Last week read two research reports on TCK (TCK.b Toronto). the stock made .14 per share cdn. compared to an estimated .10. The stock jumped briefly but then fell. Here is some points about a research report that applies to most stocks, we will use ones covereing tck as an example.
TCK they had a 12-18 month target price of $22 cdn. (cdn. $ .76)
1. with the stock trading at $9-$11 when this was done you would think it would be a screaming buy. no they rated it a sector perform. ( note brokerages never like to put sector underperform or sell. buy or accumulate. they hate putting a sell or under perform on any stock. there are always large amounts to make on future underwriting, the more stock a company or debt issues the chance the brokerage will like them.
2. They talked about the 1.5 billion cash on hand and they would have $1 billion by they end of the year. That is true but quarter over quarter they are cash flow negative. They have to invest in an oil sands project. it will project in about 5 years, there is no rush but the partners involved, have to spend so much per quareter. If you take that into account they are negative cash flow by about 150-200 million
3. they invested near the high of the market into met coal (used in steel) at one time met coal traded for 350 tonne, then 250, today it is around 80 but may fall further. at the previous highs it was a great investment now it is a dead weight.
4. the research reports talk about that they have 4 billion in lines of credit they can use, that is true however they have debt to the terrible met coal acquisition 2-4 billion. I have noticed that resource companies often buy other projects (investments ) near the peak, I have at least 5 examples. note for every one you find at the bottom well bought of the market I can find 10-12 at the top or close.
5. TCK is a good operator they are low cost operator of copper, zinc, and met coal (brutal low price in all of these markets). they also produce a smaller amount of gold and made a royalty deal to a streamer, boosting cash by 175 millionn. so this year they have done all they can.
conclusion it comes down to the prices if copper zinc and met coal prices go up (even a 10% rebound ) would mean a sharp rally, at these prices the debt in time ie. one year will be downgraded to junk and the stock is dead money or worse. one to watch when you believe these markets wil come back.
note sold my positon at 18-24 great move, but still have 200 stranded shares on the US side, for a loss of 18%, not sure why I kept the position, but will hold the small amount for now and sell calls, will wait until I put on a position.
only own yri (not a good gold stock) very little $5000, and have options against them. no other resources for now, have been on the sidelies as resources are hated, will wait for a turn...do not have to buy the bottom.
thanks
selkirk
TCK they had a 12-18 month target price of $22 cdn. (cdn. $ .76)
1. with the stock trading at $9-$11 when this was done you would think it would be a screaming buy. no they rated it a sector perform. ( note brokerages never like to put sector underperform or sell. buy or accumulate. they hate putting a sell or under perform on any stock. there are always large amounts to make on future underwriting, the more stock a company or debt issues the chance the brokerage will like them.
2. They talked about the 1.5 billion cash on hand and they would have $1 billion by they end of the year. That is true but quarter over quarter they are cash flow negative. They have to invest in an oil sands project. it will project in about 5 years, there is no rush but the partners involved, have to spend so much per quareter. If you take that into account they are negative cash flow by about 150-200 million
3. they invested near the high of the market into met coal (used in steel) at one time met coal traded for 350 tonne, then 250, today it is around 80 but may fall further. at the previous highs it was a great investment now it is a dead weight.
4. the research reports talk about that they have 4 billion in lines of credit they can use, that is true however they have debt to the terrible met coal acquisition 2-4 billion. I have noticed that resource companies often buy other projects (investments ) near the peak, I have at least 5 examples. note for every one you find at the bottom well bought of the market I can find 10-12 at the top or close.
5. TCK is a good operator they are low cost operator of copper, zinc, and met coal (brutal low price in all of these markets). they also produce a smaller amount of gold and made a royalty deal to a streamer, boosting cash by 175 millionn. so this year they have done all they can.
conclusion it comes down to the prices if copper zinc and met coal prices go up (even a 10% rebound ) would mean a sharp rally, at these prices the debt in time ie. one year will be downgraded to junk and the stock is dead money or worse. one to watch when you believe these markets wil come back.
note sold my positon at 18-24 great move, but still have 200 stranded shares on the US side, for a loss of 18%, not sure why I kept the position, but will hold the small amount for now and sell calls, will wait until I put on a position.
only own yri (not a good gold stock) very little $5000, and have options against them. no other resources for now, have been on the sidelies as resources are hated, will wait for a turn...do not have to buy the bottom.
thanks
selkirk