I Just Want To Celebrate

Sep 9th, 2009 – Comment

Lou, What is your opinion on the prediction that REE (rare earth elements) is the next big story given the world drive to hybrid cars? How do you feel about Avalon Rare Metals in this context? Thanks Henry Hi Henry, Great question! What is the future of hybrid and plug in hybrid vehicles? Current forecasts […]


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Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality – and a true believer in the happiness-inspiring powers of capitalism.


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Lou,

What is your opinion on the prediction that REE (rare earth elements) is the next big story given the world drive to hybrid cars? How do you feel about Avalon Rare Metals in this context?

Thanks
Henry

Hi Henry,

Great question! What is the future of hybrid and plug in hybrid vehicles? Current forecasts suggest we could see global hybrid vehicle sales growing at an annual compounded rate of 12% through 2015. Toyota reported in 2008 that their global production of the Prius had crossed the 1 million vehicle mark.

U.S. sales of hybrid vehicles are expected to cross 1 million units in 2012. This is all good news and as we say in technical analysis the trend is your friend till it ends. But lets keep in mind that hybrid sales are still a small subset ot total vehicle sales. In most markets you need to convert 30% of sales to a new platform to confirm the opportunity is real.

With that in mind, I think what we have with Avalon Rare Metals ( AVL TSX) is a speculation on the outcome of these developments and the advancement of their deposits. AVL is working to develop deposits of rare earth elements in Canada and if successful will be one of the few sources of these elements outside of China.

avlThe three year chart shows a stock that has taken off like a a Saturn VI rocket since the beginning of the year. When looking at the news released by the company it is clear that that they have had some encouraging drilling results and made progress in defining the process that they are considering to harvest the rare earth elements from their deposits.

The bull boards are full of very enthusiastic posting about the company which shouldn’t come as any surprise. With these kinds of returns I am sure that most investors who have enjoyed the ride start every single day playing ” I Just Want To Celebrate” by the 1970′s Motown band Rare Earth!

The question is how much gas is left in the tank of this rocket?

avl2

The three month chart shows that the stock has more then doubled since August 17. There was a golden cross at the beginning of June when the stock was trading at $1.25. The move to yesterday’s close was a good gap up on news that Former National Chief Phil Fontaine was added to the board of directors. Fontaine’s role will be to assist the company in its relations with first nations communities.

I love a great story and a stock moving up aggressively, but lets make sure that profits are booked when available. If you have a four or eight bagger on this stock make sure to get your adjusted cost basis to zero and watch that the uptrend continues. Trees don’t grow to the sky.

Happy Capitalism!

Categories: Rare Earth Metals
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