PZG.TO - Paramount and Gold Silver - Institutions Buying

First of all, I posted my first all-time high stock screen of 2011 blog yesterday. Visit the 'Stock Screen Results' link at the top of the page to view daily and weekly charts of more than 300 US and Canadian stocks.

The table below shows which stocks in the ATH list are being accumulated by institutions. The first thing to note is that only Financial and Materials sectors are represented. This fits with the sector rotation we've been seeing into financials and may reflect underlying support for precious metals even though it is a crowded trade (you know it's crowded when Mr. T is on TV talking about buying gold). The second thing to note is that these are all small companies so it is not surprising that their F and Z scores are low or non-existent in some cases. That isn't to say the scores are not meaningful, just that these companies are inherently more speculative.

Institutional Buying
Symbol	Sector	F score	Z score	Market Cap	EPS Q/Q	Sales Q/Q	Div.	Pay out	Inst Own	Inst Trans	Target Price
GYRO	Financial	2	4.0	103.63M	67%	10%	%	%	41%	78%
OBAF	Financial	NaN	NaN	65.33M	460%	-0%	%	%	15%	21%
AAU	Basic Materials	5	3.0	238.45M	-109%	-97%	%	%	6%	226%
PZG	Basic Materials	2	3.0	491.34M	-358%	-62%	%	%	8%	33%	13.6
SHZ	Basic Materials	2	8.0	250.89M	124%	111%	%	0%	0%	36%
A high Piotroski F-score indicates financial strength, and a low Altman Z-score predicts bankruptcy  Data are from GrahamInvestor.com, Yahoo Finance, and Finviz.com

I've posted about AAU (Almaden Minerals) before so today I will focus on Paramount Gold and Silver Corp. (TSX, TSE: PZG.TO, NYSE: PZG) which has relatively low institutional ownership but it is growing quickly. It also trades way, way, way below the target price listed on Finviz, although I don't know which analysts provided that number. Paramount's website gives an analyst's target price as $9.78 which makes the Finviz number seem reasonable if a little lofty. Either way, the price targets suggest a double or triple from here is possible.

Now, in and of themselves, analysts' opinions are no reason to buy a stock. But when a stock is hitting all-time highs on huge volume and the analysts think it could triple, well it's just one more bullish piece of information.

Here is the daily chart of PZG.TO. Note the explosive upward Force and huge volume on the December 10 breakout. Since then it has increased on lighter volume while stacking up two more Darvas boxes. I also like how the stock respects round numbers, i.e., its ranges have moved up from $1.5-$2.0 to $2.5-$3.0 to $3.5-$4.0. Short term, given the weakness in precious metals, it might be best to watch this stock for a possible pullback or more consolidation. Long term, though, this stock is really just beginning Stage 2 (by my interpretation of Stan Weinstein's stage analysis) and should have lots of upside potential.

From www.paramountgold.com: Our philosophy at Paramount is to maximize shareholder value and reduce risk by focusing our efforts on the gap between discovery and production. Prior to confirming a major discovery, exploration companies are highly risky investments which are difficult to value. At the other end of the spectrum, smaller companies attempting to become stand-alone producers are rarely successful due to the added technical and financial risks involved in building and operating mines. The `sweet spot` for creating shareholder value in the gold mining business is between discovery and production…growing existing resources, designing economic operations and joint-venturing them with established producers. That's the Paramount formula and you can see it at work on our Sleeper and San Miguel projects where, in the shadow of successful producers, discoveries have been made and resources are growing rapidly.

Dahlman Rose and Co. initiated coverage on Paramount Gold and Silver Corp. on July 15, 2010 with a price target of $9.06 and in September 2010 increased the price target to $9.78

An investor cannot obtain superior profits from stocks by simply committing to a specific investment category or style. He can earn them only by carefully evaluating facts and continuously exercising discipline. -Warren Buffett

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