Pooling of human capital for the unofficial 'Two Plus Two Portfolio'

[SplawnDarts]

[ QUOTE ]
List so far:

HERO: Hercules Offshore. (Nasdaq) (out of interest are you worried it has slowly gone from $44 to $26 in last 10 months? currently at $26.10)


[/ QUOTE ]

That's precisely WHY I want to buy it - it's a fantastic deal. It got run up post Katrina because they were booked solid doing rig repairs, and then when that ended HERO became suddenly un-sexy but they're making more money on an average day now than they were back then because they acquired a rig or two and some extra boats.

If there's a downside to HERO, it's in the accounting or operations (and I can't find it), NOT the low price [img]/images/graemlins/laugh.gif[/img]

[john kane]

bump

could you please put down your favourite stock for the coming months.

[dazraf69]

BJS, HAL, VLO

[missmisery]

AUN.V

It is a near-time silver producer (production should begin this month) that is ridiculously undervalued. I may post a detailed analysis if anybody cares.

[DISORDER]

missmissery,

I'd like to see your writeup.




As for a few suggestions NXG is a definite bargain. P/E is well below industry standards serious room for growth.

I also like BVX.TO and ISE

and of course HAL

[missmisery]

Here's my analysis on AUN.V (closed today at 1.25$)

Disclaimer: I own shares of this company so it is in my best interest to promote it. You should do your own DD and double-check my analysis.

I follow exclusively the resources sector and for investment purposes, I like to focus on near-term producers as they offer a very good risk/reward ratio.

With the recent closing of the private placement, Aurcan has a market cap of ~100M with 90M shares (fully diluted). AUN will start miling 1000 tons per day (tpd) at their LaNegra mine in mining-friendly Mexico this month.

In order to evaluate AUN, we need to see how much money each milled ton will generate. Based on historic data of the area, each ton should generate between 125$ and 180$. (125$ being very conservative. I believe the true cost will be closer to 180$). For this analysis, let's use 150$ / ton. This would cashflow 50M in a year, or 0.55$ /share. Small producers usually trade at a multiple of 8 times earnings. So based on these numbers, we get a 4.40$ target. Since AUN will start production right now, I believe the share price will start to climb very quickly and we could see 4$ by the end of the year.

Aurcana recently announced the acquisition on an other mine that could be put in production in 2008 and add an additional 600 tpd. Using the same numbers, it would cashflow 0.87$/share and thus a valuation of 6.75$ would be in order in 2008. As the production increases, it should trade at a higher multiple of earnings so 8$ would be more realistic.

In addition, I expect a few other acquisitions in the upcoming weeks/months. The company was already well financed and they are on the verge of being a producer. They closed tonight a private placement of 21M $. Why would they such a large amount of money right now? This is pure speculation, but I strongly believe that a few major acquisitions are in the work. This is the only logical explanation for such a large financing right now. It is well known that management is looking to acquire projects that can be put in production very quickly.. They know that sooner or later, precious metals will appreciate and they want to acquire projects right now in order to be a producer during the bull market.

My previous targets do not take into account further acquisitions since it is speculative. But if Aurcana can acquire one or two projects, the production could be greatly improved and thus a target well over 10$ would be required.

Finally, I like to look at the exercise price of the warrants in private placements as an indicator of where the management thinks the company is going. Each warrant allow the holder to buy a common share at 1.85$ and the company can accelerate the expiricy date of these warrants if the stock trade 20 consecutive days above 3.00$. This 3$ says to me that management believe they can reach this value sooner than later. Usually, I find it a very good sign when the warrants and their trigger price are way above the current price.

In resume, what I like here is the risk/reward ratio. Unless their mine collapse, I can't see a lot of risk and the potential is huge. I have 24 months target of 8$ and the upside is quite huge with a few key acquisitions. While I believe risk is low, it can be very volatile as any stocks that trade on the TSX-Venture.

They just announced the closing of the private placement which was holding the share price. Now that is it behind us, I expect a lot of news in the upcoming weeks and I believe it won't be long until we reach 2$. It may not reach my targets, but I just don't see how this stock would fail to return 100% to any investors patient enough to hold it for a year or two.

[hawk59]

Where is the $125-$180/ton figure coming from? Is that revenue? Net income?

[missmisery]

[ QUOTE ]
Where is the $125-$180/ton figure coming from? Is that revenue? Net income?

[/ QUOTE ]

From each ton you process, you extract a certain quantiy of silver (plus other metals too) depending on the grades (usually expressed in grams/ton). Let's say that when you process one ton, you get for 200$ worth of silver. It costs 50$ to extract it so you get 150$ a ton.

This recent article ( http://www.resourceinvestor.com/pebble.asp?relid=29510 ) about another near-term producer used close to 125$/ton in their estimates. However, based on historical data, Aurcana has higher grades than ScorpioMining. Therefore, for each ton processed, Aurcana will recover more silver than Scorpio. Thus my 150$/ton approximation

[burkoboy]

(NYSE:CX): Cemex.



