Super Stock Blog

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Silver Miners vs Silver ETF

I posted an article last week about purchasing ETFS Physical Silver (SILV), a silver ETF, and First Magestic (AG), a silver miner.  There is quite a difference between the two and I would like to explain when it is best to get into both.

First, the silver ETFs follow the silver price.  Some of them hold physical silver like SILV and others purchase silver futures.  I recommend SILV over other silver ETFs like SLV because it has a lower expense ratio.  Since silver prices are quite low and inflation is in the works, I feel that the price cannot go down much lower.  The gold-silver ratio is also over 80 which means there is a higher chance that silver is bottoming out.

Next, I recommended First Magestic (AG).  This is a silver mining stock that is quite low and I do think it is finally hitting a bottom.  There is additional risk in silver miners as a lower silver price means the stock goes down much quicker than silver ETFs.  This also means when the silver price goes up that silver mining stocks can go up to 3x or 4x higher.

I recommend getting into both at this time.  If you don’t like the additional risk, I recommend purchasing the SIVR silver ETF.

High Gold-Silver Ratio and First Majestic

The gold-silver ratio has broken the 80-1 threshold.  This ratio usually implies that the silver price is so low that its time for a reversal which means higher silver prices coming soon.  To play this speculation, I recommend either getting a silver ETF such as SIVR which has the lowest expense ratio or SLV which is a popular silver ETF.  The volatility on both these ETFs are rather low so I don’t see much downside.  I also think if there is a recession or inflation that silver will go up in price.

For those that like leverage, silver miners are a great way to take advantage.  First Magestic (AG) is at a 52-week low and it continues to go lower!  I do think it should be bottoming soon especially if silver prices start rising again.  You do have more risk but if silver prices goes up then this will spike up 3-4 times more than the silver ETFs.

Cash is King. Easing off HABT.

I mentioned Habit (HABT) as being a nice buy-and-hold.  It was making a nice run until the last quarterly report which took the stock for a nose dive.  I still believe this will be a nice stock in the long-term but there are many factors that are causing this stock to not be as nice investment for the short-term that has caused me to get rid of it in my stock portfolio.

First, the quarterly report was rather bearish on the guidance.  It was stated to be much lower than expected.  The minimum wage rising per hour will also cause more disruption for the revenues.

Second, regarding the market, Lowes (LOW) recently had a bearish outlook to their guidance.  If you look at Home Depot (HD) and Lowes (LOW), technically, there stock price is trending downward.  Remember in the last recession, these were leading indicators that eventually led to the recession.

Again, use your own due diligence, but in the point in the market, I rather be more conservative and wait to invest during the downturn.  I was heavily invested before the last recession which meant I did take many losses as other investors did.  I rather have some reserves this time to get bargains during the next downturn.

Mall REITs still a Good Buy

As I mentioned in the previous post, mall REITs continue to be a good buy.  First it was JCPenney that had a bad quarter.  Then, Foot Locker also showed a bad quarter that also caused a drop in retail stocks and mall REITs.  WPG, Washington Prime Group, had plenty of cash flow to cover these retail shops revenue drop.  This includes paying the dividend to investors.  There is always the challenge in playing defensive in this space.  I believe playing defensive means making sure you have the cash flow to back up any investment that you take in.  This is especially true in this cycle in the stock market where things are all overvalued.  You want to find industries that are weak where there is an opportune time to purchase and that you know in the long-term will be valued correctly.

This is why Mall REITs are a good investment but the reason I recommend WPG is that it pays a strong dividend that is over 10%.  It also is a small mall REIT that are mostly based outdoors and have a strong diverse base of retail restaurants and shops that will be able to take on the downturn that some of the retail stores that will affect its sales.  It also is taking steps to transition stores like Sears, JcPenney, and Foot Locker to more stable tenants.  I believe the dividend will keep you protected in the long run as well.

Outside the mall REITs, Target had a good quarter recently.  It is a bigger player and a challenger to Amazon.  It isn’t without the risk but it does pay a nice 4% dividend.  Having been able to turn a nice quarter in a dismal retail quarter for most companies shows that Target is able to withstand the market issues and handle the situation.

I recommend investors look at both WPG and TGT for long-term buy and hold plays.  I do own both in a retirement account.

JCPenney Affecting Mall REITS

JcPenney (JCP) had a huge drop this morning in stock price over 17% as of right now.  This was due to declines in profit and same-store sales.  Of course, this is having a huge affect on Mall REITs including one that we current invest in Washington Prime Group (WPG).

Washington Prime Group has a very small percentage of rent that comes from JcPenney. This amounts to less than 2% of the rent.  Again, Sears (SHLD) also is a renter of this mall reit but also accounts for less than 2% and most likely without further due diligence I believe sears is only accounting for 1% of the annual base rent that WPG receives on an annual basis.

For someone that has some retirement funds setup, this is a great time to get into Washington Prime Group and collect a massive dividend at over 10%.

For the fundamental trader, this is a great mall reit that should pay off handsomely in dividends and appreciation as there isn’t much more downside to mall reits.  We all know that Amazon (AMZN) wants in the retail space and purchased Whole Foods for billions of dollars.

For the technical trader, there is a bearish cross which means there is further downside.  I’m not too sure about this but it did break the support at $8.50 today so it is possible to get a better price by waiting it out.

