Thoughts from Myron — Anniversary Musings, Celebrating Winners

by Myron Martin | June 6, 2014 4:05 pm

[Ed. Note: Myron Martin is a longtime reader who writes for the Irregulars a couple times a month about junior miners and other stocks that strike his fancy. Below is his latest contribution. As always, he’s agreed to our trading restrictions and his words and opinions are his own.]

Happy Anniversary Gumshoers! Hard to believe, but it has now been a year since I started writing my Gumshoe columns, so perhaps some reflection on performance of the stocks I have profiled relative to the market itself would be in order. Basically the market has been moving sideways with occasional false breakouts, but no real serious growth of the precious metals market as a whole, though dozens of analysts believe a breakout is imminent. In spite of what has been a volatile “up and down market” I have found a lot of great companies that have moved counter to the general malaise of the market as a whole.

One man who I have been reading for decades and highly respect for his insights in respect to the precious metals market is John Embry, key executive at the Sprott Group. Here is a podcast[1] of his that I recommend.  Reading John’s columns in Investor’s Digest of Canada is a practice I had gotten away from since I no longer subscribe due to an excessive work load, but for those who have the time, it is a great resource for clear-eyed, unbiased reporting on what is happening in the markets and why. Investors Digest belongs on any serious precious metals investors reading list.

John, along with Rick Rule, are key sidekicks of Eric Sprott, the Canadian billionaire who made his fortune due to his unwavering belief in gold and silver being the only real money, countering the propaganda of the bankers with their fiat counterfeit currency borrowed into existence as debt. That reality does not yet seem to have sunk into the mainstream’s consciousness, but as prices for food and energy that are not included in government inflation statistics continue to escalate, the reality of that connection will eventually grab their attention as living costs rise faster and faster.

A column by John in the February 14th issue[2] of Investor’s Digest is noteworthy for anyone not yet convinced that the price of gold is manipulated, which is well documented by a German author (Dimitri Speck) in a book now available in English as recommended by John. I would welcome a review of the book if someone has read it or has the inclination to do so. I have too much on my plate currently to do so personally. Here is the source[3] if interested in reading on a Kindle.

I consider it fitting that this month’s column feature the very first stock I profiled in last May’s very first column. I featured it both as a “favourite beverage” from my personal interest in health food products as an appropriate toast to the success of the fascinating story of Reed’s Ginger Brews (REED), and as one of the many very successful stock picks made in the past year. To share in this toast and discover the delicious taste of these naturally brewed (and now expanded line) of beverages with distinct health benefits, you can find them at most health food stores. Or if you are not a health food store shopper, they have gone mainstream and are carried by Krogers’s and several other prominent chains. The easiest way to find the source nearest to you is simply to go to the Reed’s website[4] and click on “store locator” and look for a source in your area. Here you can follow the history[5] of this now profitable business started in Chris Reed’s kitchen in 1989, which I profiled originally, here[6], as the “next Hansen’s” which is to date one of the greatest modern growth stocks (now known as Monster Beverage).

The good news is that even though you may have missed out on thousands of dollars in potential profits if you didn’t buy on my original recommendation, you get a second chance to get in at a good price, currently just under $5. I will buy up to $7 again as it had run as high as $8.98, which for me reflected just about a double, so I took a chance and sold hoping I could buy it back cheaper, having determined a channel within which the stock typically moves. I believe so strongly in this stock I used the profits to double my stake as I believe this one has a long way to run. I expect to take profits regularly as its popularity and growing market exposure (10,500 natural food stores), send the price up regularly by several dollars, offering opportunity to take some profits at the top of the channel and then buy back in at the bottom again.

This is both a “trader” and a long term “undervalued” Nasdaq buy and hold stock. Reed’s keeps finding ways to generate growth in a bad economy. This is no “Johnny come lately” start up. It is now a 25-year-old, well-proven fundamental growth stock with popular and very unique products enjoying nine quarters of consecutive 25% plus growth. Reed’s is uniquely poised for aggressive growth and now distributed in 11 countries, the documented #1 selling natural foods stores line of sodas. It is growing rapidly in the mainstream grocery stores as well, including many niche markets. Read their latest quarter financial report here[7].  You won’t regret the time to check this out thoroughly, don’t miss it. If you already own it, buy more while the price is down. The only reason I have been able to find for the current dip is their new Kombucha line has been so popular they have not been able to keep up with production. A temporary blip that with summer sure to increase sales of these delicious and healthy drinks, this pullback, whether due to profit taking or a “short seller attack” provides aggressive investors opportunity for extra profits. I have asked the company in an e-mail if they can “shed any light” for the drop in price other than what I have suggested and will phone California headquarters if I have not heard from them by mid-week.

