Profiting from Europe’s Woes

“Ladies and gentlemen, the Captain has turned on the fasten seat belt sign. We are now crossing a zone of turbulence. Please return your seats and keep your seat belts fastened. Thank you.” I bet you’ve heard this message before, don’t worry, you can unfasten your seat belt, we just came out of the turbulence zone!

The TSX dropped almost 3% this week on sovereign debt concerns. That was a nasty air pocket if you ask me. Between us, I prefer going through stock market air pockets anytime over real ones in a plane!

For the next 2 days, Mr. Market will settle down in my opinion based on expectations of positive employment numbers. Now that the smoke is clearing, time to visit the “troops at the front”.

State of the Portfolio

If you’re not familiar with my current holdings, please review the monthly update that was provided earlier this week.

I am currently holding Reliable Energy and Atikwa Resources. Both companies are targeting Bakken oil. Reliable will double its production by the end of the year. I expect the share price to increase substantially by then. Atikwa is a high risk hold for me which explains why only a small amount is invested. But I reckon the company will meet success in its drilling propelling the share price during the summer. For both companies, I do not think I will be adding to the position for some time.

On to Impact Silver Mining which I consider a top pick in Silver miner stocks. This stock is still under the radar and has underperformed its peers. However, recent activity suggests increased interest in this company. I expect very good news by the end of May propelling the share price above 1.50 hopefully, especially that some mining site is going to feature them as the monthly flavor.

It is my custom to buy on dips, Emerge Oil and Gas was the latest buy 2 days ago. This is a solid company that can be held for any term, long or short. If my situation permits holding it for the long term, I will keep it. However, since I bought on margin, it might be prudent to trim depending on market sentiment out there.

Finally, on to Fortuna Silver Mines, one of the main reasons for blogging is accountability to myself when it comes to mistakes in the hope of not repeating them.  Fortuna is currently my largest holding in my account; it is tying up a lot of troops that could have been deployed to exploit several opportunities in the past 2 days. The mistake I did was to double my position when the sharp drop in price happened some days back.  This has limited my purchasing power immensely and I missed out on some great buys yesterday. The plan is to “straighten the front” and not to “retreat in panic”, which means trimming the position without selling at loss. The company has nothing bad and its NAV stands at 2.30ish but it will take a while before the share price increases substantially. Their new mine will be operational in exactly 1 year. The upcoming drill results from their Caylloma mine in Peru should give the share price a boost. Hopefully, this will be strong enough to start the trimming process.

Sovereign Debt Storms Ahead

Greece will not be the last European member to rock the markets. Others will be standing in line asking to be bailed out. The question here is: will any of them be left to default?

I don’t think so and here’s why. If one of them defaults, it will impact banks in and outside of Europe. It will have a domino effect that will take the world economy into another recession.  As it stands, the IMF and the ECB are currently in the world economy airplane cockpit seeing nasty storms straight ahead. Will they maintain their course and risk crashing everybody? Or will they divert their course and avoid taking this risk?

I am inclined to answer DIVERT by providing bailouts with many strings attached. As such, I will maintain my discipline in buying on worries in the hope that at the end of the year, I will be able to publish outstanding returns beating the market hands down.

How about you dear Reader, do you think we will be going into the storm?