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Archive for January, 2012

Why are E-Commerce China Dangdang’s shares on fire?

There’s one stock in particular that drubbed my portfolio last year, and it happens to be E-Commerce China DangDang (NYSE:DANG). Fanfare was high when DangDang made its initial public offering in December 2010. That early love affair with “China’s Amazon” wore off quickly, though, and investors dumped shares like crewmen bailing water in a leaky boat.

DangDang shed more than 80 percent of it’s value in 2011 as shares free-fell from $30 to $4 a pop. I cringed every time I checked my 401K. But something magical seems to be happening for shares in 2012. Over the past month, DangDang has shot up 98 percent. What gives?

Here’s my assessment of why DangDang shares are recovering:

1) More users, more cashflow. DangDang used money from its IPO to expand its offerings and bolster the company’s distribution system. That’s helped drive up the number of orders at the site by 32 percent over the past year (per Fool.com). The site’s also driven up its total number of users to 5.5 million, up 36% over last year.

2) Renewed interest in Chinese stocks. With the Federal Reserve’s recent announcement that it plans to keep interest rates near zero until at least 2014, investors’ risk appetite has grown quickly. That’s pushed up a lot of Chinese stocks – and DangDang’s going along for the ride. Other winners include social networking company Renren Inc. (NYSE:RENN), up 60 percent since the start of the year, and video-streaming company Youku Inc. (Public, NYSE:YOKU), up 45 percent.

3) Robust EPS growth. According to CNAnalyst, DangDang’s long-term annual EPS growth should hit 53.3 percent. That puts it ahead of just about every top small-cap stock on the market besides Indian travel company MakeMyTrip Limited (NASDAQ:MMYT).

4) A new e-book platform. DangDang launched its e-book platform in December for use on iPhones, iPads and PCs. 50,000 book titles are available and each sale should net the company 20 percent of the sale price. Writer Kevin Chen expects DangDang’s ebook sales to start manifesting themselves in the company’s earnings reports in Q2 2012.

There are warning signs, though. For one thing, DangDang’s already blown through a lot of price targets for the company. Brokerage analysts have set an average target price of $8.01 (per CNAnalyst). DangDang’s competition could IPO soon, too (see our 2012 tech IPO calendar for more).

Despite the challenges the company faces, and the fact that it controls just 2.3 percent of the of B2C ecommerce market in China, investors seem to have warmed back up to DangDang. Shares still haven’t hit my dollar-cost-averaged price, but it’s a step in the right direction.

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Top 10 silver price predictions for 2012

While gold was up more than 10 percent in 2011, silver prices quietly declined for the year. No one wants to remember that fact. What everyone does remember, though, was the sizzling hot spike the metal had when it shot to nearly $50 an ounce in April. For the entire year, though, silver was actually down 10 percent, falling from $31 an ounce in January to $28 an ounce in December.

Silver’s fireworks saw the metal rise 80 percent in three months last spring. When prices collapsed, the bottom fell out just as quickly. The metal crumpled 30 percent in five days! That rapid sell-off burnt a lot of investors, and they’re likely hesitant to re-enter the market.

Here’s what the pros think in a round-up of the Top 10 silver price predictions for 2012 from various sources around the web:

1) $33.21 an ounce. A Reuters survey of 45 analysts predicts silver prices averaging $33.21 an ounce in 2012 and $35 an ounce in 2013.

2) $34 an ounce. With low interest rates from the Federal Reserve, James Steel, analyst at HSBC, tells TheStreet he sees silver prices averaging $34 an ounce in 2012. He believes increased industrial demand could make up for any price weakness.

3) $60 an ounce. David Morgan, the publisher of the Morgan Report, has called for $60 silver by year end. “The key is to get through that $50 psychological barrier,” Morgan told Hard Assets Investor recently. “It’s probably going to take a couple of tries. And I do believe at some point it will. Once it does that, you could see silver go up from $50 to $60 in a matter of two weeks.”

4) $44.49 an ounce. A survey of members of the London Bullion Market Association (LBMA) shows they’re anticipating an average silver price of $33.98 an ounce in 2012 with a year-long high of $44.49 (that would be good for a 30+ percent gain on the year), per MineWeb.

5) $32.70 an ounce. Credit Suisse lowered their silver forecast from $33.70 per ounce to $32.70 per ounce (per SilverInvestingNews), but they did expect that a growing appetite for risk among investors could help the metal rise higher.

6) $35.48 an ounce. Morgan Stanley slashed their 2012 prediction for silver prices in 2012 from $50 an ounce to an average of $35.48 (per SilverInvestingNews). That’s a cut of nearly 30 percent.

