On April 11, 2012, we will be selling our holdings of California Water Services (CWT) and use the proceeds to purchase Gold Fields (GFI).
Today at 12:10pm EST, our gold stock indicator signaled that gold stocks were reasonably undervalued. This indication occurred just after the price of gold started a sharp rise in price today and just before gold stocks started to jump, as indicated in the intraday chart below:
As indicated in our Transaction Alert today (April 10, 2012), we bought Newmont Mining (NEM) as a “long term” holding in gold stocks. Our view of the long term is predicated on the percentage gain that is achieved and the alternative stocks that appear undervalued at the time. If the gain has been exceptional in a reasonable period of time and there are better values elsewhere then we may jump ship.
Despite our confidence in the Gold Stock Indicator, we believe that it is necessary to have reasonable expectations for any of the stocks suggested. This means carefully examine the downside risk. As an example, it took Agnico-Eagle (AEM) a little over 1 year to achieve +174%. In that time, AEM traded in a narrow range for a majority of the time and fell almost -30% before reaching such astronomical heights.
Our purchase of the Direxion Daily Gold Miners Bull 3X Shares (NUGT) is strictly a speculation which we will sell soon after it has achieved a gain of +7.5%. Our examination of 3x gold ETFs (DUST and NUGT) is that a gain of +7.5% is achieved 85% of the time, based on 80 transactions initiated by our Gold Stock Indicator since 1983. Direxion’s DUST and NUGT ETFs are strictly for speculators (short-term) and should not be entered into for investment (long-term) purposes. You have been warned.
Our last Gold Stock Indicator signal can be found here: Gold Stock Indicator Points Down
Posted in AEM, DUST, Gold Stock Indicator, NUGT
Today our Gold Stock Indicator fell to a level which has yielded at least 7.5% gains in NUGT more than 85% of the time. We have bought NUGT and NEM at the market and will update this information after the close of the market today.
In light of our Gold Stock Indicator approaching the long term buy signal (found here), we have decided to go over the gold stocks that pay a dividend and are near their respective 52-week lows. In this review, we’re going to cover Agnico-Eagle Mines Ltd. (AEM) and Gold Fields Ltd. (GFI). When, and if, the Gold Stock Indicator actually reaches the long term buy indication it will be posted to our site. The stocks that we cover here are for you to do additional due diligence before taking any action.
Agnico-Eagle Mines Ltd. (AEM) closed at $32.37 on Thursday April 5, 2012. Agnico-Eagle is currently operating at an annual loss of -$3.36 according to Yahoo!Finance. Contributing factors to Agnico-Eagle’s decline in price over the last year has been problems with the operation of their mines.
As described in many of our previous articles, Edson Gould’s Altimeter is based on the stock’s price relative to the actual dividend paid. The Altimeter is a critical real-time assessment of value based on the company’s dividend. Below is the altimeter for Agnico-Eagle:
In our assessment of Agnico-Eagle, we have compared the current level of the Altimeter at 161.85 and compared it to other times when Agnico-Eagle has trade at the same relative level, or below, and traded up to 400 on the indicator. In the case of Agnico-Eagle there were two periods, before the bull market in gold stocks began, that the stock was selling at a low and was a great buy (based on the altimeter). In the period from November 2, 1990 to July 3, 1993, Agnico-Eagle rose +174% and in the period from August 25, 1998 to October 4, 1999 rose +157%.
Since the gold bull market began, the only other time that Agnico-Eagle was selling below 161.85 and subsequently traded up to the 400 level was the period from October 21, 2008 to October 6, 2010 for a gain of 103%, this far exceeded the gains of the SPDR Gold Shares (GLD) over the exact same period of time.
Next in our review is Gold Fields Ltd. (GFI). Gold Fields sports trailing earnings of $1.22 in the last twelve months and a dividend of $0.61 with a dividend yield of 4.70%. Yahoo!Finance indicates that Gold Fields operates “in South Africa, Peru, Ghana, and Australia.” Based on the majority of countries that Gold Fields operates, there is some political risk to this investment. However, Gold Fields has exhibited amazing consistency in the Altimeter below:
Presently, Gold Fields is trading at the Altimeter level of 42.38. The chart depicts the times when GFI was bought at the 42.38 level and sold whenever the Altimeter reached 100. The results are amazing and provide clear evidence on how gold stocks can outperform the price of gold when combining Edson Gould’s Altimeter with our Gold Stock Indicator.
