New Position Initiated - JOR.V (Jourdan Resources Inc.) December 30th, 2010

Hello and welcome back to CRI's OnlyDoubles New Trades blog.

New trade for December 30th, 2010.

This stock came to CRI's attention lately from a desire to take a position in the 'rare-earths' metals market. The fact that there are many suggesting there is a bubble forming in the rare earth metals market to this investor suggests that to the contrary, there is plenty more room for appreciation. Couple this un-euphoric investment atmosphere with an insatiable consumer demand/appetite for Lithium as an alternative power source and with what appears to be a growing political chess piece and you have the makings for a serious supply squeeze at some point down the road.

The real trick with these types of investments however is to be constantly hunting for signs of value as once these markets get going in earnest, the concept of 'value' quickly disappears.

With the above in mind, we come to CRI's latest acquisition, Jourdan Resources Inc. (JOR.V).

While doing a recent VCIM screen, JOR quickly jumped out as a potential candidate. The stock was the subject of a 4:1 roll back in October (news link). The stock currently has 19.5 million shares outstanding and is trading at .94 price to tangible book value per share. Their assets are 100% owned exploration rights to uranium and rare earth metal properties in and around Quebec (web site). First Gold recently discovered a major rare-earth deposit in the area and Jourdan happens to have staked the property right besides them. While this is no guarantee of finding anything, they often say the best place to look for a mine, is right beside another one.

While I don't expect the moon, a typically healthy stock can trade up to 3 times book value or in this company's case, close to $.40 per share. So what is going to get the company there? In Canada, we have government sponsored exploration tax credits that must be used on an annual basis (known as Flow-through financings). While too complicated to get into in depth here, just take away for this that there must be work done on a Canadian property, in the subsequent calendar year, in order to qualify for the tax credit. To this end, the company recently raised a little more than 1 million dollars (through a flow-through financing) that must be spent directly on their Canadian properties. The company has indeed stated that there will be major work done on their Lithium property in the coming months (news link). Lots of catalysts..

With the rollback now done and a significant financing taken care of, this company is currently in the best position an exploration company could be in. They have to property, they have the cash and they have a year to do something. In essence, this is a new stock that is trading at a discount to the actual assets of the company just waiting for any good news to 'pop'.
  
3 month price chart

 

A look at the past three month's price action in Jourdan suggest that the stock has cleaned itself up and establishing a base. Considering the substantial financing recently announced at $.15 and $.20 (flow-through) it is understandable why this stock would be putting in a 'floor' in and around these levels. Additionally, a 50% retracement of the substantial rally in October would have brought prices back into the $15 area. That has happened and one might argue that while the correction has taken place, the stock has been under accumulation.

3 year weekly chart

While not as compelling as the daily chart, there are a few interesting things oing on here too. Firstly, a 50% retracemtent of the 2010 bear run would bring prices back up into the $.22 area (or 37% higher than current levels). While not a double, the mere presence of this fact suggests the stock has the proverbial wind at its back rather than in its face. Additionally, while not yet confirmed, a trade above the fall highs would imply a bull flag formation while would imply a price target near $.28 (or 75% higher than current levels). Lastly, it is worth mentioning that at current levels there appears to be a base forming from a volume perspective and momentum (while not trending higher) is no longer overbought.

Summary
As both an industrial and political component , rare earth metals (and in particular Lithium) are still very much in the world's spotlight. Jourdan is an example of a Canadian exploration company with Canadian rare earth metals properties (including Lithium) that will be doing work and producing news in the coming quarters. Technically, the stock has recently consolidated a substantial move higher seen through the fall. One might argue that through the consolidation the stock has been under accumulation. Considering too the seasonality of the market, a typical spring (May/June) top should produce healthy returns if aquired in and around current levels. As well, because of the recent financing at these levels, there ought to be a risk 'floor' established here until the hold period expires (April 1st, 2011).

CRI feels there is a good chance to double invested dollars at or near $16 and as a result is buying. Once filled, orders will be placed to sell half of the position at $.32 working on an open ticket...

