Shorting JC Penney (JCP)

It comes down to the quality of JCPenney’s management.  If you judge management based on its results to date (e.g. 21.7% drop in same-store sales), management has been shockingly bad.  Basically, the longs think that JCPenney is a turnaround story and the shorts think that JCPenney is one of the worst managed retailers.  The short trade may be a little crowded as 41.5% of the float is sold short.  In my opinion, stocks with short interest above 20% are usually seriously flawed and the shorts will be right in the majority of cases.  However, history has shown that life is unkind to short sellers and that short selling common stock is not a good way of making money.  There are books on this… Mr. Sauer worked at a long/short hedge fund that blew up and David Einhorn got burned shorting Allied Capital.

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Selwyn update… it is bad

Russell Cranswick, Resource Capital’s nominee to the board of directors, has resigned (press release).  In my opinion, it is highly likely that Resource Capital will liquidate its position.  The Selwyn project is likely uneconomic due to the increased cost of mining (this has gone up a lot in the past several years… look at the cash costs of gold producers for example) and the fall in lead and zinc prices.

*Disclosure:  Still long.  I probably should have just cut my losses earlier and sold… it’s just that I have an aversion to selling near the yearly lows and selling into a depressed market.  I will be trying to sell.

Noront update

Noront has updated its feasibility study.  “At current metal prices (August 31, 2012), the DCF indicates an after tax NPV(8%) of $233 million and an IRR of 18%.”  If you use the 3-year trailing average for metals prices, the NPV rises to $543M.  Noront’s current market cap is around $86M, so this stock could be undervalued.

Intel: a cheap-ish growth stock?

Briefly, Intel may be a good investment due to:

1. Cheap.  The P/E is around 10.3.
2. In the long run, Intel will be able to consistently grow its revenues as we find more uses for computers (e.g. smartphones, tablets, cloud).  8% revenue growth will likely continue into the near future.
3. Its economic moat.  Its dominant market position lets it enjoy economies of scale in R&D and in manufacturing.  On the fabrication side, Intel is almost always a step ahead when it comes to process size and process technology.

Canada Lithium: why I sold out

In short, I don’t know how to verify the economics of its project.

I used to assume that (pre-)feasibility studies can be trusted to some degree.  However, I looked into Consolidated Thompson’s technical reports on the Bloom Lake project and then I looked at Cliffs’ numbers– there is a huge discrepancy.  The technical reports show operating costs of around $30-31/ton (see page 135 of the PDF for operating costs) while Cliffs is currently reporting cash costs around $85-90/ton.  So now I feel like I really don’t know what I’m doing… it seems like you can’t take anything seriously when it comes to juniors.

Energold Drilling Corporation (CVE:EGD) revisited

Previously, I made a post about Energold where I said that there was some pretty fishy accounting going on.  Shame on me for making snap judgements.

Yukon-Nevada Gold (YNG.TO): definitely a value trap

Mines are a depleting resource.  Usually you mine the most economic ore first.  This causes the economics of the mine to get worse and worse as the mine ages.  Yukon Nevada owns the Jerritt Canyon project which is on its last legs.  Not surprisingly, its economics have gotten worse and worse.

Some value investors see value in Yukon Nevada (see VIC writeup).  I disagree.  The mine has negative cash flow and therefore is not making money.  It will probably lose even more money in the future and it should be closed.  That’s the reason why it was recently closed.