Stock Dinosaur

Symbols :   Toronto Stock Exchange : NWF.UN

Current Price: $17.75

Stock Dinosaur Target: Dividend income

Stock Dinosaur Rating : Long Term Buy

Summary:

The oldest company in N. America has a near stranglehold on small, remote, northern retail.

Fundamentals:

• Market Cap: 856 mln
• P/E: 10
• P/B: 2.9
• Dividend : 7%
• Payout Ratio: 86%

Evaluation

This stock isn’t for those who are looking for a large capital gain.  This stock is intended for the discerning buyer who is looking for long term dividends and continuous growth from a company that enjoys a near monopoly in the northern portion of Canada.

This company has been solidly managed for several hundred years.  They run several successful chains of stores that operate in the more remote communities in N. America.  What does this mean?  It means that NWF has the massive supply chain set in place that makes it very very difficult for other retailers to enter this space.  Their various stores and brands sell everything from baby formula to clothing.  The communities they operate in are not attractive for large box stores, like Walmart or Zellers, so they enjoy rates of very low competition.

Additionally, the products they sell are mostly low end, so in a recession, as we are in, they are likely to see more business from the unemployed and those who are forced to tighten their belts.

The one drawback to NWF.UN is they are an income royalty trust.  If you are not familiar with these, they have to pay the majority of their earnings in the form of a dividend.  For a dividend investor, this is a great opportunity, but for someone looking for excessive growth, look elsewhere.   Additionally, the Canadian government plans to eliminate all income trusts by the end of 2010.  The company will not be dissolved, on the contrary they will just be forced to become a regular corporation.  This may affect the dividend and may affect other portions of the business.

Qualms aside, I still feel that this is a good, safe play.  I am willing to trust in a company this old!

STOCK DINOSAUR STATUS: BUY

Disclosure: Own a small portion of this.  May add to my position in the future.

Symbols : AMEX: MCZ ;  Toronto Stock Exchange : MCZ

Current Price: $0.38

Stock Dinosaur Target: $0.80 +/- ( 100%+ gain) 

Stock Dinosaur Rating :  Buy

Summary:

Mad Catz Interactive inc manufactures and designs peripherals for Nintendo, Sony, Microsoft and PC based video games platforms.  The sheer number of products they offer is overwhelming.  Products range from custom keyboards to video game controllers, to stands for guitar hero guitars.  It is our belief that while not as solid a company as many video game hardware manufacturers, Mad Catz is grossly undervalued.

Fundamentals:

• Market Cap: $20.11 MLN
• P/E:  see notes
• P/B: 3.3
• P/B (tangible):  n/a Negative

Evaluation

Mad Catz is a video game peripheral maker that is very undervalued based upon current sales and valuation.  Additionally, they are a growing peripherals makers, so valuation could increase drastically in the not too distant future.

They have lost money consistently for the last few quarters, but this is due to acquisitions and goodwill impairment charges.  If you ignore these charges they have consistently had a P/E ratio somewhere between 4-10.  This is an undervalued by our estimates by at least a multiple of 2.

Summary of Key points

• P/E very low if you ignore impairment goodwill charges.
• Good relationship with games makers
• Huge presense on amazon
• Exciting new products with buzz like r.a.t gaming mouse

Conclusion:

Not a buy and hold for life security, but it should hopefully hugely outperform for 2010

STOCK DINOSAUR STATUS:  BUY

Disclosure: the author of this blog has a small position in MCZ and will likely be adding to it in the near future.

Symbols : Pink sheets: LGCFF.PK ;  Toronto Stock Exchange : LRR

Current Price: $2.00

Stock Dinosaur Target: $6.11 (305% gain) 

Stock Dinosaur Rating : Overwhelming BUY!

Summary:

After this recent pullback in the markets, now is the time to get in on Linear Gold.  This Canadian gold miner stock is poised to rocket to at least three times its current value and the stock Dinosaur is here to tell you why. Linear Gold is likely the most undervalued gold miner on the Toronto Stock Exchange (TSX).  They are priced at liquidation value while they are sitting on millions of ounces of mineable gold bullion in several mining projects.  They are Enormously Undervalued!

Read on for further justification.

Evaluation

Linear Gold (LGCFF) has current mining interests in Mexico, the Dominican Republic and Canada.  They have a project fully funded by Kinross gold at Ixhuatán, Mexico that will yield at least 1.2 million ounces of gold  (at today’s prices that is equivalent to $1,212,000,000 USD).   They also have a 1 million plus ounce gold deposit at the Goldfields project in Canada.  When gold was priced at 600 US an ounce, a feasibility study indicated that this mine would be enormously profitable.  Now, with gold at over 1000 USD per ounce, the profitability has likely soared.

With regards to their other projects, bravobevo, the best player on Motley Fool’s CAPS system picked this stock as his top pick for the CAPs allstarportfolio competitio

Bravobevo had this to say about Linear:

“Linear has a fully funded joint venture agreement with Everton Resources for the three properties it owns, one such property is merely 300 meters from the westernmost Arroyo Hondo pit of the La Lechoza prospect on the northern portion of the Ampliacion Pueblo Viejo concession located in central Dominican Republic, near the Pueblo Viejo 22.4 million ounce gold deposit being mined jointly by Barrick Gold Corporation and Goldcorp. Site exploration programs are funded by Everton to the completion of a feasibility study.”

One of the most important thing to note about these projects is that they have off balance sheet partners assuming the costs.  So Linear Gold is in a great position in that their costs are off balance sheet.