Remember, make sure the system you are using is at least 66% accurate and for heavens' sake, don't put more than 5% of your risk capital into any one play.

That's all for this post,
Brian Beamish FCSI
The Canadian Rational Investor
the_rational_investor@yahoo.com
the-rational-investor.com

New Position Initiated - BYM.V (Baymount Inc.) December 13th, 2010

Hello and welcome back to CRI's OnlyDoubles New Trades blog.

New trade for December 13th, 2010.

The venture exchange keeps powering its way up to the Point & Figure target of 2600 area.

(stockchart.com P&F chart link)
My hunch is we will take at least the next six months to work our way up there. But hey, who's complaining. In fact, after two and a half years of almost no trading, penny stocks are back in vogue and we are going to take advantage of it.


CDNX Venture Capital Investment Model (VCIM) Trading Tip for December:


December is usually a great time to go shopping in the venture capital market. Why, you ask? One reason and one reason only, tax loss selling. This is the process where an investor sells a stock at a loss and is given a capital gains tax credit to use either now (to offset a capital gain elsewhere) or at some point in the future (to offset a capital gain at that time). Depending on jurisdiction, these capital losses can be carried forward for years so it is in an investors best interest to book a loss if capital recovery isn't realistic.

With most large cap stocks there is always a chance price will come back if earnings recover down the road. So while there is an element to tax loss selling here, it isn't as significant as elsewhere. By contrast, many venture capital stocks (that either didn't have earnings or never had any prospects for earnings) can go down and literally never come back. The way the market handles this situation is with the dreaded 'roll-back'. A consolidation of a stock is in essence the final defeat of a venture. Even the most conservative purchases prior to a roll-back can become disasters after.

This brings us back to December and tax loss selling. Those investors who had to endure a 'roll-back' over the course of the prior year have a lot of incentive to sell a stock & book the capital loss. Watching this kind of loss materialize is not only a financial blow but it can also be a psychological blow too. Investors will often want to get rid of dogs so they don't have to be reminded of their mistake and tax loss selling season was designed to do just that*. Out with the old, in with the new.

*Since they now have only a fraction of the number of shares they began with, their average cost on the position is usually much higher than current market prices. In essence, the stock will need to increase many fold just for them to get back to break-even. So, if they happen to have a capital gain tax liability (from the sale of an asset somewhere else) they can sell the remaining position (usually a small odd-lot) and offset the capital gain liability with the newly created capital loss. 
 

This brings us to CRI's latest acquisition: BYM.V (Baymount Inc.)

1 year price chart

3 year price chart

This company first came to CRI's attention when it announced an intended 'roll-back' of its stock in August, 2010 (news link). Indeed, the stock was rolled back on a 20:1 basis which at the time left a little more than 8 million shares outstanding. After the roll-back, and a further slide, the company now trades at a very paltry 0.34 times tangilbe book value per share. This literally means for every $.34 you spend, you are buying $1.00 worth of assets. What a discount!
So what does the company do?
Baymount is in the horse racing business and operates in Ontario, Canada. The company's primary development is its new Quinte Raceway and Slots (“QRS”) racino facility located in Belleville, Ontario.QRS will combine the entertainment of slot machines and dining with live horse racing. The company has received all necessary licenses and approvals for the project. The company recently brought in a development partner who, at closing, will have invested $4 million ($3 million invested to date) for a 50% stake in the QRS facility. QRS will be the 18th and final racetrack and slots development in Ontario, which hosts one of the most successful slots-at-racetracks program in the world. The QRS facility is scheduled to open in Summer 2012. Additionally (an in similar fashion) they have the rights to build the new facilities for Wheat City, Manitoba (upon government concent) and they own the rights to proprietary software designed to help betters make more informed decisions. While I myself am not a gambler (I have way more fun in the market!) I can see how this company has quite a few assets behind it and is very well positioned going forward. Their 'philosophy [is] to create [an] entertainment destinations for consumers' (link) and I don't see how (with government and institutional backing) they can't do just that.

