Monday, 2 January 2012

2011 Year in Review

2011 was a tough year for stocks. While the big caps dropped marginally during the year, a lot of the small caps suffered huge losses. Many TSX Venture mining stocks are at or near all-time lows despite gold and silver breaking to new highs. That leaves a lot of opportunity for 2012 which I will be exploring throughout the year.

I started this blog in May and since then it has been particularly rough on the TSX small cap and TSX Venture stocks. That being said I managed to find quite a few gems throughout the year which led to some great profits for myself and my readers. Here's my review of each trade I made public on this site.

First Lithium Resources Inc. (TSXV:MCI): My first blog post was comparing MCI to notorious OTCBB pumped stock LEXG.  On the day of the post, May 9th, the stock closed at 12 cents. Over the next two days the stock raced to 29 cents on heavy volume as people realized that it was the one that held real value in Valleyview and that the relative market caps of the two stocks didn't jive.

Unfortunately I didn't sell in the 20's as I believed it should have hit much higher. As LEXG raced downwards the comparison looked less favourable and MCI was back down to 12 cents by the end of the month. I ended up selling a piece of my holdings in the high teens waiting for play #2 below but bought back in again later and suffered a small loss. Overall I saw marginal gains on MCI.

MCI now sits at 6 cents and despite LEXG tanking down to the 50's, it has still held higher than what many people have thought as it continues to strengthen its Valleyview holdings. Although I do not currently hold MCI, I find that it has tremendous value in Valleyview as well as its several other holdings. If it remains at a market cap that is a little over 10% of LEXG's, I will be exploring it later in the year.

Barker Minerals Ltd. (TSXV:BML): My second trade was meant to be nothing more than a short term rebound play as short sellers were obviously manipulating the stock. After buying at 7-7.5 cents, I quickly got out at 9 cents. Right now it sits at 5 cents on minuscule volume so I was right to move on. I like the properties that they own but I do not like the way they are being managed. BML makes snails seem like cheetahs in comparison with how slow they move.

The Futura Loyalty Group Inc. (TSXV:FUT): I put a lot more focus on FUT over any other trade throughout 2011. Unfortunately FUT hasn't panned out the way I thought it would so far. With that being said, after my wave of blog posts on May 24 the stock shot up from 3 cents to 6.5 cents as people saw exactly the same things that I saw. I bought over a million shares at 3 and 3.5 cents and I took a couple hundred thousand off the table at 5.5 and 6. However I continue to hold about a million shares to this day, occasionally trading a hundred thousand or so for a bit of profit when I see fit.

Despite the success of my closed trades on the stock, considering the current price is at 2-2.5 cents and the amount of time I spent on the trade, I have to consider this to be a failure for 2011. I believe 2012 will be a much different story. The premise of Futura's business is excellent, the management team seems quite adept and knowledgeable at managing growth with cash constraints and the business is extremely transparent. If you refer to their website, you will see a list of their customers that is updated several times each month. Very rarely do you see that type of honest insight into a Venture company. Maybe that's part of the problem. There's no mystery or intrigue to FUT so it's not so easy to pump up the stock price like INT or PYN.

Their Q3 results were relatively disappointing to me as I expected higher revenue based on their growth in the customer base but I await positive results in Q4 and beyond. But until then I'm holding the million shares in the background as I am focused on one of FUT's brothers in the whole TSX Venture tech sector explosion we saw in 2011.

Sino Forest Corp (TSX:TRE): Trade #4 was my most fun and profitable trade for 2011. On the morning of June 22nd I announced that I bought TRE in the 2's (and some in the 1's the day before). I felt at the time that the stock was being manipulated for someone to take it out at $5. A lot of people seemed to agree with me and the stock continued to appreciate that day until it closed up 50%. Although I don't think my blog was the sole reason, I like to think that I did add some fuel to the fire that day. While my reasons listed in the blog may or may not turn out to be correct, the call certainly was and I spent the summer that was treacherous for small cap stocks collecting greater than 100% gains on TRE. I got out just in time for call #5 and #6 and hopefully my followers listened and did too.

