Since Christmas our premium (paid) subscribers have been fortunate to see gains of 50% to 100% on a large number of stocks we bottom fished throughout December. Our strategy of focusing on grossly discounted cash paid off dramatically in a short period of time. Even for our free subscribers and Stockhouse readers, our last three picks (since December 8th) resulted in the following:
a) Phoenix Coal (TSX: T.PHC, Stock Forum) gained over 100%
b) Phoscan Chemical (TSX: V.FOS, Stock Forum) gained over 60%
c) Anvil Mining (TSX: T.AVM, Stock Forum) gained over 70%
Early last week with paid subscribers, we started to lock in gains on PHC and FOS before the correction started Wednesday, but Anvil will be held for a good portion of Q1 as the discounted value is still dramatic. You can find that December 28th report here:
https://stockhouse.com/Blogs/ViewBlog.aspx?b=355
The risks in the DRC are still high and the outlook for copper unstable, but Anvil has performed as we expected and it remains a strong speculation given the large war chest of cash.
A news story (not made public by Anvil yet) surfaced on Friday from Mali that the Governor of Katanga (province in the DRC), was reducing the mining tax from 28% to 1%.
This is a huge tax cut intended to promote foreign investment in the ore-rich province of Katanga (where Anvil has its core operations). While this has little impact when mines are put on care and maintenance, it could have significant mid-to-long-term implications.
For those interested, here is another one we are using the same strategy on:
YM Bioscience (TSX: T.YM, Stock Forum; 45 cents)
www.ymbiosciences.com
Shares Outstanding: 58 million
Net cash: $52 million (90 cents/share)
I am not a big biotech fan because they require an insane amount of patience. Payoffs can be huge but most small biotechs are run by scientists who have a hard time managing their way out of a restaurant. YM appears to be different. They have done a great job conserving cash and have a strong product pipeline with international partnerships. Since the burn is controlled, we can take the same approach as the others and speculate purely on discounted cash.
In the case of YM, I really don't care at this stage about their long-term prospects. We will likely be out of most everything before spring this year (before earnings season) so we are only speculating on any rallies in January and February.
With YM we would be looking for a move back to cash value only - roughly a 100% gain from here. If fundamental news came out and it did better, that is great. Otherwise, we simply buy cash for 50 cents on the dollar and wait to see if the markets clean up. If they don't, we can hopefully sell back out for the same cash value in a month or two.
Staying in the 40-cent range keeps risk minimal. At this price you not only buy significantly discounted cash of $52 million, but the product pipeline of drugs carries a value of ZERO. As usual, this makes no sense. Even one of their development partners could buy the company for 90 cents a share (cash only) and get the drug licenses for nothing. Chances are this wouldn't happen in our short window of two months, but it demonstrates why our risk level is quite low.
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YM owns outright the rights to AeroLEF, a unique approach to the delivery of fentanyl for the treatment of patients with acute pain, which is being prepared for late-stage trials. The company is also the licensee for the highly differentiated EGFR-targeting drug, nimotuzumab, for most of the major market territories including Japan, Europe and North America. Nimotuzumab is currently undergoing a YM-sponsored trial in pediatric glioma in Canada and the United States, while being advanced in several phase III trials by YM's licensees and other companies advancing the drug internationally. Nimotuzumab is already approved for sale in a number of countries.
Nimotuzumab - Anti-EGFR Monoclonal Antibody (this is their most advanced drug)
Late-stage development, early stage commercialization - approved in 10 countries, in pivotal trials in Europe and other territories
YM has rights for North America, Europe, Japan, Korea and, Australasia
In Japan and Korea alone, advanced gastric cancer is a >$800mm market European Union would translate into >$700mm
Nimotuzumab has been in over 3,000 patients and in more than 30 clinical trials in more than 10 tumour types.
Disclosure: Danny Deadlock owns 10,000 shares of Anvil Mining (TSX: T.AVM) and 20,000 shares of YM Bioscience (TSX: T.YM).