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Chris Damas
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Chris Damas is principal of BCMI Research, an independent equity research and trading company based in Barrie, Ontario. He has a biochemistry degree from McGill University followed by three years of industrial research at the M.Sc. level. At the age of 23, Damas had co-authored journal articles... More
My company:
BCMI Research
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The BCMI Report
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  • 10 Clues To Evaluating Seeking Alpha Articles

    Here are some clues to allow readers to identify articles that will most likely waste their time and lose them money if acted upon.

    I have gathered this list after writing, reading, commenting on and often refuting a variety of articles on Seeking Alpha for over three and a half years:

    1) The author has no investment research credentials or chooses to remain anonymous. As they say, what you don't know can kill you.

    2) The author has performed little industry research. Authors with great technology backgrounds write about commodity stocks and vice versa - why do they do this?

    3) A computer-generated stock screen provides a list of candidates but no verification of the data inputs to the ratios is then performed. Garbage in, garbage out.

    4) Simplistic ideas such as "more population growth means more food consumption means this fertilizer stock will be a winner" are used to recommend complex companies in complex industries.

    5) Home-made technical analytics and overly-complex charts are applied to small-cap stocks which are illiquid and therefore violate trading volume requirements upon which technical analysis works.
    Read Joe Granville.

    6) Investment ideas are supported by quoting company executives and investment banking analysts. Now whose interest are they looking out for?

    7) The valuation ratios used are not appropriate because the industry demands idiosyncratic ratios for the sector being discussed. More simply, growth stock metrics are different than cyclical stock metrics.

    8) The author makes a strong case for a stock and then says they have no position and no intent to initiate one. What does that say about their level of conviction?

    9) Authors churn out short pithy articles on a daily basis without any in-depth arguments as to how they came to their conclusions.

    10)Articles are titled in an overly-provocative way designed to attract eyeballs: "Stocks That Will Do Well if A Catastrophic Meteor Hits The Earth". Avoid these articles like the plague (except of course, this one).

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Mar 13 4:03 PM | Link | 10 Comments
  • Trade Oil Stocks
    It often takes until mid-morning on a Monday to determine market direction for the week.
     
    Stocks came out strongly earlier today, especially the oils and golds, but are now retreating rapidly. We’ve indicated you need to sell strength and buy weakness if you want to play commodities.  
     
    At 11:00 am:
     
    The DJIA (DIA) was down 26 at 12,143 after being up 74 at 12,243 earlier.
     
    The Canadian S&P/TSX index was down 51 at 12,201 but was up 79 at 14,331.
     
    April WTI crude (OIL) was at $105.49 up $1.08 after being as high as $106.95.
     
    April Gold (GLD) at 1,434.50 up $5.90 after being as high as $1,445.70.
     
    Yet another rumor planted by the oil “shorts” (trying to knock oil prices down and profit) that Libyan dictator Gaddafi is preparing to flee that country (a week or so ago the rumor was he had been shot and the oil market took a dive).
     
    Yes, but what about his seven sons and daughter? Would he leave them to fight the rebels alone while he relaxed in Venezuela? I think now.
     
    Why would he flee when his forces have gained back Bin Jawad West of Ras Lanuf and leveled Az Zawiyah by most accounts. Here's a map of these battle zones, courtesy of the BBC http://www.bbc.co.uk/news/world-africa-12670580
     
    Also unlikely under current conditions, is that the US would release any of their 700 million plus barrels of Strategic Petroleum Reserves. The SPR is reserved for a true and major disruption in global supply, not just because the oil price is being pushed up on speculation the "Arab Spring" uprisings would spread to Saudi Arabia.
     
    According to the International Energy Agency’s latest (March 4) report on Libya…
      
    “Reports from some European refiners indicate there is ample crude until at least the end of March and that they are now scheduling for April supplies. Currently, crude oil markets in Europe are not perceived as constrained, with crude demand relatively low due to a period of large-scale maintenance of refineries in Europe.”
     
    The truth is the Libyan revolutionaries picked a lousy time to awake and drive out their dictator. Both European and US refineries experience more downtime in Spring for maintenance and conversion to gasoline production from distillates. Therefore there is less need for crude oil compared to the Summer.
     