Our approach to buying these stocks is to purchase in two stages, once at, or near, current levels and a second time only if the stocks fall -20% below the initial purchase price. As an example, if we have $10,000 that we’d like to invest then we buy $5,000 now and hold the remaining funds unless/until the stock declines by -20%. We’re basically hedging with cash if we’re wrong. If we’re right about our first investment (the stock price rises) then we can use the cash to buy another stock near a new low.
Before bothering with the first of many gold stocks that we’ll be covering based on our Gold Stock Indicator, please review the following questions and answers:
We believe that Edson Gould’s Altimeter, when revealing consistent relative values, yields highly favorable results. While we always seek to purchases at a relative low, we always set a target for selling at higher levels rather than “holding for the long term.” Our analysis could change if the stocks mentioned above dramatically increase or decrease their dividend.
Posted in AEM, Altimeter, Edson Gould, GFI, Gold Stock Indicator
Watch List Summary
Tootsie Roll (TR) remains at the top of our list this week, making this the 8th weeks (since February 17th, 2012). Although we see potential in Tootsie Roll, the risk/reward we laid out in our March 16 list (found here) pushed us to pass on the name.
C.H. Robinson (CHRW) is second on the list for the fifth straight week. We believe this logistic company is forming a bottom with strong support at $63 (see chart). Trading now at $65 with estimated fair value of $75, you could say the risk/reward is attractive (-3% and +15% respectively). One word of caution is that, CHRW is a component of the Dow Jones Transport index which failed to test and exceed the July 2011 high, thus giving a bearish bias in the market trend.
Making its way up the list is Matthews International (MATW) which operates in cemetery and funeral home. MATW was last recommended by us on April 1, 2009 (found here) when the price was near the low at $28.52 (adjusted for dividends $27.79). We later recommended selling MATW above a gain of 10% on August 3, 2009 (found here).
It sure doesn’t sound very excited but regardless of which direction the economy goes, there’re always need for the products of Matthews International. In fact, this company has been around since 1850, long before the "Great" Depression. The chart below indicates that the stock is showing signs of bottoming with great support at $29, in addition to stronger relative strength (RSI), as indicated by the blue line. More fundamental analysis to come on Matthews International.
Walgreen (WAG) continues to pop up on our list and in our view represents the best investment opportunity yet. Trading at its cheapest valuation ever, we believe shares could rise to the mid-40s via multiple expansion as well as better than expected earnings. All of the bad news on the fallout from the breakup with Express Script (ESRX) has been priced in and on the day that the deal between Express Script and Medco (MHS) was completed, Walgreen rose +2%. To add icing on the cake, the technical pattern appears to be ripe and ready for WAG to move much higher. Great support at the $30 range will put your downside risk at 10% but a $45 would yield +36%.
Below are the 16 companies that meet our criteria and are within 11% of the 52-week low:
| Symbol | Name | Price | % Yr Low | P/E | EPS (ttm) | Dividend | Yield | Payout Ratio |
| TR | Tootsie Roll Industries Inc | 22.33 | 0.95% | 30.18 | 0.74 | 0.32 | 1.43% | 43% |
| CHRW | C.H. Robinson Worldwide, Inc. | 65.12 | 4.53% | 24.85 | 2.62 | 1.32 | 2.03% | 50% |
| NFG | National Fuel Gas Co. | 47.12 | 5.86% | 15.10 | 3.12 | 1.42 | 3.01% | 46% |
| CWT | California Water Service | 17.94 | 7.75% | 19.93 | 0.9 | 0.63 | 3.51% | 70% |
| MATW | Matthews International Corp. | 30.89 | 8.12% | 12.76 | 2.42 | 0.36 | 1.17% | 15% |
| WAG | Walgreen Co. | 32.84 | 8.24% | 11.21 | 2.93 | 0.90 | 2.74% | 31% |
| UNS | UniSource Energy Corporation | 35.99 | 9.19% | 13.09 | 2.75 | 1.72 | 4.78% | 63% |
| ANAT | American National Insurance | 71.77 | 9.22% | 9.97 | 7.2 | 3.08 | 4.29% | 43% |
| CLX | Clorox Co. | 68.96 | 9.36% | 16.82 | 4.1 | 2.40 | 3.48% | 59% |
| ATO | Atmos Energy Corp. | 31.44 | 10.28% | 14.23 | 2.21 | 1.38 | 4.39% | 62% |
| WEYS | Weyco Group, Inc. | 22.98 | 10.37% | 16.77 | 1.37 | 0.64 | 2.79% | 47% |
| NJR | New Jersey Resources Corp. | 43.74 | 10.45% | 13.54 | 3.23 | 1.52 | 3.48% | 47% |
| PPL | PP&L Corporation | 27.63 | 10.52% | 10.23 | 2.7 | 1.44 | 5.21% | 53% |
| HNZ | HJ Heinz Co. | 53.26 | 10.57% | 17.75 | 3 | 1.92 | 3.60% | 64% |
| JNJ | Johnson & Johnson | 65.34 | 10.60% | 18.72 | 3.49 | 2.28 | 3.49% | 65% |
| AROW | Arrow Financial Corp. | 23.8 | 10.70% | 12.73 | 1.87 | 1.00 | 4.20% | 53% |
| 16 Companies | ||||||||
Top Five Performance Review
In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks on our list from April 8, 2011 and have check their performance one year later. The top five companies on that list can be seen in the table below.
