For bottom pickers and knife catchers

Sean K · 1 July 2008

While a stock hitting all time lows or plunging dramatically is not necessarily a good stock recommendation, there are sometimes opportunities to be had from things oversold.

I'm not sure if we're getting to the point of the market hitting a bottom, but it's time we longer term investors started looking at some potential value in the market, and where our cash could be directed. Bottom pickers.

I think this thread could also cover stocks that look to have been sold off too much on sentiment, or fear, with no real fundamental foundation. Knife catchers.

Of course, you'd have to give a reason for the nomination, in whatever basic form. FA and/or TA, or whatever, on why something has gone pear shaped but which might be a good opportunity.

Any thoughts?

Bushman · 1 July 2008

Re: Bottom pickers and knife catchers

I like this thread.

LPT's (or A-REIT's) have been sold down mercilessly by investors due to the screaming headlines achieved by stocks like Centro, Rubicon, AFG etc.

Now with a Centro-type model, this has been fully justified. But in the rubble of the LPT-wreck, there are some great yield plays emerging where stocks have been sold down by association. So I will nominate LEP (ALE Property Group) for my bottom picker. Here is why:
1. LEP has announced a full year distribution of 33.6 cps. At the current share price, this represents a yield of 11.39%! All distributions are also 100% tax deferred. See the announcement.
http://www.asx.com.au/asxpdf/20080620/pdf/319r0jcypcwnt1.pdf
2. Now yield in itself is a historical measure and is meaningless in the case of say a Centro where future profits have been seriuosly impaired. The LEP distribution will not be impaired however as it owns a series of pubs that are let to AHL (a Woolworths subsidiary) on long-term leases. Indeed the portfolio WALE (weighted avg lease expiry) is 20.5 years!!!! That is revenue growing at least at CPI locked in for 20 plus years.
3. Capital values should therefore hold as most valuers would value these pubs as earnings/cap rate. Earnings are secure so no problem there. Cap rates should stay steady as longer-term leases are very attractive to investors.
4. Debt matures in 6 years and interest rates are hedged for 11.6 years so there is no refinancing time bombs in the mix.
5. There is no BNB type scenario as free portfolio cashflow covers 87% of the half year distribution.

So, in summary, LEP should begin to appreciate in value as the very high yield is sustainable, there is limited refinancing risk, asset values should grow with CPI and the yield is not a 'manufactured' results a la BNB paying distributions through capital and borrowing.

The bottom is in.....

For resources, I am beginning to like some of the uranium and zinc stocks now:
1. BMN;
2. CUY;
3. Kagara. etc

Sold down on the underlying commodity price plummeting but it has now been overdone. Uranium will increase as coal/oil prices hit the stratoshpere. Zinc will have undersupply in 1 to two years.

Good thread mate. You can really drive value if you pick 'em at the bottom.

CAB SAV · 1 July 2008

Re: Bottom pickers and knife catchers

Good one Kennas, I'll start with LLC, down from +$20 to $9.55. Down because of fear being classed in the fin service sector. Only 3 posts on this stock which is what I like. Most will miss the boat for a good long termer.
Check the posts on this, wont take long.
Seen half doz brokers recommendations, 2 hold 4 buy.

explod · 1 July 2008

Re: Bottom pickers and knife catchers

kennas said:
While a stock hitting all time lows or plunging dramatically is not necessarily a good stock recommendation, there are sometimes opportunities to be had from things oversold.

I follow this strategy sometimes but confirmation that the stock has actually bottomed is essential. Unless of course you feel you have a good fundamental understanding.

Bendigo Mining was a good case in point, a lot of people thought they picked it at $1.00, I did with many others at 80cents, it then dived to 30cents. I saw strenth at this point so doubled my holding and cashed out near enough for my money back at 51cents. More luck than class.

And this was at $2.50 a few years back with what I can discern as 5 faulse bottoms along the way down.

My general rule of thumb, for a conservative approach, after a fall is that we need at least 6 months of consolidation then a rise of 10% on volume.

So if we apply that to the markets, we need to watch for awhile yet.