    I am recommending taking profits on oil equities because we have had a big two week move on WTI ($90 to $105) and nothing has changed in the glut of oil in mid North America. NYMEX WTI futures have gained a large speculative long position.
     
    The next move on oil will probably be down and it will be savage when it occurs.
     
    Therefore, we recommend taking profits on Nexen (NXY) @$26.70-$27, Talisman (TLM) @$24.35-45 and Cenovus (CVE) $38.60-80. All prices Canadian.
     
    We’ll buy these stocks back after there is marked weakness to reflect the increase in Saudi oil supply and any outbreak in peace in Libya, which hopefully will occur with the rebels taking over Tripoli. Price spikes could still occur if Gaddafi bombs his own oil facilities in a scorched earth retreat – but this still doesn’t imply business is any better in North America and with gasoline prices elevating, volumes will start declining.
     
    Much better to buy our favorite oil stocks towards the end of March and before they release Q1 earnings which should be buoyant, especially for Brent oil producers like Nexen and Talisman.
     
    One note on Talisman – they hedged 60,000 bbls of their North Sea production (roughly half) with a cap at Brent prices below $92 and $97. Since Brent is above $115/bbl, these derivative positions are running big losses. This is why the stock seems to fade just when you would expect further strength. So we like to trade the stock.
     
    Yemen is faced with a standoff between President Ali Abdullah Saleh, who won't leave, and the protesters, demanding his immediate resignation. Tensions are heightening, and an armed insurrection is probable.
    Nexen has operations in Yemen, so the stock trades off news of the chances for Yemen to sink into a civil war.
    The smart money is betting the US won't allow Yemen to descend into war (unlike Libya) because of the Al Qaeda threat there and US security interests.
    Odds are the Libyan rebels will require help from the West to defeat the Gaddafi forces, which is not forthcoming as of yet. It’s a crime the US Defence Secretary Gates thinks a no-fly zone is too complicated to arrange, however it is also true they may be working on it behind the scenes with their NATO allies.  A no-fly zone could be announced shortly, another reason to trade, not marry into the high crude oil market.
     
    We are adding to our BCE (BCE) (@$35.10) and TELUS (TU) (@$47) positions with the cash from the oil sales.
     
    Trading Note – Canfor Pulp Products (CFX on the TMX)
     
    On other news, the fact Asian paper and pulp producer Paper Excellence has announced taking over the Prince Albert, Saskatchewan idled NBSK mill and will restart it with $200 million in renovations, has knocked down the stock of Canfor Pulp Products by 47 cents to $16.95. We think the fear of oversupply in the NBSK market is a bit overdone and recommend purchase of CFX at these levels, as the company is instituting green power plans and will not be affected by higher crude oil prices going forward.
     
    We’ve been a seller of CFX at $17.50-60 and a buyer below $17.00. We also like the Dissolving Pulp stocks Rayonier (RYN) @$60.50 and Buckeye Technologies (BKI) @$25.10.
     
    Writers note: Unfortunately this article written at 11am on Monday was held up by a request for revision and therefore the timeliness of the information was lost.


    Disclosure: I am long NXY, TLM, RYN, BKI.

    Additional disclosure: This information was disseminated to clients and subscribers of The BCMI Report anywhere from 12 to 48 hours before appearing on Seeking Alpha.
    Tags: DIA, OIL, GLD, NXY, TLM, CVE, RYN, BKI
    Mar 07 2:07 PM | Link | Comment!
  • Fed court leaves Globalive blowing in the WIND
    It’s a pleasant day when you see commercial courts on their game, enforcing the rules of business law, even if it’s some members of the current Government of Canada that needed a rap on their knuckles.

    So it was with pleasure I read a Canadian federal judge ruled Minister of Industry Tony Clement had illegally overstepped his bounds when he ignored a CRTC decision disallowing WIND Mobile to open for business due to foreign control and ownership disqualifications.
     
    Clement overturned the CRTC (the Canadian version of the FCC), even though WIND had obtained the majority of its capital from an Egyptian mobile phone capitalist, Nuguib Sawiris, founder of Orascom Telecom.
     
