Saturday, September 20, 2008

Maybach Financial -- Boiler Room?

In my never-ending quest for information on companies I might want to invest in, I happened across an independent broker research firm called Maybach Financial the other week. I signed up as a member to get access to some of their analyst reports on companies I already own and am thinking of buying, reasoning taht the more information I have, the better off I am, regardless of the source.

The fact that membership didn't cost anything was a huge red flag flag to begin with, but I figured there was no harm in trying. After about 20 minutes of surfing through their bare bones site (no search engine? what's that about?) I gave up and pretty well put the company out of my mind.

Until yesterday. My phone rang in the middle of the afternoon, and on the other end of the line was 'Dennis' from Maybach Financial, calling to see if I'd received all the information I wanted from the Maybach site. At this point, I'm assuming this is some sort of customer satisfaction survey -- until the conversation took a turn for the extremely suspicious.

It soon became clear what was going on. After some chit chat on the companies I had signed up for information on, Dennis launched into a sales pitch for a company called American Exploration Corp., a pink-sheet listed junior resources company. I don't tend to dabble in penny stocks -- particularly not resource companies with more exploration rights than actual mining operations -- so it seemed like an odd pitch to an investor who tends to go for multinational financial and infrastructure firms. But Dennis was not to be dissuaded.

"We're really high on the company," Dennis explained. "The stock's currently trading in a range between 8 and 9 cents, but we could easily see it in the 40-cent range very soon."

Thanks for the tip, Dennis, but no thanks. 

But ol' Dennis doesn't give up without a fight.

"The thing is," (he's basically whispering at this point, just for effect,) "the company has some news coming out soon so now is definitely the time to act on this. We've been talking to their head geologist and they definitely have some huge finds that they're about to release. I'm giving you this information because I think it's the kind of investment an investor such as yourself is interested in."

The large red warning flags in my head have, by this point, been upgraded to a giant, 12-storey neon sign flashing "PUMP AND DUMP SCHEME" with the entire sign resting atop a 60-foot blimp, made out of fire. With lasers.

After politely excusing myself from the conversation, I resolve to do a little digging around on both Maybach and American Exploration, since, you know, unsolicited investment advice from anonymous sources doesn't seem to me to be the sort of thing that legitimate companies do for a living, but what do I know: I'm just some shmuck with a website.

There may well be some honest explanation for all this, but based on my initial research in Maybach, I'm having a hard time seeing what it is. I'd welcome an explanation from the company (or anyone else out there) as to what the hell that was. Has anyone out there had any dealings with this? Or something similar?

In the meantime, I'm reminded of a clicheed lesson -- when it comes to free investment advice, you often get what you pay for.

Safe to say, I don't recommend anyone signs up for any product whatsoever from Maybach. I think a call to the company's consumer relations line -- if not the SEC -- is warranted.

Thursday, September 11, 2008

New job

I normally like the nomadic nature of my dying industry, in that in provides me with a built-in opportunity to try new things and develop my skills, but I can't deny that there isn't a fair amount of nervousness to be had as one contract runs out and I don't know where and when the next one begins.

After a diligent month of letter-bombing the city with my resume and mining every contact I have that isn't nailed down, it seems I've once again managed to land on my feet, and secure another year of gainful employment. I'm particularly excited about the fact that for the first time, I'm getting away from the dead-tree medium and moving exclusively into the world of online journalism. (There's a distant, distant chance this might turn into an opportunity to blog about finance/investing and get paid for it, but that's very nebulous at this point...)

Besides the duties (which I'm quite excited about) my new job has the added bonus of coming with a not insignificant raise from what I've been earning so far -- to the tune of about 17%, before taxes. As my cousin Jacques might say, "ne pas too shabby."

I'm a big believer in the principle that good financial habits can build into big things over time, and as such, I've been able to build a decent little nest egg over the last few years, without really sacrificing too much of the fun that life has to offer. Currently, as soon as my paycheque comes in, about 25% of my gross salary goes directly into my PC Financial high interest savings account, which functions as a sort of catch-all account until I divert it into other things (RRSPs, Visa bills, big purchases, or whatever.)

It's a system that's worked quite well for me so far, so the obvious answer to the question of what to do with these new funds might be to increase the amount I divert into that account. But I have a different idea.

I think I'm going to keep my PC account as a legitimate long-term savings and investing fund, and open another high-interest savings account (or possibly just dust the cobwebs off of my fallow ING Direct account -- I haven't checked if their rates have gotten any more competitive) to be my designated "fun" account.

I think putting that psychological barrier between the accounts will be a good thing. The new account will be the one I dip into for the vacations, gifts and *cough* plasma televisions I'm thinking about getting over the next 12 months.

At any rate, big things and good news in GIV-land. 