| Symbol | Name | 2011 Price | 2012 Price | % change |
| TGT | Target Corp. | 49.53 | 57.72 | 16.54% |
| SJW | SJW Corp. | 22.94 | 24.32 | 6.02% |
| SYY | Sysco Corp. | 28.07 | 29.47 | 4.99% |
| HCBK | Hudson City Bancorp, Inc. | 9.87 | 7.11 | -27.96% |
| WABC | Westamerica BanCorp. | 50.73 | 47.4 | -6.56% |
| Average | -1.40% | |||
| DJI | Dow Jones Industrial | 12,380.05 | 13,060.14 | 5.49% |
| SPX | S&P 500 | 1,328.17 | 1,398.08 | 5.26% |
Our watch list underperformed the market but 6% mostly due to the weakness from the regional banking sector. Only Target (TGT) and Sysco Foods (SYY) were able to meet our criteria of achieving a 10% gain within a 1-year period.
Note: This article was posted on April 4, 2012 during market hours to active subscribers. Because DUST is trading up today, April 5, 2012, it is still applicable.
On January 26, 2012, our gold stock indicator said that it was time to sell gold stock positions and go short gold stocks in general. On February 8, 2012, we published an article on Seeking Alpha (article here) that said the trend was definitively down. Since both the unpublished and published indications, the Direxion Gold Miners Bear ETF (DUST), our preferred vehicle for such a reliable indicator, has gained over +55%.
Being neither bullish nor bearish on gold and gold stocks, if you haven’t done so already WE RECOMMEND SELLING DUST at the market as we are nearing the point where an indication for the purchase of Direxion Gold Miners Bull ETF (NUGT) can be done with a reasonable expectation for substantial gain, as indicated in the chart below.
Despite the dramatic decline in gold and gold stocks on April 4, 2012, we must caution that the decline is not over. The above charts indicate that the dual short and long term gold stock buy indication should occur between now and June 7, 2012. However, we’re not there yet.
Our worst case scenario for a bottom in gold stocks is the period between June 15, 2012 and August 21, 2012. While downside risk will be present after the buy indication, we believe that, on a relative basis, our signal will provide the most ideal opportunity to buy NUGT.
Our preference for using Direxion Gold Miners Bull (NUGT) and Direxion Gold Miners Bear (DUST) ETFs aren’t for the risk averse. As noted in previous articles found on Seeking Alpha, investors who wish to accumulate gold shares from within the XAU index should benefit from well-timed purchases rather than getting whip-sawed by a wildly gyrating index that will inevitably underperform the price of gold in the "long-term." We have identified the top five stocks that are likely to outperform the XAU index when the next buy signal is given. The five companies are AngloGold (AU), Yamana Gold (AUY), Gold Fields (GFI), Randgold (GOLD) and Royal Gold (RGLD).
Gold stocks are approaching an unprecedented short term buying opportunity. If you’ve managed to follow our last gold stock indication, you have substantial profits to reallocate towards our preferred long instrument, Direxion Gold Miners Bull (NUGT), when our Gold Stock Indicator registers a buy signal.
Sell DUST at the market and be prepared to buy NUGT.
