UEX Corp UEXCF

RE: Vancouver Conference

[Harvard99]

Hey Candy I think Bill Carrigan wrote this article just for you: Jun. 13, 2004. 09:17 AM DON'T IGNORE THE ART OF STOCK SELLING BILL CARRIGAN Last week I discussed the use of stock scans, or stock filters, as a tool for use in stock and sector selection. You can revisit this item on the Star's Web site at thestar.com, or just follow the link from my site at gettingtechnical.com. Investors have always preferred to be on the "buy" side of an investment decision and less inclined to be consider the "sell" side of an investment decision. That is because investors typically associate buying to be a positive act with a positive outcome. Selling is usually associated with a negative outcome. After all, you have to play in order to win. It is this "urge to splurge" by investors that has always made them an easy sell when it comes to investment products. Financial institutions have built vast sales forces with a view to sell investment products to the investing public. You will usually get little guidance on the sell side from your "sales" representative. Several years ago an angry lady from compliance reminded me that, "if you want to play, you have to pay." Sobering reality, but it is the "buy" side of an investment decision that will get you in trouble and the "sell" side may be your only salvation. There are several ways to begin the selling process. The first step is to recognize that your new investment product is a paper asset and it doesn't know or care if you own it. In other words, do not develop an emotional attachment to any security. A few months ago I suggested the shares of a particular gold stock be sold and then I got a complaint from an investor who claimed he was the "proud owner" of the shares. I wondered if the wife knew of her husband's other relationship. The second step is to be a little contrary and to be alert for investment sheep. Usually "INVESTMENT SHEEP" will flock toward a sector that is the next big thing. Four years ago it was technology stocks, two years ago it was gold stocks, and now it is the energy stocks. Not a day goes by without a bullish item on energy in the financial press. A recent item, "Playing the new energy era," featured a group of energy experts from Alberta debating the outlook for energy stocks. They may well have been Calgary hockey fans debating the outlook for the Flames. An over-exposed CEO is another early warning to the contrarian investor. Energy giant EnCana Corp. chief executive Gwyn Morgan has had his toothy grin all over the financial pages for months. The recent smiles are because EnCana is now the proud owner of U.S. gas producer Tom Brown Inc., paying a record price for U.S. gas reserves. Petro-Canada is also buying up energy reserves at record prices. Investors are not reminded that someone is on the sell side on these transactions. Anadarko Petroleum Corp. of Houston is one of many sellers of Canadian energy assets. A third step is to look for a diverging relationship. In the case of natural resource stocks we would look at the company's shares and compare them to the price of the related commodity. In the case of gold, it would be gold shares vs gold bullion. In the case of an oil and gas producer it would the company's shares vs the price of crude or natural gas. Usually the prices of the common shares will follow the same price path as the related commodity, be it bullion, crude or copper prices. Our chart this week shows the weekly closes of the Shiningbank Energy Trust plotted above the weekly prices for natural gas. Note the relatively high correlation in prices from 1999 through to the peaks at "A" in early 2003. Note that the recent high in the Shiningbank units at "B" are matched by a lower high at "B" in natural gas prices. We call this negative divergence. The same thing happened in the gold complex this January through April when a new 52-week high in bullion was not matched by the major gold indices — and we all know what happened to the price of gold stocks. Bill Carrigan is an independent stock-market analyst. His Getting Technical column appears Sunday. He can be reached at gettingtechnical.com on the Internet.