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XMFSinchiruna (27.53)

Sinchi's Top Stock Pick for 2010

Recs

32

December 30, 2009 – Comments (50)

My choice will be divulged momentarily. Anyone care to hazard a guess? :P

I'll post a link to the article the moment it appears.

50 Comments – Post Your Own

#1) On December 30, 2009 at 10:50 AM, kralz (< 20) wrote:

Something with gold i guess? Commodities? (im just looking at your image here )

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#2) On December 30, 2009 at 10:57 AM, bizacumen (< 20) wrote:

PM, JNJ, POT, MON, KFT

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#3) On December 30, 2009 at 10:59 AM, XMFSinchiruna (27.53) wrote:

bizacumen

Nope ... wouldn't touch MON with a 10-foot pole. :)

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#4) On December 30, 2009 at 11:03 AM, smg1129 (84.29) wrote:

FCX

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#5) On December 30, 2009 at 11:05 AM, ocsurf (< 20) wrote:

POT or CHL

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#6) On December 30, 2009 at 11:06 AM, XMFSinchiruna (27.53) wrote:

smg1129

Good guess, and certainly a great stock ... but I'm thinking of a metal that has a far smaller market of above-ground physical supply than either copper or gold.

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#7) On December 30, 2009 at 11:07 AM, Bays (30.08) wrote:

HE.TO = mine.

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#8) On December 30, 2009 at 11:07 AM, catoismymotor (< 20) wrote:

JAG or AUY are my best precious metals guesses.

 

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#9) On December 30, 2009 at 11:07 AM, catoismymotor (< 20) wrote:

An aluminum producer?

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#10) On December 30, 2009 at 11:08 AM, XMFSinchiruna (27.53) wrote:

ocsurf

No, not POT. My agricultural exposure is more focused on the actual commodities themselves ... following the advise of commodities guru Jim Rogers.

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#11) On December 30, 2009 at 11:10 AM, XMFSinchiruna (27.53) wrote:

catoismymotor

Nope ... I avoid Aluminum for the reasons I avoid steel at this stage ... to much excess capaity among global producers despite the sustained strength of Asian demand.

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#12) On December 30, 2009 at 11:11 AM, XMFSinchiruna (27.53) wrote:

catoismymotor

Your getting warmer with JAG and AUY ... but I'm not buying any gold right now as long as another precious metal remains such a ridiculous relative bargain. :P

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#13) On December 30, 2009 at 11:12 AM, catoismymotor (< 20) wrote:

ACH?

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#14) On December 30, 2009 at 11:12 AM, dudemonkey (38.33) wrote:

AEM, SLW, or FCX.  If I had to pick one as what I think you're looking at, I would probably guess SLW.  I know you've been hot for AEM in the past and I wouldn't rule it out, but you've been making a lot of noises about about silver is undervalued, even moreso than gold, so I'm going to guess SLW.

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#15) On December 30, 2009 at 11:13 AM, catoismymotor (< 20) wrote:

So, not ACH. :)

A uranium refiner?

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#16) On December 30, 2009 at 11:13 AM, dudemonkey (38.33) wrote:

about about = "about how".  11:15 am and I'm still asleep at the keyboard.

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#17) On December 30, 2009 at 11:15 AM, chk999 (99.97) wrote:

My guess is silver is the metal so SLW or HL.

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#18) On December 30, 2009 at 11:16 AM, catoismymotor (< 20) wrote:

Well in my opinion if you are going for metals and mining in central or south america I would go for SID. But I know that since it is a large cap steel producer it might not be on your list.

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#19) On December 30, 2009 at 11:16 AM, PeteysTired (< 20) wrote:

TGB

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#20) On December 30, 2009 at 11:17 AM, XMFSinchiruna (27.53) wrote:

dudemonkey

;)

Great Job!! You nailed it!