Posted in Gold Stock Indicator
This is a list of Canadian dividend stocks that currently, or in the past, had a history of consecutive dividend increases. For those wishing to find the most complete fundamental information on these companies, we recommend visiting one of Canada’s leading financial websites, the Financial Post (found here). However, Yahoo!Finance probably has the better long-term charts and historical dividend data.
| Symbol | Name | Price | P/E | EPS | Price/Book | % from Low |
| GS.TO | Gluskin Sheff + Associates, Inc. | $14.77 | 8.98 | 1.34 | 5.49 | 5.50% |
| EMP-A.TO | Empire Co. Ltd. | $58.06 | 10.53 | 4.39 | 1.18 | 11.18% |
| SNC.TO | SNC-Lavalin Group Inc. | $40.75 | 15.01 | 2.49 | 3.2 | 11.46% |
| TRI.TO | Thomson Reuters Corporation | $29.13 | 17.27 | -1.68 | 1.47 | 11.61% |
| SJR-B.TO | Shaw Communications, Inc. | $21.39 | 20.4 | 1.44 | 2.86 | 11.99% |
| AGF-B.TO | AGF Management Limited | $15.63 | 11.92 | 1.13 | 1.22 | 12.28% |
| TLM.TO | Talisman Energy Inc. | $12.90 | - | 0.38 | 1.29 | 13.76% |
| IGM.TO | IGM Financial Inc. | $46.71 | 14.09 | 3.48 | 2.76 | 13.79% |
| FTS.TO | Fortis Inc. | $32.48 | 18.23 | 1.74 | 1.57 | 15.01% |
| RCI-B.TO | Rogers Communications Inc. | $40.06 | 13.95 | 2.86 | 5.76 | 16.96% |
| TRP | TransCanada Corp. | $43.63 | 19.79 | 2.17 | 1.88 | 17.00% |
| BNS.TO | The Bank Of Nova Scotia | $56.15 | 12.27 | 4.74 | 2.22 | 18.11% |
Watch List Summary
This watch summary will review Edson Gould’s Altimeter when applied to Gluskin Sheff (GS.TO) and SNC-Lavalin (SNC.TO). First up is the Altimeter for Gluskin Sheff (GS.TO). According to Yahoo!Finance, Gluskin Sheff “is a publicly owned investment manager. The firm also provides wealth management services.”
Based on the current quarterly dividend of $0.163, GS.TO is bouncing along the undervalued range of $14.11. Because the middle of the undervalued/overvalued range is $19.42 (fair value), we’re expecting that the next upside target is to the fair valued level or +31% above the closing price of $14.77.
As always, we’re primarily concerned with the worst case scenario. For GS.TO, the downside target is based on the December 2008 low at $6.71. Any substantial decline below the $14.11 level should result in GS.TO falling to $10.41. If GS.TO were to fall as low as $6.71 it would be in alignment with our rule of preparing for a decline of -50% or more and allocating our capital accordingly.
Our next stock is SNC-Lavalin (SNC.TO). According to Yahoo!Finance, SNC.TO “provides engineering and construction, and operations and maintenance services worldwide.” Edson Gould’s Altimeter, as applied to SNC-Lavalin Group (SNC.TO) presents a pattern that is quite unique. Again, Edson Gould’s Altimeter compares the current stock price as it relates to the quarterly dividend that is currently being paid. SNC.TO has a descending Altimeter with the normal undervalued range at $43.60. The next upside target for SNC.TO is at $55, however, we’re waiting for resolution on the potential downside action.
Our worst case scenario is that SNC.TO will continues on the declining trend and reach our downside target of $30.80. In our assumption, the worst case downside target continues to slide as time passes until proven otherwise. Again, while there are major upside targets at $55 and $69, we’d rather wait for the final verdict on retracing back above $43.60 or falling to $30.80.
Watch List Top 5 Performance Review
In our ongoing review of the NLO Canadian Dividend Watch List, we have taken the top five stocks from our April 13, 2011 list and have checked their performance, approximately one year later, as compared to the S&P/TSX Composite index. The top five companies from that list can be seen in the table below.
| Symbol | Name | 4/13/2011 | 4/2/2012 | % change |
| Rogers Comm. CL. B | 34.32 | 40.06 | 16.72% | |
| SJR-B.TO | Shaw Comm. CL.B | 19.64 | 21.39 | 8.91% |
| EMP-A.TO | Empire Co. CL.A | 53.67 | 58.06 | 8.18% |
| TRI.TO | ThomsonReuters | 39.1 | 29.13 | -25.50% |
| POW.TO | Power Corp | 27.9 | 26.75 | -4.12% |
| Average change | 0.84% | |||
| GSPTSE | S&P/TSX Composite | 13,833.64 | 12,507.06 | -9.59% |
Among the top five companies on our watch list from last year, three of the five companies exceeded the return of the Toronto Stock Exchange index. Power Corp. declined less than the index while ThomsonReuters fell by more than -25%. Taken as a group, the average return was +0.84% as compared to the –9.59% for the representative index.
Posted in Canadian Dividend Watch List
