A tale of two streets, big banks and junior mines
Financial firms are singing one tune on Wall Street, another on Bay Street, says this analyst, who also has news on four mining stocks.
On Wall Street, they’re still sorting out the mess. On Bay Street, things are much tidier.
Meanwhile, far from the wood-panelled luxury of financial boardrooms, in a remote swamp in Northern Ontario, mining companies jostle for the right to exploit some fresh discoveries.
Does all this fit together? It does if you’re an investor willing to look at a smorgasbord of investments, some familiar, some a little off the beaten track.
This buffet of opportunities comes from the fertile mind of Mr. Michael Smedley. He’s a long-time manager of a closed-end fund and a regular contributor to Investor's Digest of Canada.
He recently returned from New York and a conference on the financial affairs of America. That has prompted him to undertake an accounting of financial stocks north and south of the border. He has more to say about the U.S. side of the coin, where he comes up with some interesting buys.
But he also has some news from the mining front that’s so hot he can’t wait to impart it. So four mining stocks get special mention.
Plenty of drama
For the second year in a row, Mr. Smedley was a guest at the Merrill Lynch financial institutions show. Last year, the show came at the height of the financial crisis, and featured many of its most prominent actors, “both good and bad,” the analyst tells us.
There was still plenty of drama left over for this year, he says. Banks were discussing what they were doing with all those taxpayer dollars they were receiving. Then there was the “smooth patter of regional bank executives about ‘run-offs’, the jargon for selling off abandoned or reclaimed homes,” says the analyst.
It will be at least two more years until bad credit is brought to heel, he reports. But all this is water that has flown, or is still flowing, under the bridge. What’s new? For starters, a couple of big names in finance you may not have heard of yet.
Buying out bad actors
The “new top machine” in the financial world, Mr. Smedley believes, is BlackRock Inc. (NYSE-BLK). This fund and investment firm has devoted a cool $13.5 billion to the purchase of Barclays Global Investors.
“I am a big believer in the continuing growth of the index and ETF industry,” says this analyst. Barclays iShares is the leader of the ETF pack, so BlackRock surges to the front. The stock trades at a rich $227 and yields 1.4 per cent on a dividend of $3.12.
“I would look hard at regional banks that are staking out big territory by buying up bad actors,” adds Mr. Smedley. Iberiabank Corp. (NASDQ-IBKC) is one he particularly likes. This firm trades at $54.35 and yields 2.5 per cent on its dividend of $1.36.
“Among investment managers on the expansion trail, I would look into another smaller cap company,” he says. That is Stifel Financial Corp. (NYSE-SF), which is profiting from the brisk business in fixed-income securities. It trades at $56, but hasn’t paid a dividend since 2002.
Bad monsters
The three names above may not exactly be household names for most Canadians, but Mr. Smedley has two much more familiar names to consider for future gains. These are the “bad monsters” of the crisis — Citigroup (NYSE-C) and Bank of America (NYSE-BAC).
Citi is certainly cheap at $3.56, but it is also cheap on dividends, having cut them earlier this year. Bank of America trades at $15.17 and still pays a tiny dividend of $0.04, yielding 0.26 per cent.
The analyst’s last stop on Wall Street brings us closer to Bay Street. “I would buy TD Ameritrade Holding Corp. (NASDQ-AMTD),” he says. TD Bank now holds 48 per cent of this big online broker. It trades at $18.56 and pays no dividend.
Standing in stark contrast to all the ferment on Wall Street is the tranquility of Bay Street. The operative word in Canadian finance, especially among the banks, is “solid.” Indeed, Mr. Smedley has but one simple statement to make, namely that “all of the relatively small number of banks could be core portfolio holdings.”
High-octane juice
This analyst tells his readers in IInvestor's Digest of Canada: “I just have to conclude by getting some high-octane Canadian materials-sector juice into the story.” And so he does, starting in British Columbia.
His fund has just bought back into Imperial Metals Corp. (TSX-III). This firm has been hitting deep riches at its Red Chris deposit in B.C. with high grades of copper and gold. Indeed, in the short time since this article was written, the shares have risen by $5, to $14.55. There is no dividend.
Mr. Smedley is taking a more speculative look at a swampy region of Northern Ontario in the James Bay Lowlands known as the “Ring of Fire.” Here, it appears, high-grade platinum has been discovered along with known deposits of palladium, nickel and chromite.
Canadian junior Freewest Resources (TSX/V-FWR) holds important ground in the region. A battle for Freewest was fought between its neighbour, Noront Resources (TSX—NOT) and U.S. major Cliffs Natural Resources (NYSE-CLF). It ended on Monday, with Cliffs the winner.
Noront’s share price has risen slightly since then, to $2.17. Cliffs has risen steadily to $45.28, and it yields 0.8 per cent on a dividend of $0.35. The takeover by a major firm has one big advantage, in Mr. Smedley’s opinion. It takes “this ghastly region closer to roads, power and other infrastructure needs.”
The analyst hastens to get in one more “high-octane” story. The subject is San Gold (TSX-SGR). This “well-respected” junior miner announced its highest-grade discovery to date, in the Hinge Mine in Manitoba. “The stock appears to have woken up,” concludes the analyst. It is getting closer to its 52-week high, and sitting at $3.45.
No matter what street investors follow, this analyst suggests, investment opportunities are still thick on the ground, crisis or no crisis.
|
E-mail this article
Printer-Friendly
