Qantas (QAN.ASX)

Qantas (QAN.ASX) has fallen like a plane in distress of late. Looking at this monthly chart, you could be thinking that around $3.20 is support. I would suggest however that the stock will be pushed down to $3.00, if only during intra-day trading, so I'd be placing orders around $3.05.
Why are they so weak? I'm not certain, but I suspect its because of:
1. Slump in business activity
2. Slump in inbound tourism due to strong $AU
3. Higher fuel prices - though I understood Qantas had a good hedge problem. Maybe its turned awry.
4. Growing domestic competition, lower occupancy rates
5. Higher terminal charges
6. End of takeover speculation. I actually dont know the reason it ended, but I think it failed.
7. Higher interest rates - airlines carry a lot of debt and Qantas bought a lot of planes in recent years.
The stock is a great trade. If you are interested in it as a long term investment, you might consider reading a recent broker report or company-sponsored presentation on the stock. Do research them because there are a lot of negatives above. Its quite possible they will go back to $2.30. What a trade its been! I remember some bad pubicity about James Strong - the CEO.
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Andrew Sheldon www.sheldonthinks.com

Qantas (QAN.ASX) - what goes up must come down

Qantas has pulled back alot from $6.00 to $4.50, and people might be thinking this poses a great entry. I am however discouraged by several factors. The stock was pushed up by a failed leveraged takeover, the support has really not sufficiently tested the $4.20 support level, and whilst I suspect it will consolidate at that level, I dont see it holding it. I think the airline will struggle to fill seats in a contracting economy, and I think discount airlines will make a bigger impact, and regional airports will grab more market share. I think alot of cities are pricing themselves out of the tourist market and business travel will likewise contract. For this reason I can see them falling back to $3.00. More informationn at Google Finance, and see my discussion forum.
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Andrew Sheldon www.sheldonthinks.com

Futuris Corporation (FCL.ASX)

Futuris Corp is looking good with its exposure to the Australian agricultural commodity/rural sector. Futuris holds a stake in Elders Finance & stock agency, as well as fertiliser to my 'limited' knowledge. Given the outlook for commodities, this is a great stock to hold. In fact now is a perfect entry given that the stock has fallen back to a solid support at $2.00. I have no hesitation recommending this stock. Join my Google Finance FCL Forum!
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Andrew Sheldon www.sheldonthinks.com

Mincor Resources (MCR.ASX) at technical lows

Mincor Resources has reached a technical buy point judging from the following chart. The fundamentals are looking good as well since nickel prices have consolidated and stockpiles have stabilised. Might the next move in stockpiles be down? I think so. See my latest post on nickel prices and stocks at http://hot-metals.blogspot.com.
The support level for Mincor Res is $2.70, and the stock is currently trading at $2.92. Based on the positive outlook for nickel, I do believe this stock is about to rally. It fell off its high very quickly, and I suggest it will provide traders with a good rally.
Join my Google Finance MCR Forum!
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Andrew Sheldon www.sheldonthinks.com

OneSteel Ltd (OST.ASX)

Onesteel like Bluescope looks like another candidate for short-selling, only more so if the attached chart is anything to go by. This will be the 3rd attempt by this stock to break the $7.30 level. In fact the hang-man candlestick is already giving us a sign of weakness. Great for a short sell!
If you want to join my discussion on this stock, go to Google Finance.
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Andrew Sheldon www.sheldonthinks.com

Bluescope Steel (BSL.ASX)

Bluescope has provided a good rally since Xmas. I would suggest however its time to take profits as its margins will be squeezed by higher costs and weaker demand. A stronger AUD will also not help. I think this stock will resume its downtrend. There is upside to $11.50, but I dont think I would be waiting to sell until then, unless you are short selling. I would be playing a sell order now. Join my forum at Google Finance.
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Andrew Sheldon www.sheldonthinks.com

CSR Ltd (CSR)

On the topic of food, CSR strikes me as close to a buy. The stock is destined for a technical breakout. Sugar prices are trading - http://futures.tradingcharts.com/chart/SU/M are just commencing a rally after a significant pullback. Apart from a food additive, sugar is increasingly being used for ethanol production. Australia is not the lowest cost producer, all the more reason why CSR should rally hard, because its tight margins from sugar milling should benefit from higher prices. It seems probable that CSR will find support above $3.00, but there is downside to $2.80 given the current financial strife. Without doing more research I wouldn't be surprised to see them fall to $2.50, another stronger support.

There is reason for caution however based on the following report - see www.tradingmarkets.com/.site/news/Stock%20News/792812.
Wondering if there is any unfavourable hedging in there as the CFO has resigned. One of the chief reasons for the fall in earnings was the drop in sugar prices and strong AUD. Sugar prices will rise again, but its unfortunate that building products - the other core division i s set to be a future drag on earnings. Having said that, with the current property boom over in Australia, people are likely to invest in home improvements. Anyway check out the latest thoughts and contributions from readers at http://finance.google.com/group/google.finance.674217/messages.
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Andrew Sheldon www.sheldonthinks.com

Japanese Equity Picks - Aug'07

I have a personal interest in Japan, so occasionally I keep an eye on the market there. The sectors I like most in Japan are IT and resources. The following stocks are of particular interest at the moment.