Honorable mention to chk999

 

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#21) On December 30, 2009 at 11:18 AM, XMFSinchiruna (27.53) wrote:

PeteysTired

TGB certainly was present during deliberations. ;)

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#22) On December 30, 2009 at 11:20 AM, XMFSinchiruna (27.53) wrote:

OK ... so why SLW? Let's see if my dozens of articles on the stock have had any effect. What makes SLW stand out from the pack.... and what makes silver the smartest choice among metals for 2010?

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#23) On December 30, 2009 at 11:22 AM, binve (< 20) wrote:

SILVER WHEATON! (sung like Old Man River) ... :)

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#24) On December 30, 2009 at 11:23 AM, catoismymotor (< 20) wrote:

Specifically for 2010? I have no idea. I thinking five years out with this one, if not longer.

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#25) On December 30, 2009 at 11:24 AM, dudemonkey (38.33) wrote:

OK ... so why SLW? Let's see if my dozens of articles on the stock have had any effect. What makes SLW stand out from the pack.... and what makes silver the smartest choice among metals for 2010?

You have noticed that the historical ratio of price of gold to silver hovered around 12:1, and it's 64:1 right now, so you're uber-bullish on silver since no one is expecting the price of gold to drop to 1/5th of its current price.

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#26) On December 30, 2009 at 11:30 AM, FleaBagger (28.89) wrote:

Okay Sinchi: tell me why I should accumulate more SLW instead of dumipng it on valuation after its spectacular run from ~6 to >15. I'm all ears. And may 2010 see you prosper greatly.

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#27) On December 30, 2009 at 11:31 AM, XMFSinchiruna (27.53) wrote:

catoismymotor

why 5 years out? Do you consider shares fully valued at present silver prices?

Do you not expect higher silver prices in 2010?

Anyone notice the gold:silver ratio hit 65:1 again today? Holy dislocated metal market, Batman!!

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#28) On December 30, 2009 at 11:33 AM, chk999 (99.97) wrote:

I think silver is a good call.

Chris - long HL, thinking about SLW

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#29) On December 30, 2009 at 11:33 AM, XMFSinchiruna (27.53) wrote:

FleaBagger

That run from $2.51 to $15 is child's play. Recall that my cost basis from 2005 was above $12 .... I was a spectator for that entire dip and recovery cycle.

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#30) On December 30, 2009 at 11:35 AM, dudemonkey (38.33) wrote:

What makes SLW stand out from the pack...

Forgot to address this.  SLW seems to have a basically fixed production cost, which bodes extremely well in an environment of increasing silver prices (whether through inflation or TMFSinchi's "slingshot effect").

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#31) On December 30, 2009 at 11:38 AM, XMFSinchiruna (27.53) wrote:

dudemonkey

The ratio definitely is a major part of my bullishness on silver for 2010, as any further breakout in gold above the last high of $1,220-something would trigger silver's breakout closer to the March 2008 ratio of 50:1 ... for starters, that is.

12:1 is perhaps overly optimistic. The long-term historical ratio is around 16:1, but my conservative target ratio before the precious metals bull market is over is more like 30:1. We may hit lower ratios for a time, but I think that a long-term relationship will be established around 30:1 or so after gold finds its own "new normal".

Silver ... why else?  :)

And why SLW?

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#32) On December 30, 2009 at 11:41 AM, PeteysTired (< 20) wrote:

Is it possible that we have a new ratio as people feel that Gold is the choice amongst countries like China and India? 

Maybe the ratio you seek will never revert back.

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#33) On December 30, 2009 at 11:43 AM, Bays (30.08) wrote:

You have noticed that the historical ratio of price of gold to silver hovered around 12:1, and it's 64:1 right now, so you're uber-bullish on silver since no one is expecting the price of gold to drop to 1/5th of its current price.

Also worth mentioning is how there are a ton of industrial uses for the metal; more now than when the ratio was 15:1.    Also, there is an estimated 15 times amount of silver in the ground than gold. 

