TPS Trade Alert – February 28, 2014

| February 28, 2014

February 28, 2014


Buy Golden Minerals (AMEX: AUMN) up to $1.30 per share.

Trade Rationale:

We’re entering into a very interesting economic period, and it’s making investing something of a challenge.

On one hand, the US economy is showing signs of significant improvement.  As long as the terrible winter weather doesn’t leave too much of a mark, 2014 could be a very good year for domestic economic growth.

On the other hand, emerging markets are a mess.  China – one of the world’s largest consumers of international goods – could be in real trouble. And, there’s geopolitical turmoil in abundance across several emerging nations.

Essentially, we’re investing in an environment where there could be a volatility shock to the system at any time.  However, there should also be plenty of growth due to domestic economic gains.

How do you invest in a period where we have both growth and uncertainty?  It’s certainly not a typical situation.

Here’s the thing…

There’s actually a way to invest in stability and growth at the same time, using the same product.  Believe it or not, this product is actually a popular commodity.

What I’m talking about is silver.

You see, silver serves two distinct purposes for investors.  It’s a precious metal – second in popularity to gold, but still heavily traded in that role.

It’s also a widely used industrial metal, with over 55% of silver fabrication demand related to industrial uses such as electronics and medical instruments.

Because of silver’s dual role, it has the unique ability to perform as both a precious metal and an industrial metal.  That makes it an ideal investment in a period where we could be dealing with economic growth and interim bouts of volatility.

That’s where Golden Minerals (AMEX: AUMN) comes in.

AUMN develops mineral properties in Mexico and South America.  The company mines for silver, gold, lead, zinc, and pyrite – although silver is easily its primary product.

Let’s cut to the chase – there are three main reasons I like this company.

First off, Golden’s properties include 65 million of silver equivalent ounces measured and indicated plus another 66 million inferred.  That’s a massive amount of resources.

Second, the company had to close its primary mine in Mexico due to the drop in precious metals prices.  The mine was not economically feasible.  With the major loss of revenues, AUMN’s share price plunged.

However, the mine closure is fully reflected in the stock price.  What’s not in the stock price is the fact that the company can reopen the mine as precious metals prices rise.

More importantly, Golden has used this opportunity to figure out how to make the mine more efficient.  When it does reopen, the breakeven price for production could be much lower.

Finally, despite having to close its primary silver producer, the company is in strong financial shape.  As a matter of fact, AUMN has nearly $24 million in cash and no debt.

That means management can bide its time until it makes sense to restart their Mexican operations – without fear of insolvency.

Here’s the deal…

When investors fled the stock due to the mine closing, the price plunged to a substantially oversold level.  At the current price, the shares are trading at just 0.81x book value.

In other words, Golden’s assets are worth more alone than the market value of the company!

We’re going to take advantage of this crazy misevaluation and grab shares of AUMN here.

Remember to use limit orders when placing your trades.  And stick to your position sizing rules.

Key Facts:


Company: Golden Minerals
Ticker: AUMN
Recent Price: $1.12
Market Cap: $48.8 million
Avg. Daily Volume: 429,548 shares





Category: TPS Trade Alert

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