While Stock Market Searches for a New Bottom, Consider Bladex, Silver Wheaton

I have believed that the market hit its lows for the current bear market in November, the week before Thanksgiving. It now looks like the market will be testing those lows again 3 months later. Here are the current values of the major market indices and their 52 week lows:

• Dow Jones Industrials: 7,365.67….7,226.29
• S&P 500: 770.05….741.02
• Nasdaq: 1,441.23….1,295.48

The DJI is less than 2% above the recent low but the Nasdaq has another 10% to fall before cracking the recent low. In November, we were in the midst of all of the 4th quarter economic turmoil that is resulting in the poor performance we are seeing now.

I think the market is reacting again to the same stimuli. With more government stimulus money coming, leading economic indicators turning positive and my favorite, the Baltic Dry Index continuing to climb, I see at least a 50% possibility of the economy turning to positive growth as early as the 2nd quarter of 2009. Too many pundits are pushing their predictions of the recovery dates further out based on news that is really from the last quarter of 2008.

With the market crapping on everything it is difficult to try to write indepth analysis of interesting stocks. Their fortunes will not turn until market sentiment does, no matter how compelling their story. So here are a few brief notes on stocks that released earnings this week:

Bladex, the Banco Latinoamerico de Exportaciones (BLX) reported earnings for the year of $1.51 per share compared to $1.98 in 2007 (Call Transcript). During the 4th quarter the bank called in about 20% of its outstanding loans, those that it considered the most risky. The bank currently has 0% non-performing loans. Bladex is in excellent financial shape and its niche of providing trade credit in Latin America has lost most of its competition. Bladex is now in a strong defensive position and is ready to resume growth when regional trade recovers. BLX historically has traded within a few percent of its book value, currently $15.77 per share.

Silver Wheaton (SLW) reported a paper loss for the 4th quarter on a $64 million non-cash write down on long term investments. Silver prices averaged less than $11 per oz. during the quarter compared to $14 in the previous quarter. Silver is again trading around $14. SLW sold 11.1 million oz. of silver in 2008, a drop of 2 million oz. from 2007 and is projecting sales of 15 to 17 million for 2009.

Silver Wheaton has been in the "potential is in the future quarters" camp for the 2 years I have been watching the stock. Hopefully, someday that future will come. Rising silver prices and silver sales could at some point make this a hugely profitable company. I keep the stock in this site’s portfolio because I still believe it is an excellent way to have precious metal exposure. SLW is the only stock in positive return territory for my Opportunities Portfolio, which kicked off on October 1, 2008.

Disclosure: SLW and BLX are components of my site’s Opportunities Portfolio. I also hold a personal small position in SLW.

Comments

[John Polomny:]

Good calls as I also own both of these. Bladex is a layup and it is actually a joy to listen to a bank management that actually operates its business in a prudent manner.

Feb 22 05:27 AM

[booker38:]

I luv Silver Wheaton's prospects for the future, what with there being
a shortage in investment silver. Due to the recession, the base metals
copper, zimc & lead are priced well below mining costs.
Consequently, many mines have laid off workers or shut down.
Since 70% of silver comes from those mines as a byproduct, much less
si;ver is coming to market.
The premiums charged over the COMEX ptice for investment silver is
growing every month. With silver aroubd $14, eagles are selling for $20
or more & other forms of bullion as high as $18. / oz.
Because of this disparity, a number of silver futures longs have demanded the 1000 oz bars upon maturity of their contract, & then
have them remanufactured into saleable 100 oz bars & 1 oz rounds.
This depletion of COMEX stock is exacerbating the situation.
If & when the shortage spreads to the manufacturing silver supply,
prices will launch skyward.

I believe Silver Wheatom was in an oversold position in the 4th quarter.
a victim of the slaughter of mining stock prices in general.
I bought a bunch more under $3.00 before Thanksgiving to average
my cost way down. & I was rewarded by the price going up over $7.
If silver stays scarce. SLW will do much better/
Most investors do not realize that silver is rarer than gold by a lot.

Feb 22 11:52 AM

[Jake2:]

"Most investors do not realize that silver is rarer than gold by a lot." I'm not quite sure what you mean by this statement. Are you talking about the supply of silver within the context of the silver industry itself? Or what?

Feb 23 02:02 AM

[silver-bug:]

Bought and sold all in 2007, but I'm considering getting in again. Good company. Huge upside potential. Wish they pay dividends.


On Feb 22 11:52 AM booker38 wrote:

> I luv Silver Wheaton's prospects for the future, what with there
> being
> a shortage in investment silver. Due to the recession, the base metals
>
> copper, zimc & lead are priced well below mining costs.
> Consequently, many mines have laid off workers or shut down.
> Since 70% of silver comes from those mines as a byproduct, much less
>
> si;ver is coming to market.
> The premiums charged over the COMEX ptice for investment silver is
>
> growing every month. With silver aroubd $14, eagles are selling for
> $20
> or more & other forms of bullion as high as $18. / oz.
> Because of this disparity, a number of silver futures longs have
> demanded the 1000 oz bars upon maturity of their contract, &
> then
> have them remanufactured into saleable 100 oz bars & 1 oz rounds.
>
> This depletion of COMEX stock is exacerbating the situation.
> If & when the shortage spreads to the manufacturing silver supply,
>
> prices will launch skyward.
>
> I believe Silver Wheatom was in an oversold position in the 4th quarter.
>
> a victim of the slaughter of mining stock prices in general.
> I bought a bunch more under $3.00 before Thanksgiving to average
>
> my cost way down. & I was rewarded by the price going up over
> $7.
> If silver stays scarce. SLW will do much better/
> Most investors do not realize that silver is rarer than gold by a
> lot.

Feb 24 03:47 PM