Thursday, August 15, 2013
Claude Resources (CGR) - 10 Bagger on the Way(?)
This brief post is for those unfortunate souls who followed me right into the Claude Resources (CGR) muck and have persevered the nightmare of holding a huge draw-down for quite a long period of time. I commend you for your courage, your faith in the gold bull market and your ability to be the very quality required this time around, which of course, is the quality known as patience.
I made a simple chart of CGR to share with you. On the left side of the chart is the daily price action, and on the right side is the weekly.
The earnings and estimated earnings on both charts are from 2009 forward, and are current.
Here is the chart:
The company recently announced their earnings for Q2 and you can read the transcript of the conference call (I have) if interested. I didn't receive any lightening bolts of inspiration from the discussion, but that's OK. The company is cutting way back on expenditures, targeting the mining locations with the higher grades of gold ore, and basically making what appear to be reasonable decisions that will help them weather the storm.
Probably the one tidbit of some interest to me was the discussion about taking a $10 million hit this quarter. They decided that as gold valuation has sharply declined recently, the valuation of the gold in their mines has declined so they recognized this by declaring an adjustment (loss) to their tangible book value.
OK. I guess that makes sense. So now their tangible book value, I read, is $1.00 per share. But as the stock sells for only 23 cents per share, I guess that means their stock sells for 23% of tangible book value. (I could have been a math teacher, right?)
But getting back to the chart above, and my comment about the potential for CGR to become a 10 bagger in the not so distant future, you may recall an article I wrote about my trading experiences during the 2008 'similar hell'. And whether you recall the article or not, my reminder relevant to now is that the stock I owned did finally bottom at literally 2.5 cents, and within hardly more than 2 years thereafter, the stock soared what amounted to 2766%.
These things happen. And when the mining sector is taken down, it is taken way down. But the gold bull, by any measure I am aware of, is alive and well. In fact, I really think Fibonacci nailed the exact bottom in late June and 'we ain't' going there again.
So fellow martyrs, we have a True Strength Index indicator (TSI) trend line break on both charts - one using the slower and trend following TSI (25,13) and the other using the speedy TSI (7,4).
We also have a positive divergence BUY signal on both charts. About the only BUY signal missing for the full tamale meal is the ZERO crossover. With readings of just -0.05 and -0.18 we are just about there.
Smile - you deserve it!