DROOY

[soxguy]

Pay attention to this one. Gold still in sell off mode.

[David Randolph]

Pay attention to this one. Gold still in sell off mode.

Yes, big sell off in $GOLD, down more than $100 an ounce in just four days. DROOY fell 23% from the top.

In my view of the fundamentals, if $GOLD remains between $850 and $950 DROOY is worth more than $20 a share. That will only be evident when the company reports 1st quarter and especially 2nd quarter 2008 results.

I guess that over the short term DROOY may go down to close the gap at $9.79 ... or it may react positively to the $10.3 horizontal support. I don't know.

I'll hold DROOY.

[David Randolph]

In my view of the fundamentals, if $GOLD remains between $850 and $950 DROOY is worth more than $20 a share. That will only be evident when the company reports 1st quarter and especially 2nd quarter 2008 results.

I guess that over the short term DROOY may go down to close the gap at $9.79 ... or it may react positively to the $10.3 horizontal support. I don't know.

Indeed, DROOY came down to fill the gap at $9.79. Fundamentally nothing has changed.

If this was the Technimental Portfolio probably I would be buying back the stock now that the gap was filled. But I remain confident that with $GOLD above $900 DROOY should be valued at $20 a share.

4Q results were disappointing, or else we would be north of $15 ... I expect 1st quarter results to be better.

[David Randolph]

Nothing new at DROOY, just fluctuating with the gold price. I expect Q1 results to show a nice profit. They should be released over the next couple of weeks.

[David Randolph]

$GOLD closed at $926.8 and DROOY continues to be 50% undervalued.

[la-onda]

fyi from zacks.com:
Cautious on DRDGOLD Shares
Tuesday April 15, 12:57 pm ET
By Paul Raman, CFA

DRDGOLD Limited (NasdaqCM: DROOY) is an unhedged gold-producing company with operations in South Africa and Australasia. The company has separated its South African and Australasian operations, thus becoming a more focused entity. With minimal debt on its balance sheet, DROOY is well positioned to undertake expansion activities.

However, there are some challenges faced by the company with respect to its aging assets, environmental laws and currency risks. Further, as most of the production cost is in Rands while gold is generally sold in dollars, the company is exposed to currency risk by an appreciation in the value of the Rand. Given the rising power problems in South Africa, the company is likely to face lower production.

Currently, DROOY shares are trading at a 13.1x 2008 EPS estimate of $0.69, which is well below the industry multiple. DRDGOLD has low debt, strong liquidity, and a no-hedging policy. Although it has faced challenging times with its South African operations in the past, the company is recovering and is ready for a turnaround. With its unhedged policy, the company is benefiting from the strong gold prices. Still, overall we rate the stock a Hold.

[berloga]

Looks like DROOY is bouncing off of the ascending trend line.

[David Randolph]

DROOY has been disappointing, despite being "cheap":

Currently, DROOY shares are trading at a 13.1x 2008 EPS estimate of $0.69, which is well below the industry multiple.

Hopefully the stock will bounce from the 200 days SMA area, like it happened in late December. 4th quarter 2007 results were quite bad, but I expect 1st quarter 2008 results to be much better, since $GOLD was about $200 higher, on average.

But still, a bad play. I'll hold DROOY some more time, though.

[berloga]

28-Mar-08 Deutsche Securities Downgrade Buy to Hold

[la-onda]

berloga, it is a downgrade from March ??

cheers
O.

[berloga]

Oliver, oops, yes, it was March 28. Yesterday was April 28 so I mistakingly posted the downgrade. Nothing happened to DROOY yesterday. David, what is your estimate for this stock based on gold prices and prospected growth?

[David Randolph]

Oliver, oops, yes, it was March 28. Yesterday was April 28 so I mistakingly posted the downgrade. Nothing happened to DROOY yesterday.

Oh yes it did

It seems like you were guessing, the stock was downgraded yesterday and fell 12.2%.

I'm really sorry but DROOY seems to be another "it looks cheap so I'll buy it" mistake of my own.

As it happens most of the times, stocks are cheap for a reason and if one doesn't know that reason, he really doesn't know what he's doing. Acknowledging the stock is cheap is easy and not an edge over other investors. I thought I knew a great deal about stocks, but now I must be humble and recognize I knew little in comparison to what is needed to prosper in this business.

So, it seems, DROOY has "aging assets", meaning there isn't much long term sustainability to its long term business prospects. In more simplistic terms, it appears to me that DROOY's mines are running out of gold and it has been costing more and more to extract the gold that still exists. This is the cause for the discounted price versus other gold miners.

The research report attached below doesn't say this, and it still rates DROOY a BUY, but it cuts estimates and price target severely. But I can read between the lines.

I once had a 25% plus profit in DROOY and now will exit with a 28% or so loss. Anyone just following the chart could have avoided this outcome.

The lesson learned is: if you're going to use a tool, like fundamental analysis for example, make sure you're a master at it. Make sure you know all the available information. Or else you are, like I was, firing shots in the dark.

Again, I apologize for this loss. It has been painful to realize I knew little (and still don't know much). 

The trading plan for DROOY is: SELL.

[la-onda]