The $3 million dollar investment by the institution is an interesting deal in itself (news link). The company floated a convertible debenture. The conversion price is $.15/share and there is a proviso in the deal that says that if the company can get their stock above $.30 for 20 consecutive days, they can force the early conversion of the debenture into common stock. The deal has closed so it is not like this might happen......it has happened. This company now has $3 million dollars in working capital (to build the facility) almost no shares outstanding (5 million in float) and if they can move the stock into the $.30 area over the next 36 months they can literally wipe out the $3 million dollar debt.

What this means to purchasers at $.075 or better. The institution has basically said it wants in at $.15. If  the IR firm the company just hired (most recent news) and the regular street crowd can run the stock up to $.30 (and with only 5 million shares in the float, I don't see that being a big problem) then this is a win for everyone. We (CRI-ODNT people) can sell half our initial purchase at $.15 for a nice little double and look to sell more up top. The company gets the institutional debt off its books, the institution has a double on its books ($.15 to $.30) and I am sure a few brokers will make a very tidy sum.

Now can you see why CRI is so excited about this trade from the fundamental perspective?

Technically, it is very appealing too. Refering to the charts above, the company's 1 year 50% level is currently near $.23 [(high of $.40 + low $.07) / 2 = $0.235] and its 3 year 50% level is currently over a $1.00.. Purchases in and around $.08 would realize an almost 300% return if a move back to the 1 year 50% level materializes and and unbelievable 1350% should the market move back to the 3 year 50% level. However, there is NO BOTTOM in price yet. We are still very much bottom fishing here. Considering the companies plan is to open the new facility some time in 2012, I wouldn't be surprised to see the stock 'pop' on that event. Nonethless, 1350% for a little more than 24 months of work, seems worth the risk to me.

Of course, once a double bottom comes in then we can start to expect higher prices but that may be afurther down the road. My hunch, we get our normal seasonal rally into May-June and at that time we will see $.15 area if not higher. This would give us a double in about 6 months time, which would be perfectly fine by CRI.

Summary
Baymount Inc. represents really good value in the eyes of CRI.'s VCIM. The stock HAS NOT bottomed yet but CRI feels small initial purchases are warranted at this time considering the very low share count, the 'guarantee' of being in the government authorized gaming industry and the circumstances surrounding this year's tax loss selling. Once a serious bottom comes in we can start to expect to see upside objectives hit but for now consider it an accumulator. Indeed, that is what CRI has done to today and will continue to slowly do into the end of the year.

Remember, make sure the system you are using is at least 66% accurate and for heavens' sake, don't put more than 5% of your risk capital into any one play.

That's all for this post,
Brian Beamish FCSI
The Canadian Rational Investor
the_rational_investor@yahoo.com
the-rational-investor.com

New Position Initiated - AGX.V (Amador Gold Corp.) December 10th, 2010

Hello and welcome back to CRI's OnlyDoubles New Trades blog.

New trade for December 10th, 2010.

After two and a half years of utter carnage in the junior market, it is nice to see so much value once again. So continuing on the theme set forth in our 1st two weeks of Q3'10 report, we have found yet another junior resource name that looks to be trading at dirt cheap levels.

This brings us to CRI's latest acquisition: AGX.V (Amador Gold Corp.).

AGX.V 3 Months (chart 1)

AGX.V 2 years (chart 2)

Amador Gold (AGX.V) came to CRI's attention in the winter of 2010 when a friend bought some. The stock at the time was $.08 and we watched it drop to $.01 (boo). Once at $.01 there just wasn't anywhere else for this little one to go. The company could either de-list or roll the stock back (at the time there was over 200 million shares outstanding). While the company had an impressive array of gold/copper prospects (Rights and hard assets that total in the $100,000's if not millions) they had no cash to pay for exploration work and as a result, no future.

