Yesterday was a weird day in our portfolio, as we should have been up but actually finished lower as some of our stocks headed against the grain and traded lower versus their respective industries. We are looking at silver as a commodity which could increase going into the close of the year should the economy build upon the recent strong numbers. Looking out a bit further, we continue to believe that energy is the way to invest and look at uranium and coal as viable investment areas, although regarding coal we will not pull the trigger until our data indicates that it is time to buy. With the uranium stocks, we will probably have to make the jump early due to the low floats and lack of liquidity in many of the names. Limit orders will most certainly need to be utilized when creating positions.
We continue to watch AuRico (AUQ) move higher with the shares closing at $7.49/share after rising $0.31 (4.32%) yesterday after the company announced details on their third quarter production. Investors cheered as it appeared that the company is turning the corner and possibly putting those production issues behind them. That is exactly what we thought would happen regarding the production issue, but what has really pushed shares higher is the fact that the company sold one of their mines and exploration land surrounding that area for $750 million which unlocked some of the hidden value which we have written about. We are still believers in the company and would recommend keeping your long positions intact here.
Silver Wheaton (SLW) shares are still within striking distance of their 52-week highs with shares trading at $39/share. We are still bullish of physical silver here, and although we hold our silver exposure via silver coins we do believe that Silver Wheaton offers investors one of the most liquid investment vehicles that is based more on the price of silver and less on operating results/abilities. That is one reason that the miners have lagged the price of their respective commodities, but the story here is that you receive exposure to silver and get to circumvent the higher tax rate paid on collectibles as defined by the Internal Revenue Service.
With natural gas prices surging right now, it is having the effect of dragging coal stocks higher. Yesterday we saw Alpha Natural Resources (ANR) and James River Coal (JRCC) lead the way. Alpha saw their shares rise by $0.60 (7.61%) to close at $8.48/share on healthy volume of 37.9 million shares while James River saw their shares rise by $0.90 (23.20%) to close at $4.78/share on strong volume of 6.2 million shares. Even with the strong moves higher, these stocks are well off of their highs for the year. We are still looking towards next year as the year that coal recovers due to the lead time to switch from natural gas to coal on the turbines which are able to burn either material and the logistics involved. Look for coal to outperform so long as the draw downs in natural gas storage are above normal this year.
Cameco (CCJ) has been an underperformer this year when it comes to energy companies. Sure they have performed better than coal, but then again that is not saying a whole lot when one considers exactly how far from grace coal stocks have fallen. We look to the uranium story as inspiration for a reason to buy this stock heading into next year, and it does indeed appear that the industry as a whole will have the wind to its back as the "Megatons to Megawatts" Program concludes and the Russians go about driving both the long-term and the spot price of U3O8 higher. Pay attention to the industry over the next couple of months and be prepared to have some capital ready to deploy here - it looks to be an industry we move back into next year.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.