Is NexGen Energy poised to be bigger than Cameco?

Nexgen Energy (NXE) is a recent uranium company that has come into my radar.  I posted numerous times about another company called Energy Fuels Inc (UUUU) but Nexgen Energy appears to be in a better fundamental standpoint.  First, it has discovered multiple uranium deposits and the company continues to find more even the past week.  Second, the uranium deposits are of higher quality than the current mines currently out there.  Third, these deposits are close to the same amounts that Cameco (CCJ) and are poised to overtake the amount of uranium in comparison.

Nexgen Energy is a $750 million cap company while Cameco is a $3.7 billion cap company.  If it were to have equal uranium deposits, there is plenty of growth for Nextgen Energy to grow in the future.  It also recently received $110 million in funding from CEF Holdings.  This company is part of a larger conglomerate of businesses controlled by Li Ka-Shing who also is known as the “asian Warren Buffett”.  He invests in many asian countries and knows the market very well.

China is a energy hungry country that is in process of constructing and completing multiple nuclear plants in the next decade.  Li Ka-Shing knows the market going forward and that uranium will be a necessary commodity for China to fuel their nuclear power plants.  It makes sense that he would accumulate shares in this smaller company that would give him a bigger stake in ownership.  I do believe their is a chance of being acquired in the future but the fundamentals show that Nexgen Energy will have a bullish future ahead as well.

Disclosure: I did recently purchase NXE by selling some of my holdings in UUUU.

Is Akamai in for a dead cat bounce?

Akamai Technologies (AKAM) is the largest cloud technology company that helps businesses deliver cloud delivery content through their high-availability servers across the world.  A few days ago, their stock dropped over 13% when their earnings report was released.  The company did hit their numbers but their guidance was lower than analysts expects.  The stock experienced a major drop in the morning after earnings but the company stock price has been steadily moving up since the release.

One major proponent of the stock is the CEO who has multiple million dollar purchases of the stock.  He believes that the price is too low and started these purchase only this year.

Technically, major stock price drops like this usually follow with a “dead cat bounce” which means this stock will continue with the down trend.  If this happens, expect to get the stock as a cheaper price in the following week.  I am not sure if this is a good long-term stock as Amazon and Facebook have been building out their own hardware to replace Akamai’s services.  However, there are many other businesses that use Akamai including Netflix which will definitely help increase their revenues going forward.

Dividend Stock with over 10% Interest

Washington Prime Group (WPG) was once a dividend darling at 12% dividend.  It still sports a high dividend but that is expected to become lower as the price of the stock continues to appreciate.  This stock is an REIT that was hit hard when Macy’s couldn’t hit quarterly numbers including the numerous other mall stores that missed target as well.  These bad earning reports included store closures that affected REITs.  In May, Washington Prime Group hit an stock low below $7.50 which would have given you a nice 13% dividend.

Since May, this stock has had a steady appreciation with it recently going over $9.  Washington Prime Group is a unique REIT that caters to smaller retail plazas that are mostly in outdoor settings.  The Fairholme Fund run by billionaire Bruce Berkowitz invested millions in WPG recently.

For someone that has an IRA, 401k, and another tax-deferred stock account, this stock makes for a nice play.  As much as Amazon has taken so much market share in the retail space, Amazon (AMZN) has also proven that they need to be in brick-and-mortar when they announced that they are purchasing Whole Foods Market (WFM) for $13 billion.

There are other REITS in the similar mall industry that should continue to grow as the fallout disappears and investors see the true value of these mall REITs.  This stock should be a part of an investors’ portfolio for long-term growth in dividend and appreciation.

I plan to purchase shares in any dips in price but I do not own any at this time.

Short-Term Bottom on Omega Healthcare

With almost a 8% dividend (7.8% at the time of this writing), Omega Healthcare (OHI) makes a nice stock to own in your retirement portfolio.  It recently hit a short-term bottom at $32 and has been slowly moving back up.  There is plenty of noise about buyers trying to get in at $28 which would be a great level but highly unlikely to get to that point.  Yellen has mentioned that she plans to raise rates in September which should be a tiny raise and should not affect the pricing of this stock.  Remember, the baby boomer generate is continuing to retire and move into senior housing which will benefit this stock.

Rite-Aid Becomes Long Term Hold!

Rite-Aid (RAD) just announced earnings and, more importantly, discussed details of the merger deal.  First, the merger deal is off the table.  Walgreens will be paying $325 million for the termination agreement.  However, Walgreens (WAG) is going to purchase half of Rite-Aid stores for $5.2B.  Rite-Aid retains all of its west coast stores but will sell many stores in the other states.

For the long-term outlook, this is a great play on Rite-Aid.  There is a chance that another company possibly even Walgreens (WAG) in the future would be interested in Rite-Aid with the potential for the west coast stores and to own their pharmacy benefit manager.  Rite-aid is valued over $5 with this current outlook.  As long as they can start growing (which they have not in a long long while), there is the potential to move up to $9 which would be their price two years ago before all this merger and acquisition talk.

It is hard to predict where the stock price will be in the short-term.  However, if you wish to play this long-term, there is potential in Rite-Aid.  If another company wishes to acquire the remaining Rite-Aid, there is a good change you can double your money but don’t expect this to happen anytime soon.

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