Yesterday, I bought 1400 shares of TSE:FVI Fortuna Silver Mines at 2.20.
Sold TSE: MEL Midway Energy (oil & gas)
In at 3.18, out at 3.77, profit = +18% after commissions
Stock Trade Commentary
Lets start with the selling, I really would have liked to sell Midway above 3.80 but my sell price was never hit, it was partially because of greed I guess and partially because Midway is a great company and I was not in a hurry to sell. However, following the debacle with Fortuna I decided to double my position in my margin account and lock in profits from Midway to keep the margin use to a minimum.
Right now I am holding 2800 shares of Fortuna at an average of 2.34 and 1000 shares in the TFSA account at 2.32. These prices are close to the financing price of 2.30 from the beginning of the year.
Before jumping in for more shares I gave the company a call and spoke with Erin their IR contact. She was courteous and took the time to discuss with me what was going on with the companys operations and share price. Its always a good sign when a company picks up the phone and answers your questions. In case youre wondering, some companies dont pick up at all, so this is very professional and considered a huge plus.
Fortuna has been downgraded by analysts at Canaccord Adams (from 4.40 to 3.70) and Cormark Securities (from 3.40 to 2.90) which were champion sellers in the last 2 days. The price is still undervalued relative to their targets. The price is undervalued overall, period.
3800 shares is a big percentage of my account, I am not sure I should have doubled my position in light of what the market is going through: Portugal downgraded and Greek bonds receiving junk status. I mean this is the perfect opportunity to pick up good stocks on the cheap. Now that the money is tied up the margin of maneuver is small for further buying activity.
In the short term, I am not worried about Fortuna going lower and I hope the price stabilizes around 2.30. Fortuna is a great long term hold and has upcoming catalysts such as:
- The San Jose mine will be starting production within a year (Q1/Q2 2011).
- Q1 Finances out within a month
- Caylloma drilling results out within a month
- Construction updates on San Jose with potentially lower Capex (Capital expenditure)
How about you Reader, are you invested in Fortuna? What is your take?
