StockBullz.com

Stockbullz.com Weekly Stock Newsletter #4

April 7, 2006

 

“Wide diversification is only required when investors do not

 understand what they are doing”.

 

Dear Canadian Stock Investor,

Quite a bit of things to talk about for this week so let me get right to it.

First off, I want to let you know that I am removing 4 stocks from the recommended table. They are PLY, CEK, CNS, BSKO.

I have not like how PLY has been moving ever so slowly downwards for the past month or so. I don’t like their chart and even though some news has been released, it doesn’t appear to have much effect on the share price. PLY was always intended as a speculative trade and I more than doubled my money on it in about a month. Now I’m moving on, looking for a better place to invest my money in. I hinted at this last week and this week it’s off the chart.

CEK, CNS and BSKO are all Kazakh oil ideas. They have done very well, returning somewhere in the area of 50% in about 4 months. I still think that investing in Kazakh oil is a good idea but I think that ABG and POE are better investments. Those company’s share prices have performed about twice as well as the others so I have to think that these are better companies and their share prices will continue to perform better their counterparts.

In general, I prefer to focus my portfolio on fewer companies. Yes, this may put it at risk of higher volatility but I am also in a great position to increase the value of my portfolio. Let me give you a very simple example:

I am always looking for doubles. If I own 5 stocks (each 20% of my portfolio) and one of them doubles and the rest stay even, I have a 20% return for my whole portfolio based on just one stock performing well.

If 2 of them double while the 3 others lose 25% (but no more because I sell them at my 25% stop loss), then my return is still 25% for the whole portfolio.

As you can see, my strategy is to look for very high quality companies that have a good chance of doing very well. I do a ton of research because I only own a couple companies at any one time.

As far as first establishing a position, here is my strategy. Let’s say my goal is to buy 1,000 shares of a certain company. I never buy all of that in one day.

I first buy let’s say 200 shares to test the market. I have to see if I’m right or wrong about this stock. If the stock starts to go down, then the market is telling me I’m wrong. I usually wait a while and see what happens. Sometimes it could just be a short correction of 10%. I don’t worry about those. Anything up to 25% is almost irrelevant. But if I buy a stock and it goes down 25%, I have to sell it.

However, if I buy a stock and within 2 weeks, it’s gone up 20%, then that means I’m onto something. The market is telling me that this is a good stock that is going up. So I should buy another 200 or 300 shares. Then I have to see what happens again.

If the stock goes down, I don’t buy any more. If it goes down 25% from its high, then I have to sell because something isn’t right.

But if it goes up another 20%, that means I have to buy even more because I’m right and the market is telling me that this is a good stock.

And so on and so forth. This strategy works because you always cut your losses at 25% but let your winners fly until they stagger.

If you have never made any money in the market, maybe it’s because you don’t have a strategy. Trust me, you need one. Maybe you don’t like this one, well then make up your own. But it has to be profitable. The strategy I have just told you about is what I use in my own trading. It has been used by many of the best stock investors such as Jesse Livermore and William J. O’Neil.

Glancing over the returns table, I am happy to see that Urasia is playing catch up with Paladin. It still has a ways to go but they are both excellent uranium companies. Urasia is already producing and Paladin will begin production in September. If you are a bit afraid or the “crazy” speculation in the uranium juniors, I highly recommend you look at these companies because they are much larger (hence, a much smaller chance of being a dud) than their junior counterparts. Plus, they have or will have shortly real earnings and profits. They are both un-hedged so the higher Uranium goes, the more they make. I am quite sure that Uranium will continue to move higher (it’s at $41.00 right now) so that is only good news for them.

But if you like to gamble more, URA is my favorite pick for speculation right now. It is bouncing all over right now. It went as high as $0.88 during the week but closed at $0.77. I only made my initial buy in on them so I will be looking at a good second buy in the coming week or two as long as it continues to act right.

There was one piece of news released this week for URA. They basically acquired 80 acres of prime Uranium claims in Colorado. Also, “In addition to this acquisition, the Company is pleased to announce the appointment of Mr. Roger Laine, Ph.D., P.Geo. to the board of directors. Mr. Laine brings over 14 years of uranium exploration and development experience to the Company, previously working with Amok Ltd., a subsidiary of Cogema. Mr. Laine was instrumental in the development of the Cluff Lake uranium project in the Athabasca Sandstone region of Northern Saskatchewan, and oversaw a number of uranium and gold projects in the Americas, West and Central Africa, and Europe. Mr. Laine is a primary component in the Company's ongoing exploration and development of its uranium and gold properties.”

Len is building up a very nice company with some very high quality properties. It is still very early in the growth of this company. But he has taken a company from the pennies to the dollars before so I am sure he will do it once again with URA.

I remember he did mention that the stock is being weighed down a bit by people exercising options and warrants. He himself sold off 34,000 shares on March 29. However he did sell in the high $0.50’s and mid $0.60’s and the stock is higher now so that’s OK. He still owns about 1.2 million shares, options and warrants so he is still heavily invested in the company. This is not a sell-off that would spark any alarm bells for me at least.

That’s about it for this week. I wish you luck in your investing decisions,

Mike

P.S. Please feel free to forward this to all your investor friends. I don’t advertise but I think I provide a lot of content and research you won’t find anywhere else on the web so I need you to do me a favor and spread the word!

P.P.S. I made tons of upgrades and enhancements on latesturanium.com, latestsilver.com and latestgold.com so please check them out if you haven't recently. 

Stock	Date Recommended*	Price Then ($)	Price Now ($)	Return (%)
Top 2 Picks
SVM	Jan. 26, 2006	5.82	20.12	+246
NUC	Dec. 23, 2005	1.60	3.81	+138
Solid Growth
SLW	Jan. 3, 2006	6.85	12.35	+80
Speculation
MSV	Mar. 5, 2006	3.84	3.85	+0
URA	Mar. 24, 2006	0.65	0.77	+18
Ideas
PDN	Dec. 8, 2005	1.70	4.17	+145
UUU	Dec. 22, 2005	1.93	3.75	+94
ABG	Jan. 4, 2006	1.73	3.49	+102
POE	Dec. 17, 2005	2.22	4.15	+87

*Note: Most of these picks were recommended on my old blog first.

Disclaimer: This letter is merely someone’s opinion. It should not be taken as investment advice. Through viewing this publication or accessing our site, you agree to hold Stockbullz.com, its operators, owners and employees harmless and to completely release them from any and all liability due to any and all loss (monetary or otherwise), damage (monetary or otherwise), or injury (monetary or otherwise) that you may incur. It’s your money, so you are ultimately responsible for any gains/losses you may incur. Do your own due diligence! Writer may own positions in some of the mentioned stocks.