Although palladium has a much lower profile than gold or silver, it actually has outperformed both of them this year. And the case for a continued bull market in this low-profile precious metal is as compelling as that for the “yellow metal” or “poor man’s gold.” But in a sign of palladium’s growing profile, the U.S. Senate recently approved the coinage of a $25 face value palladium bullion coin.
Indeed, 2010 marks the first year that palladium demand actually has outstripped supply. On the supply side, stores of Russian palladium that have been propping up the market for years have evaporated. On the demand side, palladium has become a crucial component of automobile catalytic converters. And with demand for automobiles in China and India just starting to overtake demand in the United States, this trend is just beginning.
Despite its recent rally, palladium is still historically cheap. Palladium hit its historic high of $1,090 almost a decade ago in 2001. That’s close to 50% higher than its current price of $740 per ounce. And technically, palladium just broke through the crucial $600 level a few months ago, confirming that it is back in a long-term bull market.
You could play the bull market in palladium through the exchange-traded fund, Physical Palladium Shares ETF (PALL). But if, as I expect, the bull market in palladium is set to continue, you’ll make a lot more money investing in a palladium miner like North American Palladium Ltd. (PAL).
Thanks to soaring palladium prices, PAL is expected to earn a profit of between 30 and 46 cents per share in 2011. That’s up from a meager 3 cents a share last quarter. Equally importantly, PAL is still relatively cheap compared to the soaring price of palladium. Analysts have pointed out that with PAL trading at around $6.32 a share, the stock still is trading at roughly half of the $12 level it was trading at when palladium was at half its $740 level today. And back then, PAL wasn’t making a dime. That’s why I think PAL easily could double from today’s levels and still be a bargain.
So buy North American Palladium Ltd. (PAL) today and place your stop at $5.25. If you want to play the options for potentially big, quick gains, I recommend the March $7.00 call options PAL110319C00007000. Here’s a word of warning. This is another volatile play. It’s not unusual to see palladium fall as much as $50 per ounce in just a few days. So strap in for the ride.
Portfolio Update
Credicorp Ltd. (BAP) dropped back from near-record highs, ending the week 3.95% lower. Peru’s biggest bank is near its stop price of $118.50, and has fallen near the bottom of its trading range. BAP is now a HOLD.
China MediaExpress Holdings (CCME) rose another 5.15% this past week. One analyst has named CCME “the best stock in the world.” I also expect it to be my top pick for 2011’s AOL stock picking contest. CCME is a BUY.
iShares MSCI Chile Investable Mkt Idx (ECH) rose 2.82% this past week as it broke through the $80 level for the first time. If there is “buy and hold” in emerging markets, Chile is it. ECH remains a BUY.
ProShares UltraShort Euro (EUO) rose slightly this past week, as the euro hit two-week lows against the U.S. dollar. Your bet against the euro remains a speculative BUY.
Bank of Ireland (IRE) dropped back 9.25% this past week after more than doubling from lows of $1.44 in the past three weeks. This stock will continue to behave like an option. But at least it won’t expire. IRE remains a speculative BUY.
Ivanhoe Mines (IVN) recovered 2.92% this past week, as the price of copper hit new record highs. This long-term bet on the “Mongolian miracle” remains a BUY.
Melco Crown Entertainment Limited (MPEL) soared 8.15% this past week on news that it was back in the running for a license in Macau for the Cotai peninsula as its rivals’ license applications were rejected. I am moving your bet on Asia’s Las Vegas back to a BUY.
Sina Corporation (SINA) pulled back sharply this week after going parabolic and hitting a high of $75.62. The fundamental story remains intact and I expect to add some more options as the stock corrects further. For now, I am moving “China’s Twitter” to a HOLD.
Spreadtrum Communications, Inc. (SPRD) jumped 6.26% this past week, closing the week at a record high. With Samsung selling 12 million Galaxy phones in 2010 and technology one of the hottest sectors on the globe, this indirect bet on an “iPhone killer” remains a BUY.
Silvercorp Metals Inc. (SVM) dropped 4.9% this past week, despite the good news that its GC silver-lead-zinc project in the Guangdong Province received a mining permit issued by the Ministry of Land and Resources of China. The GC mining permit has a term of 30 years and covers the entire 5.52 square kilometer area of the GC Project. Strap in and ride out the volatility. SVM remains a BUY.
Uranium Energy Corporation (UEC) fell back 6.57% this week. The stock hasn’t been this oversold since early September. I am a big believer in the uranium story and I expect this stock to bounce sharply. But the technical action of the stock means that I have moved UEC to a temporary HOLD.
Finally, I will be taking a holiday break to enjoy time with family and friends during the next week. I wish you happy holidays and a profitable New Year. Watch for my next issue during the first week of 2011.
P.S. Don’t miss out on The World MoneyShow Orlando, February 9-12, 2011, at The Gaylord Palms Resort. This event will be your one-stop resource for the education, research and advice that you need to make smart investment decisions in 2011 and beyond. Join me there and hear leading experts reveal where they see growth opportunities in stocks, bonds, ETFs, commodities and options. Click on this link to The World MoneyShow Orlando to register or call 800/970-4355. Be sure to provide priority code 020758!
P.P.S. I also want to extend a special welcome to our many new subscribers. Be sure to watch the short introductory video about how best to implement the recommendations in Global Bull Market Alert by clicking here and viewing the video on the upper left hand corner.
