Time to go long ORV based on the monthly technical chartall,
One of the great joys of investing is finding a stock that is so mispriced by the market that noone wants to buy it. Orvana Minerals (ORVMF) or ORV.TO is one of these stocks where the market pricing on the stock is absurd. How do I know that the stock is mispriced. Well have a look at the following graphic which shows the 45 cheapest gold and silver producers ranked on market cap per ounce of quarterly gold production. As of last Friday, Orvana was the fourth cheapest gold producer and closed the week at a valuation of $962 USD per ounce of quarterly gold production. That compares against an average valuation of $6566 USD in market cap per ounce of gold equivalent production for the bottom 45 junior producers. So ORV is undervalued by at least a factor of 5.
But, the question that naturally follows is what if the market is right, and this is a value trap destined to go to zero? Well, to see if that is the case let's take a look at the entire history of Orvana with a monthly chart. The monthly chart just flashed a buy signal on the monthly coppock indicator, and that has happened only two times in the history of Orvana, and in each case investors who bought the monthly coppock buy signal had handsome returns.
The monthly ADX indicator had a buy signal back in May, and monthly OBV has bottomed at the beginning of the year and has been trending up since then.
So you have a bullish setup with a buy signal on the long term technical chart and untested high at $3.97 which is the next target.
You have ORV in a favorable seasonal outperformance time period versus the GDXJ.
The stock is underpriced by a factor of 5.
And then yesterday, management reported the operating results for fiscal year 2016 which ended in September, and Orvana had production of 98,960 gold equivalent ounces for the year.
And the guidance for 2017 is a 25 percent increase in gold production at El Valle, and a 100 percent increase in gold production at Don Mario. Copper by product production will increase by 45 percent at El Valle, while decreasing 30 percent at Don Mario. Silver by product production is scheduled to increase 30 percent at El Valle and decline by 70 percent at Don Mario. So management has confirmed the bullish case for this stock as evidenced by the monthly technical chart.
I will leave my analysis of Orvana's financials for another post. However, I believe that Orvana's 2017 guidance is very conservative.