2012 6:02 pm
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Did not think a NY listing would happen so quickly, kicking myself for not buying more. But you know what they say about hind sight. Anything new on the sister Sandstorm Metals, added abit more last week also. Hard to find any news.
Sandstorm Metals has been downright lousy, largely because they loaded up with coal streams as their first significant investments (one of which was hit so hard it went into bankruptcy), and one of their other investments is heavy into natural gas, all bad news at this point. They are in fine financial condition with plenty of cash to make deals if anything comes along, but there’s not much reason to expect a near-term recovery — their more prospective deals outside of coal are going to take a bit longer before they generate any real cash flow. The downside is relatively limited because they have a lot of cash and are trading at a substantial discount to book value, but it seems likely that the upside will take years. This was always a longer-term investment (and I still do own shares), but it got substantially long-er term with the collapse of coal.
Travis do you feel if Romney wins being that he supports coal that it would be good news for the company?
It would have been more responsible if you had warned us soon after you recommended this stock in which I have an 80% loss. Why didn’t you?
I’ve been quite wrong on Sandstorm metals, unfortunately — I thought it was a good buy earlier this year and bought some, I failed to see the weakness in their coal streams.
May I suggest stop losses? I know a ton of people help them, but I personally put a trailing stop loss of around 8-15% depending on volatility of the stock. I got burned too, but hardly consider it Travis’s fault – everyone makes mistakes and it is difficult to predict where the market will move. For example, I know a ton of ‘gold gurus’ who invested heavily in junior minors and are seriously burned.
Meant to say ‘hate them’. Coal got thrashed. I am hoping Gold holds its value. Sandstorm Gold is a ‘big bet’ of mine and this article is encouraging.
http://business.financialpost.com/2012/07/24/miners-forced-to-get-creative-as-traditional-financing-sources-dry-up/
(I am sharing it on a separate comment as well)
Thanks Travis (and Jeff) for the update on STTYF. I am thinking of dumping my share and investing in something more aggressive (while keeping it on my watch list).
“warrants will expire and disappear, leaving you with nothing if you do nothing at expiration even if the warrants hold value, so you always have to exercise or sell before the expiration date ”
OMG – This is HUGE. I am so glad you mentioned that, often with options I just let them expire. What do I do to exercise them and how does the process work/when is the latest one start it if one is waiting till the end?
Do warrants tank before expiry given they have to be exercised or sold (I am assuming that this would cause them to stop tracking the stock as people would have to get rid of them, a bunch of people would not want to exercise and instead and flood the market). Sorry, I have no experience with these and have a substantial investment (that is doing well – knock on wood) in SNXXF.
BTW Travis, you may want to alert your readers about this 6 months and a week before the expiration date. It’s a sexy investment and I’m sure a ton of warrant-novices will appreciate this notification!
If you’re a Canadian investor, talk to your broker about exercising warrants and what the procedure would be. If you’re an American investor or from some other country, you probably can’t exercise the warrants — you just need to sell them at some point before the exercise date.
This sounds like a scary thing, but it shouldn’t be — there are plenty of pools of cash out there at investment banks and elsewhere looking for an easy two cents by arbitraging deals like this, so if the warrants are worth something during the week that they expire (i.e., they’re “in the money” with the stock price above $3 a share by at least a few cents) you should be able to sell the warrants for just a hair less than what they’d be worth in an exercise because someone can buy your warrants and immediately turn around and exercise the warrant and sell the stock and book that few cents in instant profit with essentially no risk. That’s not guaranteed, of course, but I’ve never exercised a warrant and have never had trouble selling them within a percent or two of the fair price. I wouldn’t wait until the last day, but selling in the weeks leading up to expiration should be fine if you think the stock will continue rising at that time. I’d also consider selling if the warrant begins to trade at a substantial premium to the exercise value.
I’ll have to do something with my warrants sometime in the next year and a half, too, so I’ll be sure to update folks on my portfolio when I sell them.