TSX-Venture Cap lesson for the day
The easy fix for this problem in the venture capital arena is to consolidate or 'roll-back' the company's stock. By doing this, a once un-finance-able company now becomes quite attractive to prospective investors as the per share value of a purchase can justify the risk. To this end, you will often hear of financing activities in and around a consolidation. As an additional sign of 'value', many indebted individuals will take shares in the consolidated company in forgiveness of their debt. Since the new stock is often trading at a substantial discount to cash, this action enriches the indebted while at the same time helping the balance sheet of the debtor. A final note here, many company's will re-instate stock-option plans or grant new options to directors at the rolled back price as again these levels represent a 'floor' on the stock.

(Back to the trade)


AGX announced in the middle of October that it was going to roll its stock back on a 17:1 basis (news link). At the time it was trading .01 bid / .02 offer. That meant that after the roll-back it would be .17 /.34. Additionally, the company did a financing upon the completion of the consolidation which gave them working capital. With a little over 15 million shares out and trading at a substantial discount to book value (even today at .245!) the stock was a buy, it was just a case of when the 'technical's' might come in.
So for that part of the equation we look at the charts.
Daily notes (chart 1 above)
1. Notice how on the daily chart above (chart 1) the low of $.17 (or $.01 on the old stock) has been tested on numerous occasions of late but not penetrated.
2. Notice the double bottom of late (through $.205). While the recent low did take out the Nov. low, it was on a momentum divergence and it did not break that .17 area.
3. Notice too that a 50% retracement of just this range brings prices back into the $.255 area.....where it seems to be headed in the near term.
Daily Summary
Ideally one would like to be long this stock at or near $.205 with stops just below the important $.17 level. Upside targets in the near term would be the 50% level at or near $.255, the gap at $.28, the October high at $.31, the roll-back high ($.02 on old stock) at $.34. This may take months, weeks, or days but there is something going on here and CRI wants to be long.
Weekly Notes (chart 2 above)
1. First and foremost, the 50% level is currently sitting at $.935!
2. The downtrend line and the significant lows of the summer of 2009 suggest there ought to be a lot of resistance at or near $.60
Weekly Summary
One can make an argument that this stock is still in its bottom forming stage. I has yet to break out in earnest but once it does there is a lot of upside potential. Indeed, from current levels there is a very high probability of doubling your money...

Summary.
AGX.V now represents what CRI would consider a rational investment idea. Fundamentally the company has a lot going for it. Technically the company has a lot going for it. CRI has stepped up to the plate and bought, as a subscriber maybe you should too...

Remember, make sure the system you are using is at least 66% accurate and for heavens' sake, don't put more than 5% of your risk capital into any one play.

That's all for this post,
Brian Beamish FCSI
The Canadian Rational Investor
the_rational_investor@yahoo.com
the-rational-investor.com

New Position Initiated - WER.V (Weststar Resources Corp.) November 30th, 2010

Hello and welcome back to CRI's OnlyDoubles New Trades blog.

New trade for November 30th, 2010.

After two and a half years of utter carnage in the junior market, it is nice to see so much value once again. So continuing on the theme set forth in our 1st two weeks of Q3'10 report, we have found yet another junior resource name that looks to be trading at dirt cheap levels.

This brings us to CRI's latest acquisition: WER.V (Weststar Resource Corp.).

Image 1.

Image 2.

This company came to CRI's attention a couple of months ago when it announced that it was consolidating its stock (12 old for 1 new share). That left a grand total of 6.8 million shares outstanding and a total market cap at a little over $1.5 million dollars. Additionally, the company announced that they were going to do a financing after the rollback (October 13th) to raise working capital. The company still retained a large portion of their previous asset base [including a recently acquired interest in the Rainy River Gold Claims (tsx news link)] and as a result of the rollback (and subsequent financing) was both trading at a huge discount to its' book value per share and now in a position to go explore. Indeed, upon the roll back announcement the stock broke out of a tight trading channel at $.24 and quickly ran up to on the closing of the financing. While I was not participating in the story yet, I was watching closely.

