August Idea of the Month: High Yielding Doc Stock

Borrowing a high yield pick as our Idea of the Month, plus a quick update on our favorite gold streamer

By Travis Johnson, Stock Gumshoe, August 17, 2012

Before I get into today’s idea for this month, which I’m borrowing from a yield-hungry newsletter guy, I did want to quickly address some big news from one of my largest holdings, and one of the stocks that you’ve probably noticed that I write about a lot — Sandstorm Gold.

Sandstorm is a gold streaming company, similar to Silver Wheaton (SLV), Royal Gold (RGLD) or Franco-Nevada (FNV) in many ways — and they’ve been listed on the venture exchange in Canada since they were founded a few years ago. One reason I’ve been suggesting that the stock was likely to have a good second half of the year is that it’s been widely expected that Sandstorm, like the other major companies noted above, will get a NY listing late this year and thus become exposed to a new crop of individual investors.

Well, that has now happened — Nolan Watson and his Sandstorm Gold will ring the bell at the NYSE on Monday morning, and Sandstorm will start trading under the ticker SAND in New York. So what does that mean? Well, the stock has run up quite a bit this year, and since January has separated itself a bit from RGLD and FNV, the much larger gold-focused royalty companies, and this isn’t actually going to change the company or it’s performance all that much — so will the stock go up just because of the NY listing?

I think it’s likely to provide a tailwind over the next six months, but it’s not nearly as dramatic as when a real penny stock “uplists” to a major exchange — Toronto is already a major exchange, and the stock has certainly been available to institutional investors and to retail traders. They did their 5:1 share consolidation earlier this year, partly in preparation for getting a listing in New York (the big NY exchanges prefer a $5+ share price, as do many institutional investors), and that may have had as much impact as the actual NY ticker symbol will have, but there are so many moving parts (particularly the gold price, but also general investor sentiment) that I can’t guarantee that Sandstorm will do better than its peers over the next several months. I think it will, but It’s nowhere near a certainty.

As it stands now, Sandstorm still trades at a substantial discount to the other big passive gold investors ...

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