One stock I briefly mentioned in my first column is Denison Mines (DML.TO) ($1.35) which I owned for years, but did not profile. It is well-established and now a well-positioned uranium player after sale of some non-critical assets and purchase of others that fit better with other recently acquired holdings. These moves by the company have not yet been validated by the market, so it is still an excellent name to put on your uranium buy list before the market turns fully positive. Another one I mentioned but did not profile, that could well be a first mover because it has a huge stockpile of uranium in strategic locations for immediate sale, is Uranium Participation Corp. (U.TO URPTF) ($5. 00), which I owned in the last uranium boom, and did well for me. Another early mention without a complete profile was Lakeland Resources Inc. (LK.V LRESF) (was at $0.065, at $0.13 today) and has made excellent progress without a major discovery so far. They have hired some highly experienced uranium people and acquired some of the best prospective land packages in the Athabasca Basin, showing that well-managed juniors can generate decent profits for patient investors.

Long time readers are aware that as long as the fundamentals of a company do not change, I will give any thoroughly researched pick a minimum of six months to a year to show some positive progress, so I am now starting the process of taking a second look at what stocks deserve to stay in the portfolio. Sometimes one stock pick leads to another one in the same area, or same management, and other factors that warrant thorough investigation. In this case, another previously profiled in production stock update along with a neighbouring junior in the same mineral belt with near-term exploration updates to be reported in weeks, has been profiled in The Northern Miner magazine, here[8]. First the “in production” update on Trevali Mining Coroporation (TV.TO TREVF) validates my enthusiasm for Trevali that will soon have more positive news. The junior neighbour is a company called Puma Exploration (PUM.V), which has also been reporting positive drilling results and more is upcoming within weeks. They are in the same Bathurst Mineral belt in New Brunswick, Canada as Trevali Mining, which has commenced production at their Santander zinc mine in Peru and is now concentrating on getting their Canadian zinc mine in production as well. Read the details on Puma here[9].

Positive drilling results are one of the best catalysts that move a stock forward, so consider these drilling results, with more to follow in weeks, as an opportunity to speculate on additional excellent drilling results that will move an undervalued junior stock forward as more investors learn about a promising junior in a soon-to-be-in-high-demand zinc market, as older mines close. Since these stocks complement each other, the success of one is likely to benefit all companies in this not-well-known, but rapidly emerging and prolific mining district with little geographical risk.

In my second column there were three main stocks for consideration, two profiled in detail that have done very well, and one a watch list stock I have not yet bought myself, but intend to as soon as possible. Shining brightly is my first venture into diamonds: Lucara Diamond Corp. (LUC.TO, LUCRF).  The low a year ago was $0.75, today it is at $2.00, and should be good for a triple by year end. Star explorer North American Nickel (NAN.V, WSCRF), has recently raised $9 million for their summer drill program in Greenland with equipment already there and soon ready to put into action. I profiled this stock at $0.14 and today it sits at $0.405, and I believe it is likely to reach dollar-plus status within a year if good drill results continue. Last, but not least, is a major stockholder in NAN with much of the same management: VMS Ventures (VMS.V VMSTF), which has advanced from $0.16 when I first mentioned it to $0.285 today, rapidly approaching a double. VMS holds the key to the successful launch and rapid progress of NAN. It has excellent management, as proven by the fact they hold approximately 25% of NAN shares, while also developing their Reed Copper mine in Manitoba, another excellent mining district, to a carried to production stage by joint venture with Hudbay Minerals. By buying VMS (as I plan to do) you participate with a proven management team, with a late-stage mine development and a very promising explorer that has a high probability of launching a huge new mining district. While still speculative, early investors are likely to benefit the most, which is why I am putting my money where my mouth is by buying NAN in its early stages

I went wild with watch list stocks in my third column, but first let’s look at the ones I actually profiled. Brazil Resources (BRI.V BRIZF) was at $0.79 and now sits at $0.93, but management has added a tremendous amount of assets both in terms of experienced management and mineral resources and at present prices are way undervalued with the recent pullback of the gold sector, but I still consider it a “strong buy” as the gold sector bounces back. Another gold stock that has bucked the trend is Dynacor Gold Mines (DNG.TO DNGDF), which had an even bigger run: $1.23 to $1.69 against the considerable negative tide. Likewise Sulliden Gold Corporation Ltd. (SUE.TO  DDDF), which I owned years ago and fortunately sold before the pullback, held up very well, running from $0.79 to $1.00. I will buy again as soon as I am confident the gold price has turned positive. Prophecy Platinum Corp, which I mentioned at $0.62 has made management changes as well as changing its name to Wellgreen Platinum (WG.V WGPLF), is now at $0.67. While the big move in the PGM’s has not shown itself yet, this is now a strong company to keep an eye on for a good entry point.

