Friday, February 26, 2010

Wall Street’s Favorite Silver Stock

Luke Burgess, who I don’t believe I’ve written about in the past couple years, is pitching his Hard Money Millionaire advisory by saying he’s found the next Silver Standard Resources (SSRI).

He starts out by essentially saying that he’s following the big money — he noticed which institutions were heavily invested in SSRI, which saw massive returns, and saw some of those same institutions buying heavily into his new favorite silver stock.

“The same group of investors who made this company [SSRI] what it is today. . . is doing it again.

“Only this time, the stakes are higher — and the rewards are even bigger.

“No doubt you’ve heard of some of them. . .

“They’re Among the World’s Most Powerful Institutions. . .

“Barclays: The #1 institutional investment firm in the world, with $1.7 trillion under management.
“Goldman Sachs: The world’s 3rd-biggest money market manager, with $735 billion in assets.
“JPMorgan Chase: The second-largest U.S. bank, with holdings exceeding $1.17 trillion.
UBS: Europe’s leading wealth manager.”

And they dot the i’s and cross the t’s …

“Make no mistake: they’re a veritable “Investment Dream Team.”

“By making the same moves they do, investors like you are almost guaranteed to win.

“And that’s exactly what a group of savvy individuals did when they followed this group into Silver Standard Resources.

“Backed by the biggest names in finance, those who got in early walked away with gains topping 7,600%!

“So when I discovered these very same multi-national investment banks and wealth managers gobbling up shares of a similar silver mining stock. . .

“I knew something huge was about to happen.

“And it was high time I alerted my readers. . .

“This Investment Dream Team Is about To. . . Blow It Out of the Water a Second Time”

OK … so those massive institutions were all listed as shareholders of Silver Standard Resources at one time or another. We get it. We should note, to be fair, that if you look on the list of institutional owners or buyers of almost any stock of any size, you’ll see at least half of those names and many others that sound just as impressive.

Our focus today is on the next great silver stock — not Silver Standard Resources, which incidentally was one of the top performing teaser picks that I wrote about late last year (that was for an Oxford Club tease, they touted it around $8 and it’s now in the $20s), but the one that Luke Burgess now expects to blow the doors off the joint in the near future.

Burgess, like many other analysts and editors, starts with the assumption that silver will spike — not a bad assumption, since he’s already right to some degree (from the hints and other info in the ad I’m assuming that he wrote it when silver was around $13-14 an ounce, one of the risks of the time it takes some of these guys to get their ads released … it’s already over $17 an ounce and rapidly outpacing gold’s rise in recent months).

He tells us that he expects silver to spike to over $18 an ounce, which is not particularly aggressive at this point, and he pulls out the other numbers that we often see of $50 and $100 an ounce for silver.

“When the price of silver begins its parabolic spike, the small silver company I’m talking about could take off on an epic run. . . for two simple reasons:

“It’s backed by a litany of the world’s most powerful institutions.

“It’s projected to increase silver production by over 66% this year.

“Rest assured, once CNBC gets hold of the story, buying shares at this discount rate will be out of the question.

“And that’s why I want to extend you a special invitation.”

And the special invitation? It is, of course, to become one of the limited few who subscribe to his Hard Money Millionaire newsletter. In return, he’ll tell you all about his favorite silver company … and I’m sure he’ll send lots of other info your way, but if you just want to know about that silver company you’re in the right place.

Your friendly neighborhood Stock Gumshoe, of course, never limits the number of subscribers, and I can figure out who this company is from a few clues provided … and of course, it won’t cost you $495, the next few paragraphs will come your way for the limited-time discount price of zilch.

So how about those clues?

Here’s a big clump of them:

“My New Silver Play Could Return an Instant 33%. . . And Over 450% in the Next 18-24 Months Here’s why. . .

“In my years of research, investigation, and travel to corners of the world most will never even hear about — to see these operations for myself. . .

“I haven’t come across a better-founded outfit than this one.

“This small company combines a stable established base with some of the most exciting prospects in the business.

“It already has six silver-producing mines — all in geopolitically-safe mining-friendly countries.

“The company expects to continue ramping up production this year 66.7% to 20 million ounces — a $300,000,000 value at today’s prices.

“Now here’s the kicker. . .

“This company has a $1.1 billion market cap. And the 20 million ounces it will produce this year will be enough to jam double- and triple-digit gains into investors’ pockets.

