Monday, November 16, 2009

Bottom Feeding - DRDGOLD

Bought some DRDGOLD (ticker: DROOY) today as a bottom feeder play. This is a company that has been doing terribly, deals with political risk in South Africa, and is in the process of having its biggest producing mine closed. The South African Rand is rising and the currency fluctuations are hurting the firm as well. Everything looks terrible for this company right now. The stock has been hammered over the last few months.

Most people would say to avoid this company and stick with proven winners in safer areas of the world. I took a small position today in this company, as I see it differently. This is a company sitting on millions of ounces of Gold and looking (needing) to make a turnaround. Again, mining is a risky business and this firm's stock may go to zero. I am not recommending this stock to anyone.

But in the middle of a raging Gold bull market, which is far from over, turkeys will start to fly and even mismanaged companies in difficult political areas will see stock share appreciation when the Gold price gets high enough. This company is looking to switch from underground to surface mining and has the cash to see itself thru this transition. Because I know we are in a strong secular bull market, I look for the bullish implications in any Gold chart.

Here's what I see on a long-term chart of DROOY (10 year log scale candlestick chart):

And here's a short-term chart of DROOY (6 month daily candlestick):

Wish me luck...

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