Reiteration of Existing Position - PRC.V (PanTerra Resource) February 17th, 2011

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

This post has more to do with a reiteration of how much I like one company rather than an entirely new stock. The company specifically is PanTerra Resource (traded on the Cdn. Venture exchange, symbol PRC.V)  

Fundamental criteria

The stock first came to my attention when the company announced they were going to roll their stock back on a 1:15 basis in October, 2009. (news link). 

The company has recently announced substantial grant of options to directors at $.25 in November, 2009 (news link), $.24 in September, 2011 (news link) and again at $.21 here in January, 2011 (news link).

Currently (at $.25) the company is trading at a rediculous .325 price to tangible book value. Today they announced they have a 90% increase in NPV from a little over $6 million to now over $11 million (news link) 

Technical Criteria

 The charts really speak for themselves. It looks like there is a serious pivot on the stock at $.25. Considering the fact that so many directors are long from in and around that area, I am more than happy to go bottom fishing here.

Momentum looks text-book here. The market is working a double bottom from today's break above $.25. The last piece of the puzzle here is volume. Should buyers come along in size - look out...

Fortunatly or unfortuantly (I don't really know) many popular investment sites (like stockcharts.com) havn't taken into account the roll-back so their weekly charts are totaly wrong. This could work in our favor but I really don't know at this time. Anyway, the above chart is from the TSX themselves so I feel good it is ligit. As one can see, this stock tanked in the 2008 bear and never came back. While I am reluctant to suggest we are going back to $11/share, technically speaking, this stock will eventually want to get back to the multi-dollar area. As well, they always say, the longer the base, the bigger the run. If that is the case, this one has got a long way to run!!!!

Summary

Based on the fact that the company is trading at a huge discount to their asset base and the fact that the company has been slowly loading the insiders pockets with stock over the past year, I am more than comfortalble to suggest there is solid fundamental reason to be in PRC. Additionally, the technical picture supports higher prices going forward, with a near term target in the $.355 area and a long term target well north of that. 

I will submit that I have been buying this little one along the way for some time now and my cost is about $.21. Considering the double bottom breakout on the news today, I would be more than happy to add to that position. And while it is tough to make the technical argument for $.50 in the near term, I have no problem shooting for that some time over the coming spring rally. Similarly, if you consider yourself a slick trader, work open orders in and around that $.21 area and see if you can pick up some panic/month-end selling pressure stock.

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 - ZN.V (Zinccorp) February 09th, 2011

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

New trade for February 9th, 2011.

Every once in a while you come across a story that literally gets better and better the more you dig into it. Today we have to fortunate opportunity to learn of just such a story (have I got your attention, yet?). Here it goes...

The company specifically is, Zinccorp Resources (ZN.V). Currently CRI has been accumulating at or near $.16. The market is actually lower then where I bought it, but for disclosure purposes that is where I am long. And after we do the analysis, you will understand why I am ok with that cost.

Fundamental background

Zinccorp, like so many of the junior resource sector, is completely reliant on financing and more specifically flow-through financing (to learn more about why flow-through financing is so important to the Canadian Resource sector, I suggest you go here: link) to fund operations. Since we know the market is reluctant to finance companies with large share counts, we can make our lives much easier if we focus on resource related companies with low share counts. With this in mind, ZN has a total of 18 million shares outstanding (relatively low - keep in mind our VCIM model looks for stocks with less than 20-25 million shares out). As rediculous value hunters, we hate to pay more than book value for an asset. Ideally we would like to pay a fraction of book value for assets (to learn more about why book value is a good measure for the actual value of a company, I suggest you go here: link).ZN currently is trading at .50 tangible book value per share. This literally means for every dollar you spend in the market, you are buying two dollars worth of company.....HELLO!

So lets dig a little deeper shall we. The company describes itself as "a member of the Hughes Exploration Group of companies. A recently formed, tightly held junior mineral exploration company. The Company had a zinc/lead/silver discovery on the Michelle Property, one of its four highly prospective properties in Yukon, Canada in 2007, 2008 and again in 2009. Zinccorp has recently expanded its exploration profile into the prolific Timmins / Larder Lake mining camp adding a new gold dimension to its exploration portfolio." (company website). Frankly, I was not impressed when I went to the site. It is poorly laid out and way out of date. And this may be one big reason why the stock is so un-followed (if that is a word?!?) and trading at such a huge discount. In this modern day and age, you gotta be up to speed or you will be left behind. Having said that, this to me represent a potential opportunity. The company is trading at .5 time price to book so they must have something. Indeed, they do have two signficiant plays going. 100% interest in the Michelle Project in north-central Yukon Territory (zinc, lead, silver and gallium...news link) and 100% interest in newly acquired Timmins / Larder Lake property (news link). Something doesn't make sense here, right? When in doubt I always pick up the phone and so that is exactly what I did. I was very fortunate to be able to get a hold of a company executive and have a nice chat (he shall remain anonymous for this post). It turns out that yes both properties are going well and plans for a 2011 exploration budget and exploration calendar are being put together. Additionally, he told me that the company is drilling on the Timmins property as we speak. WHAT?!? I asked him why the TSX for example didn't have the news and he said that the person handling the IR left the company at the end of the year and hasn't been replaced. Can you believe that!?! If you can't please feel free to call the company yourself and do your own DD (Telephone: 604-685-2222).

So here is a poorly followed company with horrible IR. They are trading at .5 times price to book and only have 18 million shares outstanding. The last question that needed to be answered was where were the insiders of the company long? To answer this I had to do some serious digging. It turns out that way back in July 2008 (when the Yukon deposit was first discovered) the company granted 3 million options to directors at $.15 good through 2013 (news link). BINGO!

Technical picture

The technical picture is almost as compelling as the fundamental; here then are the daily and weekly charts for ZN (since the stock is poorly followed Stockcharts.com won't even carry it so I have included the basic TSX charts (link).

The daily chart has yet to bottom in earnest so any buying right now is 'dipping our toes' kind of buying. Having said that, the current 1 year 50% level is $.325 and the three year 50% level is currently near $1.33. This literally means that if we buy the stock for less than $.1625 we can realistically expect a double at our initial target. Once we have some free stock we can shoot for the $1.33 as our ultimate target. 

Summary

With the above mentioned in mind I feel like this company is extremely undervalued and can realistically double from current levels. The stock has not put in a technical bottom so I am not looking for it to take off tomorrow. Considering the low share count, the fact that the company is drilling and we are heading into a seasonally very friendly time for the stock market, I have gone ahead and 'dipped my toe' at $.16. Upon a respectable double bottom (our classic W pattern) I will add to the position. Hopefully that will still be below $.16 but one can never know for sure.

So the question for your is how do you read the next line:

opportunityisnowhere

Since you are a subscriber, I think we know the answer....

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