“Not only that, but they’ve just increased their quarterly operating cash flow by over 650% to $16.8 million.

“And their latest projections indicate that by the end of 2009, the company expects operating cash flow to exceed $100 million. . .

“That’s a 762% increase over last year — and a 183-fold increase in overall production!

“No, I didn’t miss a decimal point. . . 183-fold. Or put more precisely —

“A Projected 18,339% Rise in Output Across all of their Properties over the Next Year!

“And if you think that’s amazing, consider this. . .

“The stock price has yet to react to this newly-released data.”

Well, I haven’t seen this ad running before today … but based on the prices he gave for the company, that 33% instant return has already happened, thanks to the spike in silver prices and a bit more awareness about this company’s ramp-up in production. The company? The mighty, mighty Thinkolator tells me that this is …

Coeur d’Alene Mines (CDE)

CDE is one of the world’s major primary silver miners (primary meaning they focus on looking for and mining silver, they don’t produce it, as many major miners do, as a byproduct in gold, copper, zinc, etc. mines). They do have 6 mines across North and South America, all focused on silver (with some gold), plus a potential gold mine in Alaska (Kensington) that they hope to start development on next year.

The reason for the large increase in silver production is that they’re getting their first full year of production from “the world’s largest pure silver mine” (their words, I didn’t check), San Bartolome in Bolivia, and starting up production at a big mine in Mexico.

And yes, they did book $16.8 million in operating cash flow last quarter (reported in August), and they do expect 20 million ounces of production this year, which is a 66.7% increase over last year. I did not check the institutional holdings and changes to make sure that those matched up, but it seems extremely unlikely, if not impossible, that those exact matches would apply to another big silver miner.

Now the bad part: They don’t have a $1.1 billion market cap anymore … thanks to a $6 jump in the share price over the last few weeks of silver near-frenzy it’s now about $1.6 billion, with a share price over $21 and still climbing as I type. So if that’s what you were relying on for the quick 33% return, it’s already happened.

Of course, I don’t know if the stock price is reacting to their performance, as Luke expected to happen, or if it’s just bouncing them higher along with silver — all the silver names are up sharply in recent months, but it does look like investors are favoring these guys: Coeur d’Alene is outperforming most of them, it’s moving higher and faster than Pan American Silver (PAAS), Silver Wheaton (SLW), or Silver Standard Resources (SSRI).

Does that mean it will continue moving higher? Good question.

No, I don’t have the answer.


If we assume that the analysts are right, then CDE looks like a good bet compared to SSRI, PAAS and SLW based just on earnings, all those companies are expected to grow significantly in 2010 thanks to new production and rising silver prices, but Coeur d’Alene is trading at a forward PE of about 17 compared to 20+ for the other names, so perhaps there’s still a touch of “undervalued” in CDE if you think gold and silver will continue to perform well.

If you think silver and gold will go up, I’m fairly confident CDE will rise, too — they produce a significant amount of gold at a couple of their mines, and the Kensington gold mine is potentially very large if permitting goes through without a problem (it was tied up in court — going to the Supreme Court — until recently, but appears to be restarting now).

If you just want silver leverage without as much operational risk you might take a look at Silver Wheaton (they’re more akin to a royalty play on silver, with more predictable costs, though they’re also relying fairly heavily on a couple big mines), but if you want something a little bit cheaper, with perhaps more potential for a sharper move, CDE, SSRI and PAAS are probably all reasonable bets on a silver spike, and though I haven’t looked very closely at Coeur d’Alene before it does look like it may be worth some more attention.

And of course, CDE has already had a massive, massive run not just in recent weeks but over the past year — that already brought one analyst downgrade this week, citing the fact that they’re now more fairly valued after their price rise, but the share dip on that downgrade didn’t last long in the face of climbing silver prices.

I know there are a good number of silver bugs out there in Gumshoe Land, and I know that a lot of folks have talked about owning CDE both in comments here and in the forum, so if you’ve got a favorite for us, or some more insight on Coeur d’Alene or any of the other major silver names, I’m sure we’d all be delighted to hear about it — toss your fuel on the fire with a comment below.

Full disclosure: I own long term call options on both Silver Wheaton and Pan American Silver, and also own some silver bullion. I am not invested in anything else written about above and will not trade in any stock mentioned for at least three days.
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Was established since 20th Rejab 1430.
Just to educate myself.
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