Bravobevo went on to say:

“In May 2009, the Dominican Republic governmental mining agency re-granted to Everton and Linear a new exploration permit that will run for 3 additional years with a 2-year extension upon the operator’s request (potentially to 2014). The last two properties covered under Linear’s joint venture agreement are the Finca Miniel and Montenegro North targets, both located due north of the Pueblo Viejo gold project’s Montenegro pit.
Linear recently won approval from virtually all the creditors of GLR Resources Inc. for Linear to proceed with the purchase of GLR’s interests in properties and assets at Goldfield, Saskatchewan, Canada, which consists of two mines with total resources exceeding 1 million ounces of reserves. GLR’s bankruptcy court approval of the sale to Linear could come soon.

I think Linear’s stock price should react favorably…

Canadian mining sector analyst Brien Ludlin comments: “A number of companies are in a good spot right now. Linear Gold Corp. (LGCFF, TSX:LRR) has very aggressive management with some money in the bank. There’s a very good chance that they will win a legal dispute and secure a near-term gold-producing project by the end of the month. Beyond that, the company is looking very aggressively at other projects, and at some point will be a producer. And it has already a very good project in Mexico that is joint-ventured.”

He also has this to say:
“A reason why I like Linear is that its intrinsic value, due to the management team’s acquisition of viable mining prospects and structuring the transactions to be fully-funded from Linear’s perspective (so risks of cost overruns are the responsibilities of the joint venture counterparties), is not fully appreciated by the general public. As a result, this pick could do well regardless of whether or not the market or the dollar weakens. I think the likelihood that they might weaken is just icing on the cake.”

“Looking at the big picture, gold remains at the opposite end of a see- saw with the dollar. And, unfortunately for gold bugs, the typical relationships between gold and financial uncertainty aren’t working like they used to. These days, bad economic news frightens investors, who then buy the dollar to hedge against potential deflation. The dollar rises and gold falls. Conversely, any data indicating an economic recovery, or anything pointing toward the issuance of greater debt or currency, weakens the dollar and boosts gold. It also boosts the stock market, interestingly. So investors must form their own worldviews, and invest accordingly.

“Right now, as I say, gold is tied firmly to the fortunes of the dollar. But as inflation inevitably takes hold — more in terms of asset prices than consumer prices — we will see gold and other commodities return to favor as a counterbalance. It’s already happening, to some extent. The next couple of months will be volatile and dangerous, as global stock markets have come too far, too fast.

Gold analyst Brien Lundin said this about Linear recently:

“…one of the stories I’m most bullish on right now is Linear Gold (TSX: T.LRR). This is a well financed, well managed junior explorer that’s about to leapfrog into the ranks of gold producers — and very few people realize it. The company negotiated a deal this spring to acquire GLR Resources’ Goldfields project — a near-production project that ground to a halt when GLR ran out of money and couldn’t get financing in the credit crisis. This project would get Linear into production at around 90,000 ounces/year at great economics. The current NPV (net present value) would justify a dramatic, much higher rerating of Linear’s stock, but the company is confident they can significantly improve the numbers. The pit optimization was done at $525 gold, for example.

(Linear holds) …a big discovery in Mexico with more than a million ounces at nice grade. With this acquisition, they now have about 2.5 million ounces in gold resources, with lots of room for expansion.”

Summary of Key points

• $24 million in Cash & Debt‐Free
• possible discovery adjacent to Goldcorp’s elephant 22 million ounce find
• Price to book ratio sits at about 1-1, so the company is priced at liquidation of assets and cash value.
• Canada: Goldfields Project +1 million ounces of Gold (measured & indicated). Near term annual production of 90,000+ ounces
• Mexico: Ixhuatán Gold Project +0.9 million ounces of Gold (measured & indicated) Fully -Funded Joint Venture with Kinross Gold
• Dominican Republic: Three gold properties adjacent to Barrick’s 20+ million ounce Pueblo Viejo deposit – Fully Funded Joint Venture with Everton Resources
• Bravobevo pick for the Motley fool CAPS Allstar portfolio.  Possibly the best player on CAPS

Conclusion: Now is a great time to get in on the recent pull back in the markets.  They are well positioned, well capitalised and have enormous mining prospects.

STOCK DINOSAUR STATUS: Overwhelming BUY

Further Reading

http://investorshub.advfn.com/boards/read_msg.aspx?message_id=41374752

LRR recent presentation

Bravobevo post :

http://caps.fool.com/Ticker/LGCFF.PK.aspx

http://www.newswire.ca/en/releases/archive/August2009/04/c2393.html

Ludlin’s interview here:

http://jutiagroup.com/2009/07/24/lundin-look-for-gold-to-perform-in-very-impressive-fashion/

The CAPS allstar portfolio:

http://caps.fool.com/player/allstarportfolio.aspx?source=iersitlnk0000001

Disclosure: We currently have a position in this stock.    Read our standard disclaimer here.

Our extreme value choice offering for you today is Timminico, a Canadian company that produces solar grade silicon for the solar energy industry.  It has been brought to our attention by argaubly the best player on Motley fool CAPS: Bravobevo.  He has selected it as his top pick for the CAPS Allstar portfolio and his track record is impecable.  Our pick is based on the fundamentals and

The solar power industry is constantly becoming a more viable industry.

I will complete this post tomorrow with more information on the fundamentals, etc….

Update:  This stock has sky rocketed today, so I don’t think I’m going to currently spend any more time on it

We’ve lost our older posts due to a server error. We are working to get them back online as soon as possible.  In the meantime, do check back for new posts.

Regards,

The Management