I wrote earlier that the effect of a Fed rate cut should produce a short squeeze on a number of PM stocks. If a short squeeze does occur, there is one stock that should stand out from the crowd: Coeur d’Alene Mines Corporation (CDE). I’ve written a detailed analysis on CDE in the past and I believe given the future position of the company as a silver miner, a fair value for shares should be in the $5-$8 range.
If we look at the chart, MACD is in positive territory and the last time there was a bullish centerline crossover, we had a nice smooth uptrend from $3.60 to $4.25. We won’t be able to draw much in terms of a current trend line for CDE until we get further into the month.
The fundamental growth picture looks great. CDE expects to be producing silver at a negative cash cost of 0.41 due to gold by-product credits. The figure was calculated using a price of $550 per ounce for gold and $10 per ounce for silver. With gold now above $720 and silver above $12.90, the cash cost to produce silver for CDE should only improve.
There has been a lot of talk about Dennis Wheeler’s failure to run Couer smoothly and I tend to disagree with most of it. Dennis is doing exactly what he should be doing; anything and everything possible to grow the company’s profits. If Dennis is guilty of anything, it’s a failure to deliver shareholder value. Dennis has built CDE’s success by issuing a huge number of outstanding shares which I believe has led to a large amount of short manipulation.
I wrote a previous article with my top 6 silver picks if you are interested in investing in silver stocks.
Disclosure: The author holds positions in CDE stock and options.