As usual, very very helpful. Thanks and cheers! I didnt think of the arbitrage scenario, makes sense.
Travis, thank you for all your work and good thoughts.
Now back to Sandstorm warrants. You mention nowhere the A-warrants which expire in October 2015. A friend of mine made me aware of them with this:
“Interesting that he doesn’t talk about the A warrants which according to Black-Scholes and SSL’s revenue projections are more undervalued.”
Here’s some more on both warrants: http://canadianwarrants.com/charts/SSL.html
Your comments much appreciated. Michael
In the past I’ve preferred the value of the original warrants because they were a fair buy even without assuming g any growth and therefore a lower risk — with the time ticking I’ll have to take a look at those A warrants again.
Travis, you may want to check out a reference to page 15 & 16 of the attached SSL presentation.
http://sandstormgold.com/_resources/SSL-Presentation.pdf
Look forward to your comments.
Thanks, Michael
I don’t understand the news re: SAND today. Was it trouble financing? Do you see the dip as a buying opportunity, or is a Hold better?
Any idea on Cabot’s small-cap tease on heart treatment?
I am new to the site and am wondering if your idea of the month are general buy recommendations? If so, will you be buying any in your portfolio? I saw that the previous idea of the months have all mostly done very well. I would love to be able to catch DGPIF on its upswing especially with such a high dividend. Any advice (non financial!) would be great. Thanks!
I don’t operate the idea of the month picks as a portfolio, I consider them to be a profile of a stock that I think is generally attractive and that I would consider buying, and I check in on them from time to time (at least once a year), but I don’t issue specific trade recommendations. I don’t buy all of them for my portfolio, since they’re not all good fits for me personally and though I own a lot of stocks, I can’t own hundreds of them. Some of them I own before I feature them in the idea of the month, some I buy later, some I never buy.
Thank you for the update. I am new to the investing world and will consider putting a limit buy on. Thanks!
Brian
Re Data Group: Dividend stocks are so much in vogue now that it seems some companies are paying more than they ought just to keep their stock price up. One sign of this is when the amount paid in dividends exceeds the operating cash flow. This was the case for Data Group in the period ending June 30. I am leery of buying this stock.
I contacted my broker concerning the purchase of DGPIF. I am not able to purchase this stock through TK. Any thoughts on this?
Different brokers treat the thinly-traded pink sheets differently — though they may be doing you a favor, so far this has been a weak one. All the brokers I’ve used have been willing to trade for me in Canada when I wish, at least by phone even if they occasionally refuse a pink sheets trade online, though they often charge an extra commission, but I haven’t used TradeKing before and don’t know how they treat pink sheets/grey sheets listings. Personally I’ve found Ameritrade to be very good in pink sheets trading, and I like Interactive Brokers for trading direct in Canada, though I’ve never tried to buy or sell this particular stock.
I found Scottrade is tradeing DGPIF and other pink sheets. If DATA keeps paying 65 cents per annum at todays close of 3.82 , that would render a yield of 17.01%. This is Pretty tempting. I’m a little green at this, but learning. I think I may try a little of this.
DGI just reported lower revenues (and of course immediately announced a cut to the dividend to $0.0542). It still has a pretty good yield – because the stock price is now $2.50. Is this a falling knife or have the earnings stabilized enough?
I’m going to have to look more at this one, but my first reaction is that the business is doing worse than I thought — I was looking for stability, if decline continues the this was probably a bad idea.
January 14, 2013
Hi Travis,
Just looked at DGIF…WOW!…but I can’t find anything about their problem or the reason for the stock price. Even so if they are still paying $.65 could this be a moment of opportunity?
Gerard Binder
This was one that I gave up on and suggested dropping quite quickly after writing about it, it may be a bounceback opportunity but they do not seem to have the fundamental business steadiness that I first thought they did when they came to my attention through some Roger Conrad teasers. I wrote about them more recently here here.