7) Between $22 and $45 an ounce. Barclays believes silver will average $32.50 an ounce in 2012, per CommodityOnline. They also believe the metal will demonstrate more of its infamous volatility by touching a low near $22 an ounce and a high of $45 an ounce.

8) $100 an ounce. “With gold having passed $1700 (twice the 1980 high of $850) already … it stands to reason that $100 (twice the 1980 high of $50) silver is achievable,” Hubert Moolman writes on SeekingAlpha. Moolman argues that silver shadows moves in gold by several years. Just as gold broke through all-time highs four years ago, he thinks silver’s poised to do the same in 2012.

9) $50-$99 an ounce. Newsletter writer Patrick A. Heller gives 50/50 odds that we’ll see silver prices between $50 and $99 an ounce in 2012, per CoinUpdate. That’s by far the most likely range he believes the metal will land in by the end of the year (although he does give 14 percent odds silver will close out 2012 between $25 and $49 an ounce).

10) THE OPTIMIST: $200 an ounce. Gijsbert Groenewegen of Silver Arrow Capital Management told Forbes last week that a crumbling dollar could thrust silver up to $200 an ounce (per IBTimes).

I fully expect gold and silver stocks to outperform bullion prices in 2012. Check out our new book Top 500 Gold and Silver Stocks to learn more about our favorite miners.

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Top 10 gold price predictions for 2012

The gold market got a powerful jolt last week when the Federal Reserve announced plans to keep interest rates at historic lows through at least 2014. It was a sign, perhaps, that the gold rally has more than a year’s worth of climbing to do (until the Fed gets serious about combating inflation). The news has helped push gold prices up 10 percent in January alone, and that’s got us wondering what’s in store for the metal in 2012. Let’s take a look then at the Top 10 gold price predictions for 2012:

1) An average price of $1,765 an ounce. A Reuters survey of 45 analysts predicted an average spot gold price of $1,765 an ounce in 2012. That’s 14 percent higher than last year’s average spot price for gold.

2) New all-time high for gold. After getting pressed in an interview with the Washington Post, Puru Saxena, chief executive officer of Puru Saxena Wealth Management, didn’t name a price target for gold, but he did say: “My best guess is the price of gold could reach a new high.”

3) $2,300 an ounce. That prediction comes from Peter Schiff, a former U.S. senatorial candidate from Connecticut. He believes 2012 will be the year the dollar finally starts to “fizzle” out (per ETFDailyNews). “We’re a long way from a blow-off top that you would get at the end of a bubble,” Schiff said in the interview. “We might eventually get there, but we’re years away and thousands of dollars an ounce away.”

4) $1,845 an ounce. Global banking giant Morgan Stanley revised their gold price predictions lower on Jan. 17. They believe gold will average $1,845 an ounce in 2012.

5) $1,681 an ounce. Investment bank Goldman Sachs was more bullish than Morgan Stanley. On Jan. 9, they were predicting gold would hit a new record of $1,940 an ounce in 2012 (per Bloomberg). Two weeks later, they were revising that figure down to $1,681 an ounce in 2012.

6) $1,892 an ounce. Barclays Capital believes the yellow metal will surge 21 percent on the year. That said, they also believe the gold price could go even higher by Q3 2012: “Gold is likely to reach a new all-time record high above $2,000 per ounce during the third quarter of 2012.” (per IBT).

7) $1,450-$1,750 an ounce. Jeffrey Wright, senior research analyst at Global Hunter Securities, believes gold will remain range bound for the year between $1,450 and $1,750 an ounce (per NuWireInvestor). He echoes many other analysts, though, in arguing that we will likely see a sprint north of $2,000 an ounce in 2012 at some point during the year.

8) $1,000 an ounce. The bulls are tempered by Jon Nadler, a senior analyst at Kitco.com. Nadler argues gold will hit $1,000 an ounce before it hits $2,000 an ounce. “The question will remain for 2012, to what extent will investment demand be able to remain the principle driver and continue to attract interest from speculators and investors,” Nadler told TheStreet.

9) $3,000 an ounce. John Ing of Maison Placements Canada Inc. expects to see gold at $3,000 an ounce in 2012. “There’s just a lack of compelling investment alternatives,” Ing writes.

10) A Long-Term Prediction: $3,600 an ounce. Frank Holmes, CEO of U.S. Global Investors, believes gold prices could double in the next five years to $3,600 an ounce (per NuWireInvestor). “Does anyone really believe in the long term strength of the U.S. dollar … We’re just going to have to live with this volatility for another 12 months,” Holmes told NuWire.

The biggest beneficiary of high gold prices in 2012 could be gold and silver mining stocks. See which companies we think our poised for success in our BRAND NEW book: the Top 500 gold and silver mining stocks.

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