Stock selection for 2008
- Thread starter nitpra
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prawn_86
Mod: Call me Dendrobranchiata
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Very nice Nitpra,
Simple yet (possibly) effective. However i thought the general PE average was 16 not 18?
Obviously this is hoping that these stocks will reach (or get close to) the 18 PE.
Simple yet (possibly) effective. However i thought the general PE average was 16 not 18?
Obviously this is hoping that these stocks will reach (or get close to) the 18 PE.
Firstly, I think forward P/E's are a horribly flawed way to predict future stock prices. Especially since forward P/E's are based on future earnings and as the spectre of recession looms forward earnings forecasts become less reliable. Not to mention that they grossly oversimplify and ignore the unique characteristics of individual businesses, (e.g the amount of debt and return on capital)
If you are going to project prices on forward P/E's, rather than use the average P/E over history which I think as prawn suggests is closer to 16 not 18, why not look at where average P/E's are in recessions or environments of slow growth?
Also I notice a lot of your picks are financials, including banks. The historical P/E for banks has always been at a discount to the market. Furthermore, considering that we are now entering the worsening part of the credit cycle, ie defauls and bad debts are rising, taking a big bet on financials carries it's own set of risks.
If you are going to project prices on forward P/E's, rather than use the average P/E over history which I think as prawn suggests is closer to 16 not 18, why not look at where average P/E's are in recessions or environments of slow growth?
Also I notice a lot of your picks are financials, including banks. The historical P/E for banks has always been at a discount to the market. Furthermore, considering that we are now entering the worsening part of the credit cycle, ie defauls and bad debts are rising, taking a big bet on financials carries it's own set of risks.
Maybe stocks whose charts look like this
This is the XAO Flipped
Define the risk reward relationships
= defining the changes in the unfolding relative technical positions
The trends and positions in those trends
Increases in risk to what has been prevailing
changes the line of least resistance going forward...
changes in thrust
relate to ease of movement
demand VS supply
and
supply VS demand
Turning Points
Remember the real XAO is doing the OPPOSITE
motorway
This is the XAO Flipped
Define the risk reward relationships
= defining the changes in the unfolding relative technical positions
The trends and positions in those trends
Increases in risk to what has been prevailing
changes the line of least resistance going forward...
changes in thrust
relate to ease of movement
demand VS supply
and
supply VS demand
Turning Points
Remember the real XAO is doing the OPPOSITE
motorway
Attachments
Of Course there might not be many
The orange line is the bullish 2%
( number of stocks on 2% x 3 BUY SIGNALS )
It is still above 30% ( maybe not by Monday )
It is showing weakness
But also signs of seeking a bottom
The Purple line is % stocks above a 200 day moving average
It IS back at the level in AUG
It is below 15%
The last time below 15% before August
was in 2003
There is always rotation
ends signify ends not necessarily beginnings
( ie spring will follow winter.......But only Eventually... That is why P&F is such a powerful tool. It sees through illusions .. It is a clock only of the real )
So If you can not find any charts like the flipped All ords
Wait until you DO
motorway
The orange line is the bullish 2%
( number of stocks on 2% x 3 BUY SIGNALS )
It is still above 30% ( maybe not by Monday )
It is showing weakness
But also signs of seeking a bottom
The Purple line is % stocks above a 200 day moving average
It IS back at the level in AUG
It is below 15%
The last time below 15% before August
was in 2003
There is always rotation
ends signify ends not necessarily beginnings
( ie spring will follow winter.......But only Eventually... That is why P&F is such a powerful tool. It sees through illusions .. It is a clock only of the real )
So If you can not find any charts like the flipped All ords
Wait until you DO
motorway
Attachments
Well I may not own all these yet but are my top picks for gold sector.
Tiny cap
ORP. Small cap, only 9 mil with an actual resource of 700oz - 75% owned with target 1Moz. Same island as Oxiana matabe gold mine in Indonesia. m/c per ounce $17.
Explorer
MCO - May become a good trading stock like EXM and PRE as they have a quartz vein gold deposit which gives good drill results. Market still cautious regarding Australian gold mines but spikes on drill results are almost a given. Bendigo and CTO experiences may dampen until a resource is announced but with POG going north people may discard old concerns.
Developer
Kal of course, market cap 29 mil (including unlisted) with a resource 1.4 Moz with possible increase. Scoping study underway. Cheapest resource over 1moz on the market. Still concern regarding costs for Australian gold mines but due to this fact there are so few of them those that have managed to get to jorc stage should do well . m/c per ounce $21.
Saracen. Same as KAL, one of few Australian miners with a resource over 1 Moz but still under 100 mil m/c. 2.5Moz with m/c 65 mil. Market cap per ounce $26
Closer to production.
