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Whenever an anniversary date comes around you have a tendency to reflect and ask, “Did I make the right choices?” It's been a year now since rich Uncle Horace left a $25,000 inheritance. However, at the time of receiving the windfall it appeared that there was an opportunity to make the inheritance grow by parlaying it into the stock market, which I had every confidence would have a banner year. Indeed my expectations were correct and the S&P/TSX Composite Index which stood at 11,619.94 on October 11, 2006 has surged 22.5 per cent over the year and the Dow Jones Industrial at 11,852.13 has vaulted 18.4 per cent over the same period.
As the world appeared to be in a growth mode in late 2006, the materials sector and alternative energy sources offered the most attractive opportunities, in my mind at least.
Within the mines and metals sector I suggested investing $20,000 (Canadian) in Titanium Metals Corporation [TIE] an American titanium mining company also known as Timet. As the spot Canadian dollar at the time was 87.89 (U.S.) cents it afforded investors to purchase 646 shares at $27.21 for an equivalent of $17, 577.66. The stock currently trading at $34.66 makes the investment worth $22,390.36 for a 27.4 per cent increase. Had the Canadian dollar remained constant the investment would have been worth $25,475.44 (Canadian) for a profit of $5,475.44. However the Canadian dollar has soared 13.9 cents or 15.8 per cent to $1.0179 (U.S.), thus the investment's return has been diminished substantially and stands at $21,996.62 (Canadian) for a gain of only 9.9 per cent or $1,996.62.
The stock has traced out an ascending triangle and continues to be considered a buy however currency risk continues to be a great factor as an even higher Canadian dollar is expected.
Next I looked to the alternative energy field and suggested purchasing $2500 worth of Altair Nanotechnologies Inc. [ALTI] a leading manufacturer of safe, high-performance battery pack products for the automobile industry and nano materials technology used in energy, power and life sciences applications. With the stock trading at $3.67 (U.S.) in October 2006, investors could have purchased 598 shares. Since the recommendation a year ago the stock traded in an extended consolidation pattern and finally broke out to the upside on Tuesday October 9 reaching an intraday high of $5.45. However, it pulled back and closed at $4.53 for a profit of 86 cents or 2.3 per cent for a total profit of $514.28. However after currency conversion the profit falls to $505.24 (Canadian).
The stock is still considered a buy and the symmetrical triangle which has formed over the past 3 years appears complete. If the stock is able to close the week above $3.70 (U.S.) the $8.00 target is still in the cards with an extended time frame over the next six months.
Finally, I recommended a $2500 investment in a little known penny stock on the Canadian Venture exchange, Pele Mountain Resources Inc. [GEM] at 20 cents. I did however, suggest that aggressive investors should increase they're investment in Pele while reducing the Altair position. As it turns out that would have been the way to go.
When I first recommended the stock it was considered to be a diamond and gold play. However, shortly after my recommendation the Company announced, on October 16, its acquisition of a 60-unit uranium mining claim covering approximately 2,400 acres in Elliott Lake which adjoined a 95-unit claim already in Pele's portfolio. The acquisition virtually transformed the company into a significant future uranium producer.
Elliott Lake is a known historical uranium mineralization zone previously mined by Rio Algom in the 1970's from which Rio Algo mined about 300 million tons of uranium before prices dropped to about $10 per pound rendering the property economically unviable. However with uranium prices back up to $75 the property is once again very valuable.
The company is still a virtual unknown in the sector though which can be blamed in part on their investor relations firm O & M Partners whose efforts to get the word out about this gem has been abysmal. Additionally, the stock isn't covered by any brokerage firm as Pele hasn't done a financing through any of the Bay Street firms.
In an October 4, 2007 announcement Company officials released the results of an extremely positive scoping study authored by Scott Wilson Roscoe Postle Associates. In a nut shell the report focuses on a fraction of Pele's known reserves. As such it “focuses on U3O8 mineralization in the Main Conglomerate Bed (“MCB”) that lies within the Adit Block. The Adit Block is a 600 by 800-metre area of near-surface and relatively higher-grade mineralization that presents a favourable location for initial mining. The MCB lies about 10 to 15 metres above the basement rocks and extends across a strike length of 6,000 metres, and a dip length of at least 3,800 metres, all within the Pele property.” The study confirms an 18-year mine life, producing 826,000 pounds of U308 annually at a production cost of $55.51. “With long-term uranium contracts being negotiated at $95 (U.S.) per pound that would translate into a gross profit of US$32.6 million annually and with prices expected to rise along with the fact that the revenue is based on just a fraction of Pele's property holdings the outlook for this company will only get better.”
An initial investment of $2500 would have purchased 12,500 shares which would translate into a profit of $6125 for a 245 per cent increase with the stock trading at 69 cents. However, during the course of the year the stock did reach a high of $1.62 on January 17 which would have been the opportune time to cash out, but that was then and this is now. Based on the outstanding report, that seems to have escaped everyone's understanding, the stock is still considered to be a long-term buy.
The resource based strategy resulted in a total profit of $8,626.86 for an overall 34.5 per cent return offering a total of $33,626.86 to share with family members.
Yola Edwards is pleased to announce the launch of her new e-mail monthly subscription technical analysis newsletter. The newsletter focuses on an overview of the North American market trends, the Canadian dollar, U.S. dollar, and commodity futures, including oil and gold. As well, she will identify two or three potential investment opportunities which may generate a minimum three to six month return of at least 10%. The recommendations will give support/resistance target levels and updated monthly. However any changes in trend will be advised via e-mail alerts.
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Yola Edwards is a contributing writer and technical analyst for Bell Globemedia Interactive, providing options and technical analysis research on a variety of North American equities.