However I do often break my rules, at the moment I am doing with SBM what I did with BDG, could be a bit of a punt but think this was oversold for a number of sentiment reasons that will reverse. We will wait and see.

prawn_86 · 1 July 2008

Re: Bottom pickers and knife catchers

I will go with QOL.

A year ago they were over 40c briefly, now they are 12c.

In that time they have recieved approval, built and developed and commisioned Aus's first Moly mine for the last 15 years or so (Wolfram Camp). They just produced the first tonne of Moly and thier first shipment is planned for this month. 1yr offtake agreement for product with CITIC with option to extend after that time period.

Basically all they have done is progressed, yet all the SP has done is fall.

They recently completed a placement, menaing that they have enough cash for working capital and their other copper project, but it could mean some short term pressure on the price as the "sophisticated" investors take a small profit.

Sean K · 1 July 2008

Re: Bottom pickers and knife catchers

Hi Bushman,

I hope it gets some decent analysis as there are definately some opportunites to be had with stocks oversold for whatever reason. The market being an emotional beast, fear will drives things well under fair value, wherever that is....

I think BMN was one of them and I pasted that up in the thread.

There were a few around the Opies Prime debacle too.

Also, stocks definately fly under the radar and you can pick them up 'cheaply' on funnymentals. YT (LN) goes OK at this.

Let's see how it goes.

Cheers.

Sean K · 1 July 2008

Re: Bottom pickers and knife catchers

I might start a speadsheet to capture all these picks and see how we go.

Interesting exercise.

Will start it now with poster, reco and price.

Sean K · 1 July 2008

Re: Bottom pickers and knife catchers

CAB SAV said:
Good one Kennas, I'll start with LLC, down from +$20 to $9.55. Down because of fear being classed in the fin service sector. Only 3 posts on this stock which is what I like. Most will miss the boat for a good long termer.
Check the posts on this, wont take long.
Seen half doz brokers recommendations, 2 hold 4 buy.

I've been watching this too along with WDC long long term. Not sure how the entire real estate market is going to go in the immediate future, so I'm scared to call a bottom on anything in housing/development right now. eeeek.

prawn_86 · 1 July 2008

Re: Bottom pickers and knife catchers

LOL im liking this, i just went through my watch lists and found a few more.

IPR: Ipernica
They are a firm that deals in solving IP problems/breach of IP. They gain a fee when they reach settlement of the breach. Basically like IP lawyers or at least something along those lines.
Last year was about 18c now 7.6c. Current MC of about 21mill cash at bank 32mill No debt

PLT: Polartechnics
A biotech equivilant to a near term producer. They have a cervical cancer screening process, and contracts to sell into almost every Asian country, as well as others like Russia.
Last year 60c, now 12c, when again there seems to be no fundamental reason. They are beginning to deliver their machines and product which means income is beginning to flow. 2009 will be a year to watch for these guys imo.

EDE: Eden Energy
Have a multitude of projects.
Geothermal in S.A. Coal Seam Gas in the UK. They own a cyrogenics comapny in America which providesd some nice income. Their biggest project is Hythane. This is a hydrogen and deisel mix, aimed at green technology. India has come on-board and wants all of its public transport busses converted to this fueltype. First trial is up and running as i type. If they do fit out every bus in India the profits would be huge.
Last year 70c, now 28c.

Have a look at these again in 6 - 12 months time

Man, this just made me realise how much i wish i had some more cash to invest

disc - i do not hold any of the above, but wish i could at these prices.

Sean K · 1 July 2008

Re: Bottom pickers and knife catchers

prawn_86 said:
LOL im liking this, i just went through my watch lists and found a few more.

Man, this just made me realise how much i wish i had some more cash to invest

disc - i do not hold any of the above, but wish i could at these prices.

They are in, Name Spelt Wrong Way..

prawn_86 · 1 July 2008

Re: Bottom pickers and knife catchers

kennas said:
They are in, Name Spelt Wrong Way..

Thankyou, Name Pronounced Wrong Way.. :

Sean K · 1 July 2008

Re: Bottom pickers and knife catchers

prawn_86 said:
Thankyou, Name Pronounced Wrong Way.. :

LOL, not if you pronounce it the right way. :

Speewha · 1 July 2008

Re: Bottom pickers and knife catchers

Hello Kennas

What a good idea not sure that my pick qualifies as an oversold unless you go way back to 2003. However feel VMT is undervalued, they a going through an issue of new shares at the moment, the directors are participating at not much discount to the current price of .105c.

