Below is a snapshot of my write-up on Timmins Gold (TGD) from April 28th. TGD popped up on my deep value screener and was hanging around the top of the list for a while but I cared not to look. However, after looking at the price action of gold, and developing a personal hypothesis on the global macro position of gold, I thought TGD would be a perfect way to play gold. I coined TGD “a long call option on gold without the theta (time decay)”. Further commentary from the write-up on TradingView goes as follows:
April 28th, 2017
TGD 3.27% came up in my Deep Value screeners as one of the highest ranked companies in the screener, so I took a look to see what they were about. Timmins Gold Corp 3.27% is a gold 0.61% mining company, so right away I knew their success or demise was closely tied to whatever the price of gold 0.61%did. Before going into the fundamentals, let’s take a look at the charts.
Since late January of this year, TGD 3.27% has been consolidating nicely around the 0.35 – 0.42 price levels. I liked the length of the consolidation, and the overall chart seemed pretty well set up for a high run breakout if the price action dictated. Liking the chart, I headed over to check out the fundamentals of this company to see if there could be any substance to the breakout, or if the breakout would even be justified.
TGD 3.27% is trading at 3.77 times , 0.94 times book value, and is trading 3.59 times its free cash flow. Not bad ratios, and it clearly makes this a deep value play within the gold 0.61% sector. Taking a look at some of the return percentages for the company I was pleased to find that TGD 3.27% had an Operating Margin of 30%, ROA of 20%, of 25%, and a 21% ROI . Pretty impressive. Next, I took a look at their cash positions, because I love investing in companies with a ton of cash ( RGR -0.47%is a perfect example of this idea of tons of cash, no debt, and it paying off). TGD’s Current Ratio is 3.01, more than enough cash to cover its debts.
Taking everything into consideration, this is virtually a long call option on the price of gold 0.61% without the theta (time decay). I am looking for it to break that consolidation pattern, perhaps the 0.46 price level, at which I would go long, and place my stop right below the consolidation pattern at 0.30. Once again, I want to stress that although the company appears to be solid fundamentally, they are very correlated to whatever the price of Gold 0.61% does. If gold 0.61% goes south, TGD 3.27% will most likely follow. However, if you’re long term on the price of gold 0.61% like I am, this could be a way to expose yourself to gold 0.61% without having to invest purely in gold 0.61% or gold futures 0.61% .
I know this is a shorter post from me, but I wanted to update y’all on the way value can be captured if you look in the depths of the stock market pantries. Obviously these types of situations where a company gets bought out and the share price realizes a 900% gain are FEW AND FAR BETWEEN, you can enhance your chances by looking where no-one else cares to look. These types of “rare bird” (taken from Dr. Michael Burry) situations can only be found in the small / micro cap space. Successful small cap and micro cap companies are like baitfish to a hungry Great White shark. Except in the baitfish example, the baitfish turns into a Great White shark as well.
That was a horrible analogy. Long story short, look into the cobwebs of the market, dust off those left-for-dead companies, and see if you can squeeze any value out of them.
Disclaimer: Rockvue Capital cannot guarantee to find another 900% winner, and past success in highlighting stock picks does in NO WAY guarantee future success in the endeavor.