At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." The pinstripe-and-wingtip crowd is entitled to its opinions, but we have some pretty sharp stock pickers down here on Main Street, too. (And we're not always impressed with how Wall Street does its job.)
Perhaps we shouldn't be giving virtual ink to such "news" of analyst upgrades and downgrades. And we wouldn't -- if that were all we were doing. But in "This Just In," we don't simply tell you what the analysts said. We also show you whether they know what they're talking about. Thanks to the magic of Motley Fool CAPS, we're able to track the long-term performance of Wall Street's best and brightest -- and its worst and sorriest, too.
Time to "accumulate" some silver
And speaking of the best, this morning we saw one of the better mining analysts out there initiate coverage of Great Panther Silver
Now, four bucks may not sound like much, but it would actually make for about an 18% profit from today's stock price if GH is right. The question is … is the analyst right?
Let's go to the tape
Initial indications look good. Global Hunter isn't the biggest name in stockpicking, or the most active, but what it does, it does well. Within the Metals and Mining industry, for example, GH currently boasts 62% accuracy on its several recommendations, including such winners as:
|
Company |
Global Hunter Rating |
CAPS Rating |
Global Hunter's Picks Beating S&P by |
|---|---|---|---|
|
AuRico Gold |
Underperform | **** | 45 points |
|
Silvercorp Metals |
Outperform | **** | 35 points |
| U.S. Energy | Outperform | *** | 3 points |
On average, its recommendations in this industry have beaten the market by more than 10 percentage points per pick -- not bad for an analyst that's been reporting on mining stocks for only 18 months or so. And I have to say I like Global Hunter's style.
Great Panther: Great stock?
You see, like most gold bugs and their silver siblings, Global Hunter puts at least some weight on the theory that the U.S. dollar is devaluing and that, therefore, precious metals will rise in value, making gold and silver stocks look cheap, generally. But GH goes further, pointing out how Great Panther Silver in particular "is halfway through an aggressive organic three-year growth strategy and cash flow is just now beginning to ramp up based on increases in production, more efficient operations, and higher silver prices."
Organic growth? Rising cash flow? Music to a value investor's ears.
Great Panther isn't exactly a household name -- not even for Ag-afficionados. It's a bit player in an industry dominated by bigger players such as Hecla Mining
But to my Foolish eye, Great Panther is moving in the right direction here. Operating cash flow at the company turned positive two years ago and has been growing since. At last report, the company generated $9.2 million in cash flow for the last 12-month period; it burned it all away with $9.8 million in capital spending, of course, but today the company is within just $600,000 of free cash flow-breakeven.
Foolish takeaway
Global Hunter thinks this trend could prove a friend to Great Panther investors today. I agree. I'm not brave enough to invest in the stock until I see free cash flow turn finally and definitively positive, but I do believe that the analyst's recommendation to begin "accumulating" the stock on price pullbacks makes sense. Odds are, there's gold -- or at least silver -- in them thar shares.
