247Bull portfolio update: 2 January 2013

This article provides an update on the 247Bull investment portfolio. It includes details of the companies we have sold, those we have purchased, and those we have placed on probation.

Recent sales

None.

Recent purchases

Olivut Resources Ltd (CVE:OLV): Olivut is a diamond exploration company which is exploring for diamond-bearing rock in Canada and South America. Olivut is well managed, well financed, and offers huge potential upside for investors. Read the August 2012 company profile here.

Sandstorm Metals and Energy Ltd (CVE:SND): Sandstorm Metals and Energy is a resource company that provides exposure to the price of copper, palladium, coal, natural gas and oil. Sandstorm Metals and Energy has an excellent business model, a management team with a proven track record, and all of its projects are located in politically safe jurisdictions. Read the December 2012 company profile here.

Sandstorm Gold Ltd. (CVE:SSL): Sandstorm Gold is a gold streaming company that operates in a similar fashion to Franco-Nevada. The company provides upfront financing for gold miners that are in need of capital. In return Sandstorm receives a gold streaming agreement which gives them the right to purchase a percentage of the gold produced by its partner companies at a fixed price, for the life of the mine. Sandstorm currently has nine gold streaming agreements, but it has plans to grow its low cost production through the acquisition of additional gold streams.

Companies on probation

The following companies within the portfolio are on probation, meaning that we are keeping a close eye on them and if they continue to underperform they will be sold.

Cameco Corporation (NYSE:CCJ): The recent bounce in the price of uranium has helped Cameco recover some ground since it was placed on probation in November. To avoid being dropped from the portfolio the company must remain above its 2011 lows of around $16.25 to $16.35.

Gold Resource Corporation (NYSEAMEX:GORO): Gold Resource Corporation has been plagued by problems (documented here), however on 15 November the company provided a detailed update for investors in which it took the time to address each of the issues that it has been facing (see here).

From the November article:

“Although GORO has not yet provided the capital appreciation expected, we will continue to hold the company as a long-term investment. GORO remains an excellent company and the poor performance of the stock is somewhat tempered by the monthly dividend income which is now equivalent to 5.59% annually.

The company also offers shareholders the option to convert their monthly cash dividend into physical gold and/ or silver and take delivery of their precious metals.

Our target for the stock (2-3 years out) is $30.”

McDonald’s (NYSE:MCD): McDonald’s is the world’s biggest fast food chain with more than 33,000 restaurants worldwide. Over the past 10 years the company has increased its dividend payout by 27.4% per year and the stock price has risen by over 469%.

However 2012 was not a good year for the company. A weak global economy, competitive pressures and a stronger dollar all reduced McDonald’s profitability last year. Same-store sales slowed and even turned negative for the first time in nine years, though they did improve in November with sales up 2.4%.

The company plans to boost sales by offering more products as part of its dollar menu and by focusing on value deals such as the 100 yen menu in Japan and the 2 euro burger in France.

It’s too early to say whether the November improvement can be attributed to this new strategy, or whether it is the beginning of a recovery, however the long-term outlook remains positive. The stock is attractively priced with a forward P/E of 15.6x (versus 18.8x for the industry) and it still pays a decent dividend of 3.5%.

McEwen Mining (TSE:MUX): McEwen Mining has agreed to a settlement regarding their ownership dispute on the Los Azules copper project in San Juan province, Argentina.

From the November update: “The company has also chosen to raise $60 million via a rights issue which allows existing share holders to buy additional shares in the company. In a letter to share holders last week, Chairman & Chief Owner Rob McEwen, stated that he has ‘personally committed to subscribe for any and all unexercised rights, thus insuring our Rights Issue will be successfully completed’. Mr McEwen also stated that he ‘will be investing a further $15 million in the Company… because I like our growth prospects and I see value in our large and expanding mineral resource base’.”

Our holdings of McEwen Mining are down 14.2% but over the next 18-24 months we expect good things from the company.

Newmont Mining Corp. (NYSE:NEM): Newmont is the largest gold producer in the US and the second largest in the world. The company’s fortunes are tied to those of gold. If gold continues its march upwards, Newmont will likely follow.

When the price of gold begins to move higher Newmont will become attractive as an income play, since it has linked its dividend payouts to the gold price. Investors will receive a $0.20 increase in the dividend payout for each $100/oz rise in the average realized price of gold. Shareholders could receive an annual dividend of $4.70 a share if the average realized gold price reaches $2,500 an ounce.

Pinetree Capital Ltd. (TSE: PNP): Pinetree invests in early stage micro and small cap resource companies in the following sectors: precious metals, base metals oil & gas, potash, lithium and rare earths, uranium and coal.

From the November update: “Pinetree reached a high of $4.29 in February 2011, however by May of this year it had reached a low of $0.78. It looks as though the company made a bottom back in the summer and we like Pinetree as a long-term holding, however it is now approaching support and failure to hold will see it ejected from the portfolio”.

The 247Bull portfolio (Click on the chart for a larger version)

Portfolio as at 2 January 2013

Overall the 247Bull portfolio is down -1.83%, however the medium and long-term outlook for the companies and assets held is very positive.

Watch list

With uranium showing the first signs of life and the bullish outlook for the sector in 2013, we are keeping an eye on Strathmore Minerals Corp. (TSE:STM), Denison Mines (NYSEAMEX:DNN) and the Global X Uranium ETF (NYSEARCA:URA).

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