Taken from Investor Guru the (DIG)
Dear Guru: What is your opinion now on STS - the stock seems to be going nowhere. Do you still like STS short and long term???? Thanks in advance
RESPONSE: Absolutely! Read their last few press releases as to upcoming projects. STS has just closed a PP and another will close soon. We were in this one as well. We may be accumulating another large position and making a market for STS, to dry up the supply soon. It will take time, but we believe in management and that they have sourced good projects. However, short term we need some help from gold prices to cause a turnaround in the junior expl. markets. Until then we continue to accumulate long term positions in several very beaten up companies with good properties and past results. When the supply dries up we will have tremendous leverage at cheap prices.
Here is how we look at STS and other juniors we like. You have heard the saying "buy when everyone is selling and sell when everyone is buying". This is at least true for trading positions, until long term fundamentals work out and become recognized. We practice this and it has been the source for most of our big wins.
We first recognize existing or developing fundamental value. We buy when they are ugly, quiet, beaten up and forgotten. We manage our risk/reward on the way up to take some profits for other deals or to average back in on pull backs. The key is to get in low, sell half on doubles to regain capital and maintain liquidity, leaving a core position which can be held without worry. If it runs you really score, if not your risk is minimized. Most of our 10 baggers were held for over a year before they made their run. When they do run it is almost impossible then to get enough stock at cheap levels to make the run meaningful. STS closed at .13. It might take us a month to accumulate a 100,000 share position at under .20. You can imagine how hard it would be when it starts moving up again.
You have to position slowly, quietly and over time. This type of time and price positioning requires a keen eye for value and lots of patience and guts, as opposed to investing on fear and greed with the action. We prefer this to hopping with the crowd on the weeks most active trader for a few dimes, before the usual blowup. In other words we wait for the crowd to come to us. Maybe not for a few months or longer, but the resource market will come back as it always does. This is a bottom fishers market, if you are patient.
Note: we do often trade active stocks as well, but purely on technical action and we move in and out very quickly. We comment on these stocks at 900 MR STOCK and in Email MR STOCK (which we will start up next week), but if we tried to post these stocks on our site, we would usually have sold them before we could get all the info uploaded.
Another key to success is to invest your time to know what you are doing. The more you know the sharper your darts become. We know most of the companies we invest in on a first name basis. Putting money into the market is easy. Understanding that successful investing is not about joining the crowd is more difficult. Successful investing is however, figuring out where the market and the crowd will go next.
Another saying goes "bulls make money, bears make money, but pigs and sheep get slaughtered". This means in a bull or bear market, for good value or technical investors, long or short, there are always opportunities. However, those who follow the crowd like innocent lambs, without understanding what a stock is really worth, or who refuse to sell anything like a pig who is greedy, usually loses.
What does all this have to do with STS? We sold some of our trading position in STS over $2 and at the time regretted it. The temptation to hold on was never greater. We still hold our core position which was purchased from .48 to $1.22. Now with STS at .13, we are grateful for our trading position rules. Now that greed has turned into fear for resource stocks, bargains abound. We took another look at STS and what they are doing and plan to do. The properties they are acquiring in Uganda and Zaire "DRC" look great so far. They would have cost substantially more a year ago and most couldn't have been acquired then. Plus STS still has the larger Riverstone diamond concession in Angola, which is near producing concessions. They recently announced private placements and we decided to take part again. Now STS has the funds to move forward. This time last year when STS was getting close to $1, before it ran to $3, we would never have imagined that Bre-X would be a bust, gold would be $100 lower and STS would be under .20. Next year hopefully will be more like 1995 or 1996 than 1997. In any event we feel STS has as much promise now as it did last year.
home.istar.ca |