If one were to look at the price history of this company over the past few years (Image 1. above) we see that anyone who invested in this company over this period has been hurt. Indeed, a 50% retracement of this monster down move would bring prices back up into the $1 dollar area. We also see (in typical venture capital fashion) the final insult to old investors came in October '10 when all old shareholders were required to surrender their already depressed stock for even less. It is only after this final shock that the stock starts to move higher. Whatever previous sellers existed before the roll back now have had their positions reduced materially. This is probably the hardest part of the game for new investors to understand. Yes, stock prices move up and down but it only the shares outstanding that govern weather a company can raise capital for prospective ventures. Now, in the light of only 10 million shares outstanding, one can understand how this company's stock price can work its way back up to 50% levels.

That brings us to today. Currently (11/30) there are about 10.5 million shares outstanding of which about 4 million are 'locked up' until the hold period comes off (four months after closing of financing October 28th) or until the end of February. As previously mentioned, the company has retained a large portion of their previous asset base which means that even after the substantial run of the past two months, the stock is still trading at a substantial discount to its book value. Indeed, at $.355 the current book value per share is a paltry .68.Considering the very active mining market, the juicy gold property they picked up this summer and a substantial amount of cash on hand to do field work it would not surprise CRI to see this stock not only through the highs seen recently but well on its way towards the two year 50% level in the coming quarters.

If we look at the short term chart (Image 2 above) we can see the impressive double bottom breakout in price (through $.24) and the quick run up to $.54. Very slick traders bought the stock at $.25 and have already seen a double. Patient investors (who missed the original breakout) ought to have open orders working at $.24. More realistically, a 50% retracement of the most recent move would bring price back into the $.32 area [(.12+.54)/2 = .32]. It is with these two prices in mind that we will start to try and accumulate this stock. It is super thin so be patient and work your open orders. In case these recent lows are THE LOW, CRI has taken a small position at $.37 but will continue to add to the trade on weakness down to $.24. Should we get lucky and get all that we want. I will look to sell half the position on a double. Assuming we only get our stock in the mid to high .30's then I will be looking to sell half the position at or near $.75...

Remember, make sure the system you are using is at least 66% accurate and for heavens' sake, don't put more than 5% of your risk capital into any one play.

That's all for this post,
Brian Beamish FCSI
The Canadian Rational Investor
the_rational_investor@yahoo.com
the-rational-investor.com

New Position Initiated - UNG April $6.00 Calls at $0.60, November 08th, 2010

Hello and welcome back to CRI's OnlyDoubles New Trades blog.

New trade for November 08th, 2010.

CRI's recently released TTA - First Two Weeks of Q4,'10 Report suggested that technology & commodities ought to do well for the quarter. With the recent run-up in certain commodities, value is getting hard to find. Not only have prices of base metals hit upside objectives, one might argue there is an asset bubble forming. I don't see this changing until the US Fed stops pumping money into the system but maybe we ought to be considering other commodities that don't have such dramatic downside risk.

That brings us to CRI's latest acquisition: UNG April '11, $6.00 Call Options. While most would consider natural gas a very risky asset, CRI might take the opposite opinion. Aside from the seasonally bullish backdrop and an expected unusually cold winter, one might consider natural gas 'cheap' too.

 

So aside from wanting to be long natural gas vs. oil itself, are there any other compeling reasons for us to want to buy natural gas?

Lets take a look at the UNG chart and see what it might be telling us...

 

This is a very interesting chart indeed. As one can clearly see, prices have fallen quite dramatically over the past year or two. But there a few little things that suggest that maybe the market has been a little too bearish on natural gas prices.

Some of these things include:

1. The current 1 year 50% level is more than $2 higher than current prices (that's more than 30%).

2. Momentum has actually been building not falling even though price is going down. This is known as a divergence and while it in itself isn't enough to buy, it suggests that the market is a lot stronger than what price is leading us to believe.

3. There is a double bottom in price that has broken the most recent four month downtrend line.

So as a technician, there is enough technically bullish criteria for me to seriously consider a trade. The question now is how to go about it. One could just go and buy the UNG (at the breakout near $5.85) and risk down to the recent lows ($5.20). There is a potential to make $2.22 on the trade (or about 38%) but there may be a way to do a little better. For this we turn to the options market.

