Cara's Stock of the Year for 2007: Crystallex

I am not amused when readers try to pull my chain as was probably the case with “NT” this morning:

Dear Bill Cara,

I'm surprised that now you don't think it's a good idea to invest in Crystallex. Not too long ago you said after much research and after talking to a top official at Crystallex you thought it was a good trade, albeit highly speculative. Why have you now changed your mind? I've held Crystallex for several months and agree with the ROB-TV videos I listened to today. (Please see below).

Thanks in advance for your reply. I respect your opinion.

“NT”

11:15 AM ET
Market Morning with Lisa Oake and Marty Cej
Gold
John Ing, president & gold analyst, Maison Placements Canada

Re: How to play the gold market: John Ing said...time to look at the junior players...Crystallex comes to mind.

12:30 PM ET
Market Call with Jim O'Connell
Gold and Precious Metals
Robert Cohen, portfolio manager, Dynamic Funds.

Cohen: Crystallex has had a 32% bump. From $3.20 TO $4.32. Venezuela's risk has been priced in & out of this stock. Right now it's priced out of this VZ stock and the market says Crystallex is going to get their permit.

I have received maybe 10,000 reader letters in 2006 and this one probably takes the cake.

I think 99.9 pct of you know where I stand on Crystallex.

But in case you don’t: Crystallex will be the Stock of the Year for 2007. Gold will be the asset class of the year.

Cited authorities Ing and Cohen are excellent analysts.

Cohen holds lots of KRY in his Dynamic Precious Metals Fund. His comment about the permitting risk being priced out of the stock suggests to me he believes the stock is fairly priced here. If he is correct, he’ll be able to buy more stock at these levels, which, from the remark he made, is what I'm presuming he'd like to do.

About the text of his comment: I disagree. Strongly. There is a healthy risk premium still in the stock.

Moreover, if, as and when the environment permit is received for mine development at Las Cristinas, the stock will probably double. Then (and this is the good part), I am expecting a take-over battle between Goldcorp and one of Gold Fields, Barrick or IAMGOLD.

Before this Crystallex play is over and done, I expect to see the share price well above US$10. My crystal ball is telling me that today (January 3) KRY will pop by, oh… +4.5%.

KRY 1-yr chart

Comments

[Brendan Henry:]

Chavez is a marxist. His role model is Castro. He is incrementally nationalizing the economy.

KRY will get a pop, if they get the permit. Chavez wants the mines to get built. But one day you could wake up and he'll have made a proclamation, and your stock is worth zero.

Of all the gold stocks to own, why own this one?

2007 Jan 03 12:26 PM

[WC Whiner:]

"Stock of the year"? I love me a junior gold now and then, and I salute you for the courage of making the prediction. I think you might even make a little scratch in US$ terms, since I think pressures on the dollar aren't about to relent.

That said, if I were to buy a single junior rather than a basket (and I don't see the point of not diversifying), it would probably be Greystar instead. Doing business in Columbia is no picnic, I grant, and GSL's deposit is at best half the size of Las Cristinas. However, there is essentially zero "Bolivarian" risk, and GSL's market cap is one-third of KRY's, which has outperformed by ~50% the last couple months.

Risk matters, as does valuation.

Crossposted to billcara.

2007 Jan 04 12:15 AM

[NO DooDahs:]

The crystal ball may need polishing. Regardless, the low float on the stock would certainly create leverage, IFF (if and only if) gold futures rise dramatically. In the event that they don't, i.e. they die a slow death or worse, fall below $550 as I think they will, then this stock will collapse, but it WON'T make a good short - the low float and lack of institutional sponsorship guarantee that.

2007 Jan 06 02:28 PM

[NO DooDahs:]

As mentioned in a later comment on a Cara post, I was mistaken on the float and ownership dynamics of KRY stated here. I "assumed" since it was a junior minor it was low float and under-institutioned. That was a MISTAKE!

KRY is in fact very large float for a company of its ilk and has widespread institutional ownership.

I apologize to readers for the lack of research in the Sat Jan 6 2:28 pm comment.

2007 Jan 09 11:31 AM

[Nova Law:]

Cara's track record in forecasting, to put it charitably, is terrible.

A mere seven months ago he described KRY as "a dog", and that at least 30 gold and silver stocks were superior. And now stock of the year? I'd bet that the difference is that he was short KRY back then, and is long KRY now. Conveniently he doesn't say, but the turnabout is striking.

Go back and read what he published exactly one year ago, 1/7/06, where he claimed a recession was coming in 2006, that equities would tank, and that the only way to make money would be to day trade in and out of stocks. Your reward for following that advice would have been missing the 16% runup in the S&P500 and getting stuck with a bunch of trading commissions.

2007 Jan 08 02:55 PM

[NO DooDahs:]

Oh, he's definitely one of those types that is always bearish on stocks in general, "the economy," and bullish on gold. Him and several like him are analogous to the old man carrying the "end of the world is nigh" sign on the street corner, except they're cleaned up, and, God forbid, managing other people's money in some cases.

There's another one out here, similarly poor forecaster. But, they do get the press!

I can guarantee the exchange-traded stock of the year hasn't been heard about yet. It will be some low-float, micro-cap come-from-nowhere.

2007 Jan 08 03:19 PM

[Nova Law:]

Actually, the only think Cara is usually bullish on is Cara - he's got an ego the size of Lake Ontario with an arrogant, nasty streak. Another characteristic is that if he can, he'll take both sides of a question so that when one is proved right he can claim he was correct all along.

His poor track record is further demonstrated by his bear market call on June 17, 2006. Sell everything! Head for the hills! Or as he said: "Wake up. The bear has won." What a dreadful call - he almost exactly picked the 2006 bottom to proclaim the beginning of a new bear market. The SPY closed at 124 on June 16, and its lowest close the rest of the year was 123.

2007 Jan 08 03:37 PM

[NO DooDahs:]

Got a link for that call? Be nice to share it with his SeekingAlpha readers. Especially if he *never* took the long side.

After all, it would be understandable for a technical trader to sell in the May-Jun period if operating under a re-entry criteria, and mid-August was definitely the "idiot light" on the buy back in.

2007 Jan 08 04:23 PM

[NO DooDahs:]

Nah, no such luck. Just as the "idiot light" breakout was occurring, Aug 17, he printed this.
"This market rocket will run out ... "
www.billcara.com/archi...

Hey, seldom do you see a more easy-to-find "W" bottom on support with a breakout confirming. Nobody shoulda missed that. If I'da had better horses under me, that rally would've made my year rather than just being "OK."

2007 Jan 08 04:37 PM

[Nova Law:]

Happy to help, you can check his wrong bear market call at:

www.billcara.com/archi...

One word of caution, however, I have noticed that he goes back and alters posts to suit his preferences. I would not be surprised to see that archive page changed to remove the headline quote of "Wake up. The bear has won."

2007 Jan 08 05:35 PM

[NO DooDahs:]

KRY down double-digit % today.

2007 Jan 08 05:47 PM