I have held Energy Fuels Inc. (EFR.TO EFRFF) for quite some time and bought much lower than the $4.75 at the time of profile. It currently sits at $8.65 and is another major winner that has much further to run. Next in line is Uranerz (URZ) at $1.25 has reached $1.57, still a nice gain. UEX Corp. (UEX.TO UEXCF) has taken over Strathmore Minerals, but in this volatile time has not yet been rewarded by the market and remains around $0.44 or break even. But with patience it can still turn into a major winner with the added assets. In the oil sector we have another strong winner, Bellatrix Exploration (BXE BXE.TO), at a current $8.78 whose low was $4.65 and reached a high of $10.70, but such pullbacks are quite normal and I have a target of $15.00 if the market stabilizes. We also had New Zealand Energy (NZ.V NZERF), which I have on “hold” for now—its 52-week range has been $0.09 to $0.47 and has yet to prove itself—and likewise East West Petroleum (EW.V EWPMF), $0.28, meaning if you already own these two, don’t buy more unless there is some good news, or you can afford to speculate with a bigger stake and possibly suffer a small loss if they do not find the oil they are looking for.

For the fourth column we went to Europe in July for three more winners. First up, Avrupa Minerals (AVU.V AVPMF), profiled at $0.065, now at $0.19 after some acquisitions, joint ventures and financing. I count it as a sure triple, so it is making solid progress. Astur Gold (AST.V ATRGF) who, like Avrupa, has assets in Portugal, is down $0.04 at $0.25, which is not serious considering gold bullion’s recent pullback, and will surely bounce back once gold hits the upward trail again. The big winner for Europe is Reservoir Minerals (RMC.V RVRLF) which I received free as a spinout and went from $3.05 to a current $6.19, which you should watch closely before it possibly gets taken over by its joint venture partner Freeport McMoran (FCX), the copper giant. Two more European-domiciled projects from the watch list I still have long-term confidence in are Mundoro Capital Inc. (MUN.V, MUNMF) and Medgold Resources (MED.V). Mundoro is down a few cents after a 52-week range of $0.18 – $0.36 and can still turn into a winner like Medgoldwhich was a late addition to the watch list at $0.05 and is now $0.13, demonstrating how easy it is to generate doubles with juniors, and there are more.

My question for you is, did you actually set up a watch list as suggested several times and check it regularly? And more importantly, did you actually buy any of the watch list stocks when they showed signs of life? If you did and had some winners from the watch list in particular then congratulations! There are many more to come in the next quarterly review. If not, here are some more that you missed:

In summary, this is a pretty good report card for the first four months of stock picking after a year, and each succeeding quarter I will review several more months when they reach their one-year date. If every quarter is as good as this first one under difficult market conditions then we should all be “happy campers” with increased confidence in my stock picks.

I own quite a list from this first quarter, and would like to buy at least half of the watch list, but I hope this column will inspire more of you to utilize your own watch list so you don’t miss some that get brief mentions because they are likely fully vetted stocks in one of my 15 portfolios that have some relevance to the theme of the column, but are not fully profiled, due to lack of space or immediate urgency relative to the current market. One way in which you could all be very helpful to me and save me a lot of time, is mentioning the name of the stock you are writing in about. I do appreciate your comments and questions, but I identify stocks by name, very rarely by four-letter ticker symbols as I rarely buy on the American markets unless by necessity OTC. Thanks in advance for your co-operation. Similar sounding names can be confused, but tickers even more so, when you are dealing with hundreds of stocks.

I own the following names currently and will not trade in them for the usual 72 hours, giving you a chance to make any purchases ahead of me. Asanko Gold, Astur Gold, Avrupa, Balmoral, Denison Mines, Dynacor, East West Petroleum, Energy Fuels, IBC Advanced Alloys, Lucara Dimonds, New Zealand Energy, North American Nickel, Reeds, Reservoir Minerals, Trevali, VMS Ventures, Wellgreen Platinum. Remember this reflects only my first four columns, from then on there are two columns per month, so future reviews like this may cover two months rather than four. The length of this review allowed only one newly mentioned stock (Puma Exploration $0.19 – $0.21) but with imminent further reports on drill results that are already very positive you may well turn a quick profit by getting a stake promptly. Of course there are nearly two dozen to take a second look at to put on your personalized watch list. Need to get to work on my next column and finish getting my garden in.

Endnotes:
  1. Here is a podcast: http://www.sprottmoney.com/sprott-money-weekly-wrap-up
  2. column by John in the February 14th issue: http://sprott.com/media/301732/Investors-Digest-Feb-14-2014.pdf
  3. Here is the source: http://www.amazon.ca/The-Gold-Cartel-Government-Intervention-ebook/dp/B00EQ95NPI
  4. Reed’s website: http://reedsinc.com/
  5. Here you can follow the history: http://reedsinc.com/videos/
  6. here: http://www.stockgumshoe.com/2013/05/microblog-thoughts-from-myron/
  7. financial report here: http://reedsinc.com/press-release/reeds-inc-announces-first-quarter-2014-results/
  8. The Northern Miner magazine, here: http://www.trevali.com/i/pdf/NorthernMiner-Trevalis-Caribou-looks-profitable-May26-2014.pdf
  9. details on Puma here: http://www.kitco.com/news/2014-05-28/World-Class-Copper-Silver-Mine-Lurking-In-Plain-Sight.html

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