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SSRI - A Rare and
Unexpected Opportunity
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Q: Jay,
I saw you added 0.9% to your SSRI (Silver Standard Resources, Inc.) on March 25th. Why is that?
A: I just read some great new research on SSRI. Steve
Sjuggerud did an article on it in the April issue of True Wealth. He mentioned that SSRI controls the largest silver reserves of any publicly traded silver company in the world. They have an estimated 1.7 billion ounces of silver in the ground in Argentina, Peru, Mexico, Canada, Chile, the United States and Australia. At today's price of $13.5/oz, that's around US$22 billion in market value. At the same time, their stock's market capitalization (total number of shares x the current share price) is around US$1billion. In addition they've just announced for the first time a new substantial gold reserve property. If you buy SSRI at today's market value you're getting silver in the ground for 50 cents per ounce, and the new gold reserves free. Then, watching the news, we see that Ben Bernanke is doing everything he can to print more US dollars and destroy the value of the dollar. Mainstream investors are finally coming to realize that the more money you print, the less it buys. Currently, a lot of people think in terms of gold as a hedge against inflation, but they don't think much about silver. It's still off the radar for most people, even though it's fundamentals are better than gold. When the market begins to revalue silver based on its fundamentals, then silver mining stocks should rise. The best ones should leverage your investment up many times. In view of this new information, I added to my SSRI. It looks as close to a long term cinch as I've seen.
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Q:
You now have 5% in this one stock, something you have rarely done. Why is this?
A:
First, let me urge you to look at a 10-year chart of SSRI. What you see is a totally different picture than what you see looking at the price action since the credit crisis began, a relentless
up trend from the year 2000 until the credit crisis hit the market (reaching a high of $48 in November 2007), as the company kept adding to its silver reserves in the ground, but not spending the huge cost of mining it. You are seeing the value of real wealth stored in the ground and rising with the price of silver and the addition of new reserves.
Maybury began recommending and buying SSRI at $3 in 2002. At yesterday's close, he was up nearly 6 times on his investment,
even after the big drop caused by the credit
crisis. When the market revalues this new information, SSRI could go into orbit. In my opinion, It could
easily be a $100 stock in 1-3 years, and maybe much higher, based on conservative revaluation of the increased reserves and
expected price of silver. As always, a major event could change this outcome, but it's one of the best reward/risk opportunities I've seen in
ten years.
Q:
You've owned SSRI longer than any other stock you hold, but compared to other stocks it's performance has not really been too spectacular in the last year or so. Why does it seem to be
under performing?
A:
It fell from 48 all the way down to 5 during the crisis, but then quickly rebounded to 20 on high volume. At today's price it's down 64% from its high, compared to about 50% for the Dow and S&P, but it has far outperformed the financial, housing and some other sectors of the market. I sold a portion of my SSRI in the high 30s, then repurchased some at 6 and some at 9 near the bottom. The new information makes it one of the best bargains out there now in my opinion.
Q:So what would you recommend for those of us with less than 5% of our portfolio in SSRI?
A:
I suggest you may want to add to your SSRI if you have less than 3.5% in it.
Q:
If we add to SSRI, then what do you recommend reducing?
A:
To begin with, cash. Besides protection from deflation, that's one of the best reasons for having a good cash allocation, to be ready to take advantage of rare and unexpected opportunities like this one. Then you can decide if you want to sell something else with less potential in order to restore your cash allocation if it has fallen below 30%. Also this is a good place to mention that those who hold SLV or GLD might consider replacing some of them with SSRI to substantially enhance the potential on that capital for the next few years. But read carefully the closing disclaimer at the end below.
Q:
When do you think the price of SSRI will start moving up quickly? Are there some events or announcements that could trigger a strong move upward?
A:
Not possible to know, but the chart looks excellent now. If 20 is taken out
decisively in the next few days, I wouldn't wait any longer to add. I am watching closely for evidence of informed or insider buying. The volume has already increased during this present rise. If it
accelerates from here along with the price, that would be a strong indication the smart money is buying.
IMPORTANT NOTE: SSRI is a speculation, meaning higher risk. Every stock carries higher risk than tangible assets. But the reward-risk ratio is compelling in my opinion. Several of my experts agree. What I love about SSRI is that it's assets are real wealth held in a vault (the ground) making it more like tangible assets. Decide your limit based on what you are willing to lose and invest accordingly. Don't go overboard. Save some for a further add in case we get a nice correction. If I add more I'll let you know.
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