Monarch Gold. Though must confess not sure if the cost of recent purchase is reflected in numbers so maybe way off here. 5Moz, m/c 108 mil. That would mean a m/c per ounce of $22 so I doubt I have updated numbers. If we just add 65mil to m/c it would mean a m/c per ounce of $35 which is still outstanding value.
Citigold. Trouble I think here is that if they drill to define resource they actually drill the resource to bits so they will not persue anything more than inferred resource at this stage. Please correct me if I am wrong. Though still great value at half there inferred resource so I will give it a shot.
Producer
Resolute Mining - Large resource, 11Moz - m/c $584 mil. Again low market cap per ounce but at this level maybe ev per ounce is a better guide. Cash costs have come down I believe so should do well.
Lihir, I like because it has good market sentiment and plenty of institutional support. Not bad cost and of course large resource.
_________________________________________________________________
Points regarding gold stocks and grades.
Cash costs seem to be far cheaper based on economy of scale rather than grades. Cannot see any proof that slightly higher grade deposit is any more valuable.
Cash costs are very much cheaper offshore than Australia.
So grade doesn't seem to have as much impact as many suggest. I guess the cut off grades for various types of deposits ensure that most fall within a similiar cost range.
Example .
NCM have cash costs $190 an ounce and they mine gold as low as .65g/t. Compare to citigold, high grade low cost yet expect $470 per ounce initially.
Majority have cash costs between $500 and $600 per ounce regardless of grades but all of course smaller deposits than both mentioned. So if grade does make a difference it may not be so much, of course some grades are too low all together depending on size of mine, type of deposit etc but far more important is that the POG goes up enough to make all our gold profitable.
Go gold in 08 !
_________________________________________________________________
Tiny cap
ORP. Small cap, only 9 mil with an actual resource of 700oz - 75% owned with target 1Moz. Same island as Oxiana matabe gold mine in Indonesia. m/c per ounce $17.
Explorer
MCO - May become a good trading stock like EXM and PRE as they have a quartz vein gold deposit which gives good drill results. Market still cautious regarding Australian gold mines but spikes on drill results are almost a given. Bendigo and CTO experiences may dampen until a resource is announced but with POG going north people may discard old concerns.
Developer
Kal of course, market cap 29 mil (including unlisted) with a resource 1.4 Moz with possible increase. Scoping study underway. Cheapest resource over 1moz on the market. Still concern regarding costs for Australian gold mines but due to this fact there are so few of them those that have managed to get to jorc stage should do well . m/c per ounce $21.
Saracen. Same as KAL, one of few Australian miners with a resource over 1 Moz but still under 100 mil m/c. 2.5Moz with m/c 65 mil. Market cap per ounce $26
Closer to production.
Monarch Gold. Though must confess not sure if the cost of recent purchase is reflected in numbers so maybe way off here. 5Moz, m/c 108 mil. That would mean a m/c per ounce of $22 so I doubt I have updated numbers. If we just add 65mil to m/c it would mean a m/c per ounce of $35 which is still outstanding value.
Citigold. Trouble I think here is that if they drill to define resource they actually drill the resource to bits so they will not persue anything more than inferred resource at this stage. Please correct me if I am wrong. Though still great value at half there inferred resource so I will give it a shot.
Producer
Resolute Mining - Large resource, 11Moz - m/c $584 mil. Again low market cap per ounce but at this level maybe ev per ounce is a better guide. Cash costs have come down I believe so should do well.
Lihir, I like because it has good market sentiment and plenty of institutional support. Not bad cost and of course large resource.
_________________________________________________________________
Points regarding gold stocks and grades.
Cash costs seem to be far cheaper based on economy of scale rather than grades. Cannot see any proof that slightly higher grade deposit is any more valuable.
Cash costs are very much cheaper offshore than Australia.
So grade doesn't seem to have as much impact as many suggest. I guess the cut off grades for various types of deposits ensure that most fall within a similiar cost range.
Example .
NCM have cash costs $190 an ounce and they mine gold as low as .65g/t. Compare to citigold, high grade low cost yet expect $470 per ounce initially.
Majority have cash costs between $500 and $600 per ounce regardless of grades but all of course smaller deposits than both mentioned. So if grade does make a difference it may not be so much, of course some grades are too low all together depending on size of mine, type of deposit etc but far more important is that the POG goes up enough to make all our gold profitable.
Go gold in 08 !
_________________________________________________________________
Actually you dont need to accurately predict future earn but close to the ball park because the value of a stock is all the future earning combine discount to the present value so the past give you a guide but it doesn't do anything to your investment as you when you bought it you want earning from the day you bought not some 5 years ago.
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