The funds raised will pay Bank debt, fund the Balance of the costs of the new factory in China; fund the takeover of a Spanish Motor Bike/Scooter company. They have recently enjoyed great scooter sales in Europe and recently sold 30,000 engines to Vietnam.

Not bad for an Aussie Company breaking into a market which has been dominated by players long established.

No matter how much governments spend on public transport it will never give the when and where freedom of your own means of transport. With the rise in petrol prices globally I think especially with the younger set scooters are set to be a growth segment and VTM are nicely placed with operations in Europe and Asia. I think sales will increase in Australia of this type of product mainly in metro arears.

So hope you will include VMT as an undervalued Stock in your spread sheet. As with all things time will tell. I own stock in this and have done so for some time.

Regards

Sean K · 1 July 2008

Re: Bottom pickers and knife catchers

Speewha said:
Hello Kennas

What a good idea not sure that my pick qualifies as an oversold unless you go way back to 2003. However feel VMT is undervalued,

Regards

Speewah, could fit the idea of the thread as it's close to 2 year lows.

This isn't really for just generally undervalued stocks wavering about but for those who have been punished dramatically for whatever reason.

Having said that, VMT has gone from 22c to 10.5 in the year, so a 50% ish drop may qualify.

Gosh, might end up with the entire ASX in this thread soon.

Sean K · 1 July 2008

Re: Bottom pickers and knife catchers

OK, the spreadsheet will look something like this, but I will also add a sell price on to it, for people trading dead cats, and the like. So, when you think you should sell the stock after a bounce, post it in the thread and it will be recorded.

This thread is in it's infantsy and may change direction to be more manageable, so work with me. Suggestions welcome.

I see some value for people identifying massive sell offs, or turn around stories, that have some short term $ potential.

Hope it helps..

Wysiwyg · 1 July 2008

Re: Bottom pickers and knife catchers

I spy a good knife that has dropped a long way.It would be interesting to know how many tried to catch this companies s.p. in big downhill run.Tharp says wait until the trend (up) is established .

I don`t recommend bottom picking (especially in public

) BUT ( no pun intended

) it can be a profitable trading opportunity.

Steve_QS · 1 July 2008

Re: Bottom pickers and knife catchers

WOW - woolworths i believe qualifies for this thread, given that they have consistantly turned over increased profits for the past quarters, yet there share price has dropped considerably. by roughly $10 dollars $34 down to $24, althought there is some conjecture from the local producers getting squeezed. Yet it's still a great stock fundementally. Seems to be consolidating as we speak around the $24 dollar mark, which looks to be forming a base, not entirely sure still bit of a newbie?

nomore4s · 1 July 2008

Re: Bottom pickers and knife catchers

Maybe this thread should be merged with the Dog of the year thread:

Mofra · 1 July 2008

Re: Bottom pickers and knife catchers

Perhaps a shorter term retracement, but OXR would be worth a look due to:

Technically, it has found support above the previous support level/low in Jan 08 at just above $2.50. On pattern, it appears to have halted the 2 month downtrend & commenced a period of consolidation.

Sean K · 1 July 2008

Re: Bottom pickers and knife catchers

One thing that might be missing here is time frame.

So, it's going to be hard to manage unless we nominate things that are **** pick, or a knife catch, or maybe both .....

Not sure whether to separate the fundamental from the technical correction, or what??

Thread under construction and welcome for suggestions.

I think I can manage both constructs with assistance from members to remind me of gains and losses, to be added into the Pickers and Catchers Matrix..

One thing that I think this may achieve is to have a section for punters to lay their best picks on the line, either FA or TA, and we see where they go.

However, it's for a bottom pick!!! Or, there abouts....

Also, the most important thing is some analysis.

Some justification for a bottom, or an oversold.

I'm going to record them all, and splash them up when I can, to try and make this wothwhile..

Everyone is under scrutiny so don't just splash up any old sold off dog...

For bottom pickers and knife catchers

Sean K

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