Stock advice in actual English.
Joined Sep 2, 2009
1,224 Blog Posts

New Position: SLW

I think the other contributors on this site are dead on about a new move in the precious metals, so I have my lotto ticket selected. I bought SLW for $24.90.

SLW has managed to keep revenues flat from 2011 to 2013; think about that. Gold and silver were cut down (silver lost more than 50% from the highs). But SLW held revenues flat.

How did they accomplish this? Well, part of it was probably that they weren’t getting the top dollar for their production anyway (either holding out for higher spot or held down by existing futures contracts). But an equally big attribute has been the unwavering stream of acquisitions they’ve been from 2011-2013.

They’ve been offsetting their own loss of revenues by buying out competitors.

That has put them in a curious position of being a very strong play on a rebound in silver and gold. In spite of that, when I look at their cash flows and financial position, they don’t look distressed (if you believe their filing, it’s foreign).

Personally, I don’t completely renounce my common sense here, and I’ll be on the look out for signs of trouble (for instance, creative accounting and instruments of financial destruction buttressing up their book).

But at the moment, taking a new position at these levels feels right enough. They pass the first smell test.

I offset the purchase will sales of HCLP and BAS.

No before you ask, I do not think HCLP or BAS are to be sold here, I just have way too much in them after they doubled this year. It made sense, while taking this new position, to use them to offset the purchase. My other positions were driven below 10%. I need to rebalance soon but want to wait to see if BAS and HCLP can break out further before I do too much.

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  1. boyaj

    Cain, did you sell your entire positions in HCLP and BAS? Not asking for the purpose of getting “stock advice” on those two companies, but for gaining insight into your trading strategy and tactics. Appreciate the insight.

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  2. Mr. Cain Thaler

    No, offsetting sales just to cover the new position. HCLP and BAS together still make up like half my book. Two originally 15% positions going on 130% runs will do that.

    I am not selling out of either.

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  3. boyaj

    Makes sense. That’s what I’d call the best rebalancing problem to have. Thanks for the response.

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