How I make an investment / trading decision
by, 16th-October-2009 at 12:24 PM (7770 Views)
For long time followers of my blog here and previous personal blogs you would have see how I invest.
Find undervalued stocks and trade them on fundmentals and technicals.
I will start with a real time example, that will probably fail! lol
This is the set up:
Citigold (CTO) is a recent gold producer, but which I would still class closer to developer.
They have continued to overpromise, and underdeliver. Continually!
They have a JORC 10m oz au @ 11 g/t which is phenominal, at any depth. A world class deposit. Not many over 5m, and not many over 5 g/t. Outstanding.
And yet, they are trading at the level of a junior explorer at about $14 an ounce EV. This is absolutely crazy on the basic fundamentals of it. Crazy!!
Now, more importantly to me because of this is that their share price has been smashed. SMASHED!
While gold has run to all time highs, CTO has run to all time lows! These two things combined make my ears prick up!
So, as a value investor watching technical indicators this stock is prime to watch for a break out and trade it accordingly.
There is no way I could invest in this as at TA while it is going down, or sideways-down biased.
However, due to the (seemingly) robust fundamentals this must be placed on a close watch list for an investment.
Now, many fundies will look at this and think it is absolutely compelling. Yes, right! How many other compelling fundamental investments have failed? Too many.
The reason why the fundamentals do not speak for themselves here, is because we are not in possession of all the facts. Management has them and will hide them and sprewk them to their hearts content. In my opinion, this company has a bunch of rampers from HC behind it. '50m ounce potential'? They are idiots.
So, lets see how this experiment goes. It is just one of many stocks I follow and may invest in, or not.
I have a very negative sentiment towards them which may make me biased, but I hope not.
I'm watching the first green circle for my first tip toe in.
(I must add for perspective, I am obviously not a mechanical trader. When I find something that my judgement leads me to believe is an excellent investment, I will commit significant resources to it. I have no 2% rule, this would totally limit gains after discovering a no-brainer. This is not a no-brainer yet!)
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