Tuesday, October 22, 2013

Today's Trades in Gold, Silver and More

It sure looks like we're getting that follow-through in precious metals that I was looking for. So, I added to my positions in GDX and BTG, adding to the original half-positions I put on on October 17th ...

(Updated chart)

However, I believe this is just the beginning of gold's next bull run. So, I'm adding another. I would add more, but I would rather wait for a pullback.

Here's a chart that helped me pick what to add ...

(Updated chart)

This is a chart of relative performance since precious metals bottomed on October 16th.  You can see that gold (GLD) is actually underperfoming silver (SLV), the large gold miners (GDX), silver miners (SIL) and junior gold miners (GDXJ).  The gold explorers (GLDX) lagged, and so aren't on this chart.

Anyway, those funds are fine. Then I put one of my favorite silver miners, Silvercrest (SVLC), on the chart. Obviously, it's a leader.

(Updated chart)

If we can get the breakout I'm looking for, this could go much higher. My target is $3 a share.

Silvercrest Mines (SVLC on the NYSE) is a producing silver/gold miner that is ramping up production and reserves.

Its principal property is the 100% owned Santa Elena Mine covering approximately 3,160 hectares and is located to the northeast of Hermosillo, Sonora State, Mexico.

I’ve talked to COO Eric Fier and found him to be a stand-up, straight-talkin’ guy. He told me what Silvercrest planned to accomplish this year and next, and I was impressed with his ambition. 

However, overhead resistance from the 200-day moving average may give us a chance to add at cheaper prices. So, I only added a half-position in SVLC today.

Trade Outside of Natural Resources

I also added a pick outside of natural resources.

Kraft (KRFT) operates food and beverage businesses in North America including convenient meals, refreshment beverages and coffee, cheese and other grocery products.

(Updated chart)

You can see that Kraft is breaking out of an inverse head-and-shoulders pattern. 

I've traded Kraft before and I like the stock a lot.  Importantly, it plays to the theme I talked about in a post earlier today, that consumers should have more money in their pockets thanks to lower gas prices.

There is a large segment of the American population that has to make uncomfortable choices between filling up the gas tank and eating more, better food. I think they'll be gobbling up Kraft products now that gas prices are cheaper.

Kraft has a solid business. The company reported second quarter earnings of $1.38 per share, which beat the consensus of analysts' estimates by $0.72. 

Also, Kraft is a dividend raiser. It sports a dividend yield of 3.89% with a payout ratio of 65% of trailing 12-month earnings (or 80% of free cash flow). Importantly, on October 1, the company announced a $0.525 per share quarterly dividend (a dividend boost of 5%). We've already missed the ex-date, but I like a company that keeps raising its dividends.

These are not official recommendations. I am not your investment adviser. You should not buy something just because some guy on the Internet likes it.  Do what is best for your own investing purposes. And you have at least until tomorrow morning to do your due diligence on anything I mentioned here.

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