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#34) On December 30, 2009 at 11:44 AM, catoismymotor (< 20) wrote:

I understand that you believe silver could increase in value to around $50 per ounce. I would be surprised if that happens by next December. My crystal ball, chicken foot and and ouija board tell me summer 2011 is more likely.

With the increase in electronic doohickies used around the world, with silver a major component in said doohickies, I can see that placing a greater demand on the metal in question. Another factor is that gold has increased in price to be increasingly out of reach of most jewelry buyers. Silver will be the affordable alternative. And speaking of which I helped to compound the problem by buying a pair of sterling silver and jade earrings for my mother as a Christmas gift.

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#35) On December 30, 2009 at 11:45 AM, dudemonkey (38.33) wrote:

The long-term historical ratio is around 16:1, but my conservative target ratio before the precious metals bull market is over is more like 30:1.

That's a margin of safety that a value investor like me can understand :)  I've been looking at SLW for basically the same reasons you have.  I think silver is due for a big move.

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#36) On December 30, 2009 at 11:47 AM, XMFSinchiruna (27.53) wrote:

PeteysTired

For a number of reasons, I have selected a conservative target that is more than twice the historical average ratio.

Consider that my $50 silver price target to correspond with $2,000 gold represents merely a 40:1 ratio.

And consider how much less "mature" the bull market cycle for precious metals was in March 2008 when the pre-correction ratio stood at 50:1.

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#37) On December 30, 2009 at 11:49 AM, catoismymotor (< 20) wrote:

Why SLW? They are buying silver from miners while it is in the gound for around $4 and ounce, or 1/4 the current price. It is all gravy for SLW. And as the price per ounce goes up so does their profits. It is a unique business model for precious metals. They get to make all the money while someone else gets dirty. This is the one company I own that has a such a sky high P/E, yet this does not bother me.

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#38) On December 30, 2009 at 11:52 AM, ocsurf (< 20) wrote:

SLW-closest silver company to the gold royalties. A pure silver play. They contract with silver miners to purchase all or portions of the silver produced at a fixed price. Of course they pay for this contract. Miners get capital up front. SLW gets silver at a fixed price.

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#39) On December 30, 2009 at 12:03 PM, XMFSinchiruna (27.53) wrote:

catoismymotor

Yes, with fixed costs at prices that low, SLW provides the greatest leverage to price gains in silver ... even in an environment where rising silver prices occur alongside rising energy prices (quite likely) that would send the costs of miners rising accordingly. That cost factor is enormous!

The quality of the mines they have streams from is untouchable.

Look at where the stock was in March 2008 versus today, and consider the impact of the two major accretive acquisitions made in 2009.

By the way, PE is a meaningless valuation metric in the mining industry.

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#40) On December 30, 2009 at 12:04 PM, 100ozRound (29.42) wrote:

Sinch -do you have a price target for 2010?

I'm averaged in SLW at $5.59

 

 

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#41) On December 30, 2009 at 12:11 PM, XMFSinchiruna (27.53) wrote:

Here is the parent article for the Best Stocks for 2010 series, so you can size up the competition facing my selection of SLW before the individual articles filter out.

SLW article should be out shortly.

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#42) On December 30, 2009 at 12:16 PM, dudemonkey (38.33) wrote:

TMFSinchiruna, if you do an article about how to value companies that extract natural resources from the ground, I'll make that my home page in Firefox.  I just bought another book on that topic because I'm trying to get smarter about it, but my guess is that you're several steps ahead of me.

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#43) On December 30, 2009 at 12:21 PM, AvianFlu (33.82) wrote:

In the admittedly unlikely event that the federal government confiscates all gold like it did in the 1930s it would make sense to own silver. Silver is widely used for a number of industrial applications and confiscating it would not be practical. So....safer from confiscation. Another reason to like silver.

