Frank Barbera at Large (Part II of II)
Continued from February 7, 2007
Fari: OK Frank, you also follow Gold, and other metals, what do you like in that area?
Farnk: Well, basically everything, … I am kidding, but I like what I see happening in all the metals, especially Gold, where a move over $665 on nearby April Gold would be bullish as all get out. Near term support for Gold is shaping up nicely at $648 to $650. I like GLD, and I like the Gold Stocks. Among the large cap mining stocks, Agnico Eagle (AEM), Yamana Gold (AUY), Silver Wheaton (SLW) and Goldcorp (GG) are my favorites. AEM is amazing in that they have a negative cost for mining gold, due to the fact that they have poly-metallic output from their mines, and with copper and zinc prices where they are, -- even down a fair amount in recent months, for AEM, the cost of mining gold is zip, nada, zero as Copper and Zinc credits pay the whole freight. Yamana, managed by Peter Marone, is a great growth gold, well on its way to production of 1 Million Ounces a year, -- what a great CEO, the guys a rock star in my book. In the juniors, and now I am really talking my own book, in the interest of full disclosure, I love, love, love Eastern Platinum (ELR-TSE). Eastern Platinum trades on the Toronto Stock Exchange (http://www.tse.com), and is usually on the Top Ten or Top 15 Most Actives. Today, it is No 3 Most Active (http://www.tsx.com/HttpController?GetPage=MDFMarketView&MarketView=MostActive&DetailedView=DetailedPrices&Market=T&Language=en).
For US investors, the stock trades under the five letter equivalent of ELRFF, and can be purchased through any US broker. Below C$1.60 ELR is an excellent buy. The company is in production, and has output flowing from several mines at its Crocodile River Complex near Capetown, South Africa and will soon be adding another mine, the Mareesburg Mine in early 2007. This is a growth Platinum story where output will go from 100,000 ounces a year in 2006, to over 500,000 in the next two years. The stock in my view is still a ten bagger from here, and would not be surprised to see it trade north of $10.00 US in a the next two years. It is an investment position, and not a trading stock, but the company has top notch management in CEO Ian Rozier, who I hold in the highest regard, he has done an awesome job for the company and this is one of the best values I see in the mining sector. In the small cap arena, I also like Minera Andes (MAI on the Venture Exchange) quite a bit, they have a great property in Argentina and are getting no credit in the market for a highly prospective copper deposit.
Fari: Looking at 2007, if things deteriorate in the Middle East, where would Gold go ?
Frank: In my view, Gold will break out above $1,000 per ounce, and after a long consolidation, could now be setting at the beginning of that move. All of the Gold Stocks, would go through the roof, and should turn in excellent returns. At my newsletter, The Gold Stock Technician, we keep people current with all of the latest on these markets and up to date with current buy/sell recommendations.
Frank: Honestly, I cannot warm up to this market, not at these levels. The DJIA and S&P 500 have never gone this long without a 10% correction, or even a 2% down day, so the markets are riding this wave of euphoria that seems to ex-out any perception of possible risk. Last year, at the beginning of the year, I liked Tech and Healthcare with names like Zimmer Holdings (ZMH), Cisco Systems (CSCO), LSI Logic (LSI) and Microsoft (MSFT). This year, I simply have a hard time finding under-exploited situations, and the multiple on the market looks high to me considering we are talking peak earnings. I think the S&P 500 short term could start doubling back toward 1400 as first support. Ultimately, there is probably more time needed for the market to build an important top as carry over momentum levels are high, and will likely under pin the market most of the first quarter. That said, at some point, I would not be surprised to see this market roll over in dramatic fashion, and make haste for the 1200 zone on the S&P. That would wipe out the rally of the last few months, and in my view could be the beginning wave of a much larger bear market. I believe the stock market represents high risk investing and the only sectors I feel could buck a downward trend would be Gold and Oil, and that is where I operate day to day.