Afexa Life Sciences Inc. (TSX:FXA): I used much of my TRE profits and put that into Afexa in July in the mid-50's. While my guess of TRE's buyout has not materialized yet, my guess of FXA's buyout came to fruition just a few weeks later. I sold in the 70's as the stock finally settled at 84 cents before being taken private. A near 50% gain on top of an over 100% gain on TRE led me to a summer of great profits despite the brutal market performance.

Cyberplex Inc. (TSX:CX): Cyberplex was an interesting trade. Unlike the others where I built up a position over several days prior to my blog post, CX was the first stock where I went all in one day after my blog post. I cleared out everything that was being offered at 11 cents on September 19th. That was probably enough to keep the stock on everybody's radar so while the market dropped 8% in two days starting September 20th, CX rose to 16 cents.

Despite my belief that the stock should be at least 25 cents, I sold at 15 as I licked my chops from the multi-month lows that were being had on several stocks. But one stock in particular stood out as it dropped to less than 10 cents, my next trade. But keeping on the subject of CX - it stumps me as to why the stock continues to struggle at 8.5 cents. They hit the upper end of their Q3 guidance. They got more favourable debt terms from their lender. They appear to be on the right track with Yahoo! If someone doesn't believe they can earn enough profits to successfully pay off their debt that's fine. But those issues all existed last January when the stock was over 50 cents. They should have sold back then. Cyberplex is in much better shape now than they were a year ago but the stock is down to 8.5 cents. The complete herd mentality is so apparent in the Canadian investing community. CX is an anti-herd stock that will provide investors at sub-10 cents a good return on their investment once it is hot again. For now I am not in CX but I am waiting like a vulture if the stock drops low enough.

Fireswirl Technologies Inc. (TSXV:FSW): While my first blog post dedicated to FSW was on December 5th, I was actually building my position over the course of several months. As mentioned, I sold out of CX to start my FSW position at 10 cents in late September. Throughout the course of the fall I steadily built up my position.

I had the opportunity to sell twice over 16 cents as FSW's contract with China's No.1 Animation Brand and excellent Q3 results resulted in two separate pops in October and November. But I wasn't about to let go of the stock at those prices and in retrospect that was a good move. Since my blog post on December 5th, the stock has doubled in price, moving from 11.5 cents to 23.5 cents. While my blog might have had some short term influence in early December, unlike MCI and CX which came back down shortly thereafter, FSW had a short pull back but rallied after Christmas and is now at its highest stock price since early July.

Despite its recent double in price it compares very favourably vs other TSX Venture tech peers. As we head into RSP and investing season, I should note that at the beginning of last February, the stock quickly rose from 5 cents to as high as 38 cents. FSW is an excellent stock to be in at the start of 2012 and I'm proud that it has resulted in more than 100% gains for myself, 100% gains for my early readers and good returns even for the late buyers in the high teens and low 20's. And it appears that the run is just getting started. It could bust through 52-week highs as speculation grows that their earnings in Q4 will be great.

Actually, I should restate that. It SHOULD bust through 52-week highs. In fact, it SHOULD already be double or triple those highs. The Price to Sales metric is less than 0.5x. In comparison, AMZN's, the e-commerce giant in the US, is 1.8x. MELI, the e-commerce giant of South America, is 13x. INT, the TSX Venture tech darling, is nearly 30x. A good Q4 likely results in $25M of revenue for 2011 for a $10.5M market cap stock. A mediocre Q4 still results in $22-$23M of revenue for the same $10.5M market cap stock.

1 comment:

  1. Analysts said global stocks tumbled in lockstep, suffering from the effects of natural disasters, a wobbly recovery in the U.S. — and an escalating European debt crisis that remains resistant to the endless measures taken by the region's governments and financial institutions. But, it will always make a way. The same with starting a new business, it may fall but it will rise again.