    What is unbelievable to me is in spite of the heavy media coverage of this latest twist in foreign ownership and (lack of) government control over Canadian telecommunications, narry a TV mention has been made of an interesting fact:

    Sawiris has been quietly (at least in Canada) but busily monetizing his telecom stakes, including the Canadian assets subject of this recent court ruling. 

    That is, until a little popular revolt of his own got started at home and froze his company shares. Aka The Egyptian Revolution.
     
    Sawiris’ holding company WIND Telecom had signed a deal with Vimpelcom (VIP), a large Russian mobile operator, to sell its 51.7% stake in OrascomTelecom (ORSTF) and take back 305 million Vimpelcom shares and $1.5 billion US in cash.
     


    This, the backer of WIND Mobile, the largest of a trio of startups in the Canadian mobile communications space, and tacitly backed by the Harper Tories as the Great White Hope of more competition and lower cell phone prices for the little guy.
     
    Sawiris is the same person who was recently quoted in the Globe and Mail (October 29, 2010) as saying about the three big incumbents Bell (BCE), TELUS (TU) and Rogers Communications (RCM)  “We will make Pain, and they will Suffer”.
     
    I guess Sawiris really meant to say “We will make haste, and dump our Canadian mobile venture along with our other telecom assets as soon as it becomes expedient for me”.
     
    I was always concerned that we were opening the front gates to a company that prided itself on operating mobile networks in a host of repressive, 3rd world regimes and political hot spots.
     
    Orascom’s geography of operations reads like a “Who’s Who” of where either controlling dictators rule the minions with propaganda or where the next political unrest and revolt could be kindled:
     
    Let’s see….Algeria, Central African Republic, Egypt, Lebanon, North Korea, Pakistan, Tunisia, and Zimbabwe.
     
    Oh, and of course, Canada (with their 65% interest in Globalive Investment Holdings, the owner of WIND).
     
    Vimpelcom is no slouch either, in finding ways to equip countries on the human rights sanction list with mobile services, as it counts Cambodia, Georgia and Tajikistan as good customers. 
     
    If it weren’t for Telenor (TELNY), the Norwegian telecom operator and one of Vimpelcom's major shareholders,  this deal would have been consummated and WIND Mobile in Canada would have had Russian owners during today's kerfuffle over Tories being sent into the corner over there penchant for contradicting the CRTC.
     
    The Orascom/Telecom deal was scheduled to close on January 16, 2011, just nine days before the Tahrir Square protest began, and eleven days before the Egyptian stock market suspended trading of equities, including that of Orascom Telecom.
     
    Sawiris’ stock last traded in Cairo at 3.62 Egyptian pounds, on January 27, 2011. It had jumped to 5.48 on October 5, 2010, when the Vimpelcom deal was announced touching off a wave of enthusiasm. The stock continues to trade on the LSE, and has declined further.

     
    It has been reported often in Canada that owning the mobile phone network isn’t particularly important to our national security and therefore we should not get too fussed about who owns the “Pipes” in this country.
     
    Last time I looked, the RCMP, the provincial police and even local law enforcement used mobile phones to communicate between each other, in addition to their captive radio networks.
     
    And clearly, the fact Mubarak’s government could throw a switch and take Egypt’s entire mobile communications service away from the public, might indicate that perhaps its important for us to choose, not just regulate and have report to us, the new owners of our vital telecom services.
     
    Vimpelcom may be nice folk, and I see they listed on the NYSE in 1996, one of the first Russian companies to do so.
     
    The Vimpel Communications SEC 20-F filing lists no less than 21 pages of Risk Factors associated with their operations  (assassinations, political tumult, corruption, human rights violations etc)
     
    You know, the usual risks of operating in marginal 3rd world countries with less than rigorous political systems. Canadian telecom operations would have been a bold step for these people.
     
    So let me reiterate: We allow new entrants to gather capital from foreign owners, but when they decide to sell the asset to an even less.....

    News flash - this Canadian mobile communication has been interrupted by a decree from Russian President Vladimir Putin in response to incursions by the Canadian navy into Russian sovereign Arctic waters. 

    See what I mean? 


    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Tags: VIP, ORSTF.PK, TELNY.PK, BCE, TU, RCI
    Feb 07 9:00 PM | Link | Comment!
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