Whenever I consider an options trade I always ask one simple question: Will the intrinsic value of the option (that being the market price minus the strike price) at our target be twice what the current premium is for a six month position. If the answer to this question is yes, then I can seriously consider the trade. For example, UNG's target is the 50% level ($8.075). Currently the six month (April, 2011) $6.00 Call option is currently trading at $0.60. If UNG goes to $8.00 some time over the next six months, this call option will have an intrinsic value of $2.00 (or more than twice what it is currently trading at).

So, for this trade, lets take that original risk money (5.85-5.20 = $.65) and lets go buy some call options with that. We will risk the whole $.65 and hold the options until expiry. At the same time, we will work an open order to sell half at $1.30 (double our purchase price)....Should we get near expiry and the sell order has not been filled we can either roll the position out to a late month or abandon the trade.... 

Remember, make sure the system you are using is at least 66% accurate and for heavens' sake, don't put more than 5% of your risk capital into any one play.

That's all for this post,
Brian Beamish FCSI
The Canadian Rational Investor
the_rational_investor@yahoo.com
the-rational-investor.com

New Position Initiated - MSFT October 28th, 2010

Hello and welcome back to CRI's OnlyDoubles New Trades blog.

Here you will find new trade ideas that CRI is initiating in CRI's account. If it is posted here, then we are doing it.

New trade for October 28th, 2010.

CRI's recently released TTA - First Two Weeks of Q4,'10 Report suggested that technology & commodities ought to do well for the quarter. Considering the fact that X-Mass is just around the corner, gaget hungry consumers ought to help tech. outperform. Additionally, CRI's most recent CTS is still quite bullish of US stocks and specifically the Nasdaq.

So the question then becomes, if one were to invest in technology where should one do it. Since most tech. companies trade at very steep valuations, finding value amid this group can be tough. Few of these stocks will trade at a discount to book value since growth in tech is still very much alive. In fact, if you buy into the 'cloud computing' revolution, there is still way more growth to come.

That brings us to CRI's latest acquisition: MSFT

This once growth powerhouse seems to be trading at utility levels with little regard to the fact that this is still the largest market cap tech stock around. Specifically, MSFT currently trades at 12 times current earnings and a paltry 9 times forward earnings with a dividend near 2.5%. If we assume that Microsoft isn't going to grow at all over the coming year then these metrics will change little. However, if we assume a small positive change to any of these numbers then the stock could take off.

So what may bring change?

Microsoft of course is well known for its Windows operating systems and MS Office platform of software products. These are the classic drivers of the company (the 'bread and butter" if you will) that will ensure Microsoft's utility status and I don't see any significant change here for a little while yet.
But did you know that Microsoft is eating Nintendo's lunch with thier new paddless motion video games unit for the X-Box 360? and even more impressive, did you know that Microsoft owns a considerable portion of Facebook....bet you didn't....
This brings us to the notion of cloud computing and what I would consider the next wave of internet expansion: applications/services provided online. The combination of a Wireless X-box console, social networking capabilities, a plethora of applications/content and a monstrous cash position put MSFT in what I would consider a very good position to dominate this space. Yes there will be competition from the Goggles and Apples of the world but this market is so big and Facebook is so popular, MSFT doesn't have to worry about be crowded out just yet.

If you looks at the chart above, one can't help but notice that MSFT is trying very hard to break out of a wedge pattern. The tight double bottom has given us both an indication of demand for the stock and a nice little entry point. While price and momentum look good, I will concede that volume hasn't been confirmed yet - but that may come in on their quarterly earnings which is due out after the bell October 28th.

Simply put, with the recent double bottom and momentum breakout - I would fully expect the winter/spring highs of last year to be tested in earnest. If the market does move into that range then the options that we are considering will be 'in the money' which is a very strong position for options with a lot of time remaining. Ironically enough, even with the street's current earnings projections, the mean avg. price target by analysts for the coming year is $31.85 (or 21% higher). This means that the street fully expect those highs to be tested an further to be taken out....But what happens if Microsoft happens to beat those numbers?