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#44) On December 30, 2009 at 12:39 PM, XMFSinchiruna (27.53) wrote:

dudemonkey

You want to see how it's done? Check out what your very own fellow Fool speedybure put together for SLW. [Before the transformative Barrick deal, but after the strategic Silverstone acquisition]

That is how you value a resource producer. You have to work multiple product price scenarios into the picture, and obviously any material error in long-term price projections sends the entire analysis afoul. Ultimately, projected free cash flow becomes the key data point. In most cases, you have to guesstimate average operating costs over time, which chucks a significant wrench into the process, but not in the case of SLW. :)

It's definitely an artform, and one that leads the cautious investor to factor in a significant margin for error ... as you suggest above. :)

 

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#45) On December 30, 2009 at 12:44 PM, XMFSinchiruna (27.53) wrote:

Here you go, Fools!

http://www.fool.com/investing/general/2009/12/30/the-best-stocks-for-2010-silver-wheaton.aspx

Please let me know how you vote, and why. I have considered Silver Wheaton the most rock solid equity on the planet for several years running, and I'm very cusious to know how many of my fellow Fools agree.

I know this company inside and out, frontwards and backwards. If anyone has any questions as they condust their due diligence, I will be happy to answer them.

Thanks for voting, and Fool on!

 

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#46) On December 30, 2009 at 12:58 PM, XMFSinchiruna (27.53) wrote:

http://www.fool.com/investing/general/2009/12/30/the-best-stocks-for-2010-silver-wheaton.aspx

Here's a favorite excerpt:

"Combined attributable silver reserves and resources equate to 5 ounces of silver for every share of Silver Wheaton stock -- a sort of underground vault of physical silver supply with a present market value of about $85 per share before costs. Since those costs are essentially fixed, projecting profit and cash flow for multiple silver price scenarios is a relatively simple process that I think Fools will enjoy tackling on their own. I expect long-term prices to trend substantially higher, but even using today's silver prices, I see room for shares to double once more before we reach fair value."

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#47) On December 30, 2009 at 1:22 PM, dudemonkey (38.33) wrote:

Please let me know how you vote, and why. I have considered Silver Wheaton the most rock solid equity on the planet for several years running, and I'm very cusious to know how many of my fellow Fools agree.

 

I went Excelon.  While I think that Silver Wheaton is a great company with a great business model, I'm looking long-term here and Excelon is a quiet, predictable company with a shareholder friendly management and it's trading below my estimate of its intrinsic value.  Basically, it has all the pieces in place to be a solid investment.

I'm not saying that SLW doesn't, but I don't view see it being as much of a slam-dunk as Excelon.

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#48) On December 30, 2009 at 2:40 PM, XMFSinchiruna (27.53) wrote:

dudemonkey

Like you said, replace your pick with mine, and everything you like about your pick still applies in spades.

Silver Wheaton is a quiet, predictable company with a shareholder friendly management and it's trading below my estimate of its intrinsic value.  Basically, it has all the pieces in place to be a solid investment.

;)

 

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#49) On December 30, 2009 at 3:56 PM, dudemonkey (38.33) wrote:

Silver Wheaton is a quiet, predictable company with a shareholder friendly management and it's trading below my estimate of its intrinsic value.  Basically, it has all the pieces in place to be a solid investment.

I totally believe you, and I definitely trust your analysis.  I'm learning more and more about how to value mining companies and, as I get better, I'm sure I'll have a greater understanding of your position.

I took a look at speedybure's spreadsheet and that really helped a lot.  It was very useful to see the numbers lined up because I could see how you guys are boiling it down to free cash flow, which is my weapon of choice for valuation.  I'm going to continue following this stock and will probably add some of it to my real life portfolio.

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#50) On December 30, 2009 at 3:57 PM, dudemonkey (38.33) wrote:

Basically, I'm saying that I don't totally get mining companies like you guys do yet.  As I get more comfortable with them, their economics, and their valuation, I'll feel more willing to invest in them.  Up until now, my main mining investments have been diversified miners because they're easier for my to analyze.

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