Buy Impala Platinum (IMPUY.PK)
I’m going to take advantage of the selloff in emerging market stocks and global commodities on fears that China’s government might be about to slow China’s economic growth to buy shares of Impala Platinum (IMPUY) for Jubak’s Picks. (The stock is already a member of my long-term Jubak Picks 50 portfolio.)
My buy rests on three points.
First, despite a huge rally of more than 50% in 2009, platinum still sells far below its historical price ratio to gold. Right now an ounce of platinum buys 1.41 ounces of gold. That’s about 23% below the 10-year average, according to Bloomberg. Recently commodity money has started to move from gold to platinum in a bet that the price gap to the historic average will close.
Second, while platinum is a physical store of value like gold, it is much more widely used in industrial processes. About 70% of platinum demand in 2008 came from industrial uses (including the catalytic pollution control machinery in cars) compared to the 11% of demand for gold from industrial and dental uses. That gives platinum big upside leverage to an improving global economy in general and increasing global automobile sales in 2010 and 2011 in particular. The Center for Automotive Research projects that U.S. car sales will climb 20% in 2010 and General Motors China forecasts sales of automobiles in China will increase by at least 11% in 2010. Auto sales in China increased by 46% in 2009.
Third, thanks to the global correction in commodity and emerging market stocks, shares of South Africa’s Impala Platinum have dropped 11% from January 8 through 2:50 ET on January 25. (For more on buying in this correction, see my post http://jubakpicks.com/2010/01/22/when-to-buy/ )
Earnings per share will be $1.15 in 2010 according to Deutsche Bank and then more than double in 2011 to $2.21.
As of January 25, I’m setting a target price of $37 a share by September 2010.
Full disclosure: I do not own shares of any stock mentioned in this post in my personal portfolio. I will, however, buy shares of Impala Platinum three days after this is posted.
More on Platinum
Platinum Overtaking Gold as Metal of Choice on Autos (Update3)
From (today)
http://www.bloomberg.com/apps/news?pid=20601109&sid=a6FYtQ20VKI4&pos=13
Could someone plesae explain this to me… Non-equity, bulletin board, OTC, pink sheet and other specific securities are not eligible for the price type you have specified.
I’m tryint to buy shares through Etrade but it won’t allow me to which is a first for me!
Please disregard my last message, I called and got an explanation! Great learning experience just now…
ok, I have a question for you folks out there that invest on a regular basis… I have limited funds a month that I put away, say 600-800 dollars to invest in different EFT and stocks through Sharebuilders. So I invest 100 in this stock and 200 in this EFT and so forth… Is it a good idea to use this method of investing say to buy Impala Platinum? or Marvell? or COMPANHIA DE BEBIDAS? thanks for your comments
IMPUY, eh, I am afraid the volume is a bit too low and it’s OTC. Sorry, I just worry about the convenience of buy and sell.
Kensan,
I’m partial to Marvell, but I bought it when Jim suggested it. Also, the recent dropoff in the market makes for a good opportunity to pick up some more for even cheaper.
A NYSE platinum and palladium stock is Stillwater Mining (SWC). They are located in Montana and I believe they are still the only producer in North America.
Jim,
I was looking for your future fantastic 50 stocks. I can’t find them on here. Do you still have a group of 50 stocks that you think will be good for the long term 5-10 years?
Concerning point #2 of Jim’s rationale, it assumes that catalytic emissions reducers are a functional requirement for an auto to be sold any where in the world. Do we know what are the emissions standards for new cars sold in the countries with rapidly burgeoning economies? I would expect the catalytic converters to be one of the first ‘accessories’ eliminated to lower costs. …short-sighted but profitable…
Meanwhile, I feel like I’m paying for an education on the gold markets and would only dive into platinum with some of the position allocated to GG… Any suggestions on timing such a swap?
Ooops! …sorry if that sounded negative, just above… I should have included a wink!
Best regards from Mpls.
Frank
Volume today (1/25) was less than 76,000 shares. That feels slightly illiquid, or am I just being too way?
I have been looking into IMPUY lately too. I remember that I had chance to buy it last fall at about $20, but I got cold feet!
Jim, what made you pick this over the new Platinum ETF PPLT?
Thanks,
Matt
Catalytic converters are not standard equipment in the UK, last I heard.
Jim, when you issue a buy like this one, what percentage of your model portfolio do you put into the stock, or is it even standardized? Thanks
Jim,
Some of these comments are beginning to depress me.
Best wishes.
salmoned, a book answer might be 10% for a full position and 5% for a half position….but I think Jim would rarely get that specific since every portfolio is different and aimed at achieving different goals. For instance, if you already own GG, GRS, or TC, FSUMF you might already have an appropriate allocation of your portfolio in a precious metals or commodities type sector.
Cheers,
Brock
Jim, glad to see the interest in platinum. I’ve been into ELR on the TSX for a while, and I think it has farther to run.
salmoned, each position in Jubak’s Picks starts off with an equal dollar amount. That amount has changed with time–I have increased it (last time was January 2009) to absorb more cash as the portfolio has grown). Right now a new position is $12K.
Jim, I can clearly see you don’t want to reveal percentages of idle cash or initial investment positions. What I can’t see is why you are intentionally not revealing why you are reticent concerning those matters. Is portfolio management NOT a part of what you wish to share in this forum? Is that all covered in your book? I can’t be alone in seeing this foundational area of investment strategy being skirted. If I were learning Texas Hold’em, I’d want to learn asset management alongside odds of making a hand or player patterns, else I’d have a gaping hole in my understanding of the game.
salmoned, at the onset JJ and the other moneycentral editors used equal $ stakes in stocks , usually 10,000 for each stock. it was really for comparison reasons and i guess still is. You apparently have come in lately so have a different prospective than we who were here in the beginning. It is almost impossible to correct without starting fresh as they used to on MSN money. Please don’t rock the boat as this is the best information on the web. JJ IS GREAT but you are going to have to figure out how to allocate your funds all by yourself. It is different for all of us anyway.
Thanks amtrend10
Jim, Does your position change on this with the latest earnings report? Down 75% from the year before. What impact will this have on the short term price or finding an entry point if we are considering following your portfolio for the first time?
http://m.24.com/content/FullArticle.aspx?aid=ARTICLE_2570046&cat=Finance&sh=Finance
Jim, not sure if you keep up with old post like this, but an economist article mentions Impala as a firm that would be hit if Zimbabwe proceeds with its threatened “indigenisation.” Any comments?
http://www.economist.com/world/middle-east/displaystory.cfm?story_id=15955482