1. Toho Zinc (TSE:5707): This company is a refiner of base metals and also takes equity investments in mines around the world from which it purchases concentrates. Its code on the Tokyo Exchange is 5707. I like this stock on the basis of its technical characteristics. I know that it has equity in Consolidated Broken Hill (CBH) in Australia, as well as buying its metal concentrate. Today its share price is Y1096. See http://quote.yahoo.co.jp/q?s=5707.t&d=c&k=c3&a=v&p=m65,m130,s&t=1y&l=off&z=m&q=l

2. Sumitomo Metal Mining (TSE:5713): Sumitomo Metal Mining is a diversified metal refiner and miner with a focus on nickel and gold. I first recommended this stock at Y1540, and would be inclined to recommend it at Y2500 now. No doubt its benefiting from a weaker yen and its increasing output.

See http://quote.yahoo.co.jp/q?s=5713.t&d=c&k=c3&a=v&p=m65,m130,s&t=1y&l=off&z=m&q=c&h=on

3. Yozan Inc (JASDAQ:6830): Yozan is not the best exposure to the ongoing development of the WIMAX communications format, but its Japanese exposure, so worthy of mention. With laptop computer sales overtaking desktops around the world, and increasingly people wanting flexible lifestyles, its clear that there is a role for WIMAX-based solutions. The question is - Can new WIMAX infrastructure compete with the established HSPA (3G) networks. The positive aspect about WIMAX is that it promises to offer high-end business people better communication solutions when they travel overseas. See http://quote.yahoo.co.jp/q?s=6830.q&d=c&k=c3&a=v&p=m25,m75,s&t=6m&l=off&z=m&q=c&h=on

4. Tobu Railway (TSE:9001): Tobu Railway is one of the larger rail-development companies in Japan. Such companies have a powerful position in the market because of their capacity to use their cashflow from railway operations to finance additional stations and the property infrastructure and services around them. They really are fully-integrated property-transport development companies. This company has a little distance to fall until it reaches support, but should be good buying soon around Y500 support. See http://quote.yahoo.co.jp/q?s=9001.t&d=c&t=2y&l=off&z=b&q=c&k=c3&a=v&h=on&p=m65,m130,s

5. KDDI (TSE:9443): KDDI is the 2nd largest cell phone provider in Japan after NTT Docomo, following the amalgamation of the AU and other provider(forgot the name??). Expect synergies from consolidating these businesses. Whilst this looks like a good buy, I dont like them as a long term investment because of the maturity of the technology and declining population growth. Expect profit margins to narrow. A buy at Y800,000 with an intent to sell at Y900,000.

See http://quote.yahoo.co.jp/q?s=9433.t&d=c&k=c3&a=v&p=m65,m130,s&t=2y&l=off&z=m&q=l

I personally have no interest in the blue-chip stocks or anything close to paying dividends - franked or otherwise, but then I retain some excitement for any opportunities I see. The following stocks are likewise.

1. Emperor Mines (EMP): Emperor's Vatakoula UG mine in Fiji has one of the longest lives of any in the world. I remember this company from its heydays in the 1980s, when the stock was trading at $12. Some 20 years later, it is still producing 110-140,ooooz/year, albeit at higher operating costs. Its record over that time has been chequered, but what can you expect when the prior MD was an accountant. Nevertheless this is a difficult mine. For starters its a 'hot' volcanic mine requiring refrigeration. Grade control & reserve calculations are spirilous because of the irregular distribution of the gold. The veins are thin, so mine headings are narrow. Having visited this mine, I can say workers are confronting some of the hardest conditions in the western world, excluding South Africa. Little surprise that strikes are common. The last 6mths has been shocking after a mine flooding, shaft equipment failure, high oil (thus power) costs and higher maintenance costs. The mine went from $6-8mil 6mth profit to a $33mil annual loss. The management team has abandoned the mine, opening the project to fresh ideas. DRD Gold's takeover demonstrates the value inherent in this minem having secured 49% of the equity. Conversion of their loans into convertibles suggests this might increase. Regardless, the bad news seem to be behind them. They still have a respectable 3.3Moz of gold resources at an average grade of 12g/t. The company has $6mil in cash and its debt will be reduced by $8mil if Alcaston can negotiate the sale of the Tavolu project (0.4Moz in Fiji). The Net Tangible Asset value of the company is $0.18, and the share price is $0.26. Being a significant gold producer (albeit high cost) presents an attractive turnaround story at a time of rising gold prices, particularly if they succeed in returning gold production to 140,000 oz per annum. Higher oil prices and continued operational problems pose the biggest concerns. See the chart below - I see scope for a break-out.
2. Resolute Gold (RSG): They operate 3 gold mines in Australia (Ravenswood) and Africa (Ghana & Tanzania) producing around 230,000 0z per annum. They have alot of blue-sky upside to expand resources, and I wouldnt be surprised to see a merger with Gallery Gold (GGN) to expand their market profile with institutions. They have a significant about of hedging, but expanded output will create added upside. The chart suggests the best opportunity to buy has been missed. Wait to see if resistance at $1.30 is broken, as a better entry might come yet. ie. A delayed wedge breakout.
3. Croesus Gold (CRS): CRS operates in 3 districts of WA. The company operates mines in the Binduli, Davyhurst and Norseman areas of WA. Production is currently running at 183,000 oz per annum. The company has hedged 21% of its reserves. It has recently increased its total resource base to 3.6Moz, and the company has raised $15mil through a convertible note issue to fund an exploration program in the Norseman area, as well as acquisitions overseas. The notes raises CRS cash reserves to $21mil + $4mil in investments. The project has significant upside in underground resource potential. The institutions dont like it because it lacks a large resource base and has high operating costs. The chart suggests weakness in CRS despite higher gold prices. The reason is the deterioration in cash operating costs the Davyhurst (and Binduli) operations. Their 329mil shares at 36c are worth $118mil. Look for support at 35c, otherwise weakness to 20c. See chart below.