This then brings us to the trade. Currently MSFT is about $26 dollars per share. The January, 2012 $30 call options are currently $1.40. This option lets you control 100 shares of MSFT for next 15 months at $30 or higher. The premium is $140 (or about 5%). As indicated above, the mean avg estimate (based on current projections) is for the stock to hit $31.85 over the coming year. If this happens then the Jan., 2012 $30 call will have an intrinsic value of $1.85 or $.45 higher than current prices (or 32%). But what happens if the stock breaks those highs?
In CRI's opinion......the next target is an incredible $39.46.

This would be the case because a weekly close above $31.27 would confirm a bullish flag pole chart formation. This can be clearly seen on the Monthly price chart included above. As well, it appears that the upper cycle bull trend line also sits in this area. While I don't expect that line to be hit for another couple of years, it is still out there and if the market gets really going then this is where I would expect significant resistance to come in.

Now, at $39.46  these $30 call options will have an intrinsic value of $9.46 or about 547% higher than where they are today. I'm not saying its going to happen, but considering the huge upside potential, the relative 'hated-ness' of MSFT and the compelling growth story coming out of a Wireless X-Box/Facebook I think this trade is worth the risk.

So in summary then. MSFT has what I would consider to be limited downside risk while at the same time quite a bit of upside potential. While I do not expect the stock to double over the coming year, I do see an opportunity to double one's investment capital through the options market. I have bought (and will look to buy more on pull-backs) the January, 2012 $30 Call options on MSFT up to $1.45 today. I will look to sell half the position at or above $3.00 (hopefully on the coming earnings news!) but am more than happy to ride this position for the next year and three months until expiry.

Remember, make sure the system you are using is at least 66% accurate and for heavens' sake, don't put more than 5% of your risk capital into any one play.

That's all for this post,
Brian Beamish FCSI
The Canadian Rational Investor
the_rational_investor@yahoo.com
the-rational-investor.com

New position initiated - ASX-V. October 20th, 2010

Hello and welcome back to CRI's OnlyDoubles New Trades blog.

Here you will find new trade ideas that CRI is initiating in CRI's account. If it is posted here, then we are doing it.

New trade for October 20th, 2010.

With the impending Republican sweep back into the House of Representatives (and maybe even the Senate too) It seems one ought to be taking a good look at sectors that will do well in that event. Oil has always been a mainstay of the Republican party and I do believe that the market is thinking the same way.

CRI's recently released TTA - First Two Weeks of Q4,'10 Report  suggested that commodity related assets ought to do well for the quarter. And specifically suggests that Energy shall be one of the best performing asset classes for the quarter. Additionally, CRI's most recent CTS is still quite bullish of Oil and has a close to $90 target.

So the question then becomes, if one were to invest in energy where should one do it. One could buy a large stock and even an option on a large stock but the screens suggest we look a little further down the food chain...

We use the Ven Cap Inv. Model to screen potential fundamental candidates.


ASX-V (Alberta Start Development) for example screened very high.

With only 21 million shares outstanding (5:1 rollback in March, 2010) and currently trading at .79 price to tangible book value per share, this company is (in my opinion) very cheap. As well, over the summer they announced both an asset purchase and shares to insiders of the company (in the form of options to directors).

Technically, ASX has recently completed a very wide based 'W' or double bottom price pattern. This pattern was confirmed when prices closed above $.45 the second week of September. CRI was able to work open orders to buy the stock at $.455 and has been filled over the past two trading days.

According to the 50% rule, one ought to expect a run into the low $.80's over the coming weeks. Considering the fact that they are currently drilling multiple wells and news of potential production increases could hit any day, it is not surprising the market put the bottom in and is slowly working the stock up.

I will have an open order working to sell half the position at $.91 and will let everyone know when I get filled. Once we get to that point we will decide if holding onto the remaining position makes sense.

Regardless, ASX-V appears to be a good little company that is trading at a fraction of its book value.

That's all for this post,
Brian Beamish FCSI
The Canadian Rational Investor
the_rational_investor@yahoo.com
the-rational-investor.com