Huge Opportunity Just Hit My Desk
Today's issue of Small Cap Investor Daily is going to be short - and not just because today is Friday and I want to leave the office early.
A huge small-cap opportunity just hit my desk and I need to dig into it. If the opportunity is as big as I think it is, I may need to buy this stock immediately. Or wave goodbye.
But before I get to digging into this opportunity I want to follow up on your comments from yesterday.
David wrote in wondering about Cellcom Israel (NYSE: CEL):
"The data you presented seems almost too good to be true. Besides the added info could you indicate how you go about finding out more detail?"
David, I'd recommend pulling the latest 20-F for Cellcom from the SEC's website. You can click here to go straight to it. This is the annual form for foreign issuers, and it will tell you what the deal with the company is. Just like a 10-K, or 10-Q, these forms tell you a ton about the company – a lot to read but focus on the most relevant parts and you'll feel better about a potential investment.
Avi wrote in with some comments on Cellcom as well:
"I was surprised to see your call for investing in Israeli stocks. On fundamentals basis this is a very good call since the currency is strong and getting stronger. But you should be very selective… don't touch Israeli telecom industry… All those companies are leverage like [U.S.] company during the subprime era… they [are] handing over too much [in] dividends since they [are] afraid of the next step of the Ministry [of Communications]…"
Avi points out my main concern – that the dividend payment is not sustainable. In the last quarter the company paid out around 95% of its net income in the form of dividends.
He goes on to suggest that the telecoms in Israel are paying the high dividends because the regulated industry needs to be sure the Ministry of Communications won't repeal, or substantially modify, its licenses.
The company has a policy of paying out at least 75% of net income in the form of dividends. But it currently has a lot of debt so leverage is an issue.
Bottom line, telecoms like this pay a big dividend, but it's not guaranteed. So be aware that this isn't a 'put it away and lock the key' investment like Altria (NYSE: MO).
But there are plenty of other Israeli tech stocks that don't pay huge dividends, and don't have a lot of debt. Avi mentioned some that I've been following, and I'll return to these next week. Right now I've got to get back to the big opportunity I discussed earlier.
I'll let you know what I dig up next week.
***The gold mining company I've been alluding to in Small Cap Investor Daily rose another 6 percent yesterday. That makes 11% this week. There is still time to buy this miner and benefit from gold's rally higher. In fact, I think this stock could double in 2010.
In the last quarter this company received an average price of $1,119 per ounce, and total cost per ounce was only $425. That's a $694 profit per ounce! That's why I love low cost gold producers, as the price of gold goes up, their margins expand. And the more gold they pull from the ground – well you get the picture.
It's not too late to pick up shares. Get my full research report here. If gold continues to climb, as I think it will, you won't be disappointed.