Cemex SAB de CV ADR CX


Analyst Picture by Matthew Warren


Analyst Note 01-31-2007

Cemex CX reported solid fourth-quarter results Monday, with sales and operating profit up 13% and 21%, respectively. This capped a year in which the firm produced nearly $2.7 billion in free cash flow (before growth-oriented capital expenditures), or more than 10% of its current market capitalization. We are maintaining our fair value estimate at this time.

Despite the fact that U.S. sales and volume worsened throughout the year, pricing and productivity gains still allowed for substantial profit growth in this key market. As price increases become increasingly difficult in the states, we expect margin pressures to emerge in the year ahead. This tough situation is highlighting Cemex's improved diversity, as its home market in Mexico improved in 2006 and its enhanced position in Europe is really beginning to bear fruit. The firm's strength in Europe is directly attributable to the RMC acquisition in 2005, and promised cost savings are coming through just as its end markets begin to pick up speed. That large deal looks smarter with each passing day.

Cemex is waiting for its Rinker RIN acquisition to be blessed by regulators on both sides of the Pacific before it contemplates any further moves. In the meantime, we expect Rinker's 2007 profitability to suffer relative to 2006 as it laps price increases put in place before its key U.S. end markets turned south in dramatic fashion.
Thesis 11-01-2006

Cemex's assets would be nearly impossible to replicate. This narrow-moat firm enjoys enviable positions in some of the world's most attractive markets, and its seasoned management team boasts one of the lowest-cost structures in the industry.

While similar grades of cement are essentially commodities, transport costs act as a barrier to entry for incumbents in geographically protected markets. The cost structures at the cement plant as well as the distribution level--Cemex is a leader in both, thanks in part to its flexible energy strategy and advanced logistical capabilities--determine the baseline economics in a market. If production costs are lower in another region, this disparity can be profitably arbitraged only as long as transport costs don't chew up the difference.

While waterborne transport is by far the cheapest, this service has doubled in price over recent years because of tight ship supply and escalating fuel costs. Despite this, cement continues to be traded among coastal regions to alleviate supply and demand imbalances. As one of the industry's largest cement traders, Cemex benefits not only from its well-protected inland plants, but from seeking out underserved markets as an outlet for highly profitable incremental production.

Another barrier to trade involves government intervention, often in the form of quotas or tariffs. In fact, Cemex will be a prime beneficiary of the unwinding of one such situation. The U.S. and Mexican governments have negotiated a reduction and eventual elimination of long-standing limits on Mexican cement imports. Because U.S. demand has long outstripped domestic supply, Asian plants have filled the gap. If Cemex can supplant a portion of this business with its Mexican cement, the additional volume and attendant operating leverage could yield quite a windfall.

Cemex has a long-running record of using the steady and substantial cash flows from its Mexican operations to support the cheap debt necessary to opportunistically acquire competitors around the globe. With Mexican population centers largely landlocked, Cemex has captured more than 50% of the market. And because self-construction is so prevalent, the firm has amassed a substantial brand and distribution advantage, which allows for prolific margins on bagged cement. Now a global powerhouse, Cemex is well positioned in an increasingly oligopolistic industry.
Valuation
We have raised our fair value estimate to $45 per share from $33 to reflect higher assumptions for Cemex in its existing form and the value creation we expect from the proposed Rinker acquisition. With the RMC acquisition in 2005, Cemex management once again proved its expertise in merger integration and the sharing of best practices. We expect more of the same if the Rinker acquisition moves forward. Modeling the combined entity, we project 6% compound annual revenue growth over the next five years and expect operating margins to fall below 15% (thanks to the tough residential construction environment in the United States) before returning to our midcycle margin assumption of about 17%. Though revenue and margins decline during global downturns, average cement volume growth generally tracks GDP growth, and prices tend to move in step with inflation. We employ a 9.3% cost of capital in our discounted cash-flow model.
Risk
Cemex's Mexican operations still produce a significant portion of the firm's cash flow, though this would decrease to less than one third if the Rinker acquisition is completed. As professional homebuilding grows faster than self-construction in this market, lower-margin ready-mix sales are advancing faster than higher-margin bagged cement sales. With the Rinker acquisition, Cemex will have increased exposure to now-busting residential construction in formerly hot U.S. markets.







Cemex is now a 5 star stock on morningstar

Cemex has dropped significantly with the how the market is going. Even if we don't decide to invest in cemex, I definitely think we should get this up and going ASAP since the markets are somewhat down.

Stock Price
As of 01-31-2007
$35.38
Fair Value Estimate
$45.00
Consider Buying
$34.70
Consider Selling
$56.40

Closed at $32.80 today

[latefordinner]

just go to MSN stock selector and pick their top ten stocks for the day, or go to CAPS at motley fool and find recently added 5 star stocks added by the top ten performers and you have just as much chance at 'beating the market'

Personally I have done research on a number of "clean tech" and renewable energy plays that I think will significantly outperform the market as medium-long picks (ie 3-4 years, but who knows where energy will be in 7 or 8). PZD is actually a decent way to play them I think (though i think they should pick up FTEK) but I'll write up the most promising of the candidates sometime tomorrow if anyone has any interest in the sector.

if you don't want pure granola hippie exposure, CY and AMSC are both good plays. more tomorrow.