For the time being :)

Wednesday, September 03, 2008

Kicking the tires -- Sherritt International (S:TSX)

What with the cash piling up in my savings account, it's about time for me to make another RRSP contribution, so I've been doing some digging, looking for a suitable stock to buy into. I'm liking what I see about resource company Sherritt International, (ticker symbol S on the TSX). I see a lot to like about the company, and some things that raise my eyebrows a little, so I thought I'd post a few thoughts here for my clever readership to see and try and get some feedback on my thought process. My apologies if you're numbers-averse.


  • It's a resource story. Sherritt's business basically divides into four units, listed here in order of size, in terms of percentage of sales -- Metals, Oil/Gas, Electricity, and Coal. Outside of a few token trusts and dividend-paying energy companies buried in my dividend ETF (CDZ on the TSX) I don't really have much of a resource presence in my portfolio -- rare for a Canadian investor. I've been underweight for a while, looking for an entry point into the space in general. I know it's impossible to time the market, but what with oil having retreated significantly from its July high of $147, I figure now' s as good a chance as any to jump in. Most commodities have seen a similar decline in value over the last several months, and nickel (66% of which goes into the production of stainless steel) is a major part of Sherritt's business. In the spirit of buying high and selling low, I figure my odds are pretty good at the moment. Whether it's the right firm inside the sector remains to be seen.
  • It's international, and diversified across several industries. With a number of operations across the country, the Toronto-based company obviously has a strong Canadian presence. But things like power plants in Cuba, offshore oil patches in Spain, gas operations in Pakistan and nickel mines in Madagascar give me a little more international exposure as Canada's economy shows signs of slipping into recession.
  • A whole bunch of the company's fundamentals look really, really good right now. Consider a few of them. Over the past five years, Sherritt has boosted its profit by an average of 36% per year. Consensus estimates expect further earnings growth in the next two fiscal years. In June, Sherritt was the only company in Canada to earn an A grade both as a value stock and a growth stock by MoneySense magazine. The company pays a dividend (albeit a small one) and it's growing. The company's book value (basically, the floor price that the company would be worth if they sold off all their assets individually) is somewhere between $12-$13, analysts say (sorry I can't link to the reports). Considering Sherritt currently trades at under $9 a share, a price/book value of about 0.75 makes me positively giddy. Of the seven analysts who cover the stock, all rate it a "buy" with target prices ranging from $15.50 to $21 -- not that I put too much faith in analysts who basically get paid to convince clients to buy stocks.
  • The Cuba 'thing'. Sherritt does more business in Cuba than many firms, and I can't decide if that's a good thing or a bad thing. I like that they have the courage to go against the flow, but I have to question the wisdom of a company that basically flips the bird at the U.S., the world's largest economy, and does business in Cuba. Sherritt's had a huge presence on the island for years, and it shows no sign of pulling out any time soon. I suspect Washington's trade embargo can't go on forever, and god knows what will happen when Raul Castro dies and/or steps down. Sherritt could be better-positioned than anyone to hit the ground running on the influx of money that would result. Or not, and maybe Washington will carry a grudge. Even before Cuba opens up, who's to say they wouldn't go back to their more totalitarian tendencies and start seizing assets, Chavez-style. I have no idea, and uncertainty like that is not generally something I like in the companies I own
  • The stock has been a ski-hill downward for the last month. Normally, I don't care about things like that unless it's a stock I want to sell, but the scope is quite drastic. Since reporting a 39% dip in profit (largely due to tanking nickel prices) at the end of July, Sherritt stock has gone on to lose more than 50% of its value. A collapse like that hardly seems appropriate just because of a profit blip. What am I missing? I like buying things cheap, but am I trying to catch a falling knife?
  • Insider trading, going in the wrong direction. This one leaves a real bad taste in my mouth. According to filings, independent company director Daniel Owen owned more than 2,000,000 Sherritt shares in March, worth some $18-million. But Owen dumped more than half of his stake throughout August. And that was after the bad earnings release. Does he know something I don't? Probably...
Anyway, that's the basic picture as I see it today. Nothing imminent, but it's certainly a stock I can't seem to get out of my head. Ironically, I'd be more sold on buying the stock if Mr. Market hadn't just given it a 50% haircut. It's often hard to go against the herd.

Monday, September 01, 2008

labours of love

In honour of everyone's favourite excuse to pass out while swatting mosquitoes with an empty bottle of Moosehead Tragically Hip CD, a cornucopia of labour-themed links for you all this Labour Day.

  • But reports of the death of labour might be greatly exaggerated. Outgoing CAW president Buzz Hargrove disagrees, for one.
  • As most of the world's economy wobble close to recession, signs are trickling out of China that that country's roaring economy is even starting to slow down. The latest numbers predict single-digit growth in China's GDP this year. One of the culprits? Increasing costs for transportation, energy, raw materials and -- you guessed it -- labour. Should be interesting to see how China responds as their inherent manpower advantage is slowly eroded away over the coming years.
That's it. Unlike most of the 30% of Canadians at work today, I get paid triple time to be on the Internet today. But you? You have no excuse. Put down the iPhone, have another beer and think about fixing the lawnmower, already.