PAL and SWC are Good Short Plays

By: ispeculatornew
Date posted: 03.07.2008 (12:27 am) | Write a Comment  (6 Comments)

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SWC – Stillwater Mining Co. (NYSE) – (Closing Price – $18.37)

The prices of palladium and platinum recently spiked to all time highs due to power disturbances that resulted in rolling blackouts in South Africa. Speculators seized on this news to bid up palladium and platinum prices to ridiculous levels.

The stock prices of North American Palladium (PAL) and Stillwater Mining Co. (SWC) spiked in tandem with palladium and platinum prices and both companies present good shorting opportunities.

The stock price of PAL more than doubled earlier this year and SWC tripled. Obviously, speculators sent these stocks up to unsustainable prices and I think they will quickly drop back down.

The price of palladium has been dropping quickly and I expect platinum to drop quite a bit from its record levels. The concern over supply due to power distruptions in South Africa has eased and the momentum has dried up. I expect the stock prices of both of these companies to see significant declines.

You can pick either stock to short but I am going to give a recommendation to short SWC at today’s closing price.

Disclaimer: I have no position in PAL or SWC.

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6 Comments

  1. Comment by WBJ — March 7, 2008 @ 12:01 pm

    Hi Phillip,

    Thnaks for your awesome picks. I shorted SWC 1K at 18.41 this morning. I wish I had shorted COIN too, but I shouldn’t be too greedy. Please keep up your good works. WBJ

  2. Comment by admin — March 8, 2008 @ 4:28 pm

    thanks

  3. Comment by noobie — March 8, 2008 @ 5:36 pm

    Thanks for the head up Phil. I’m a little nervous shorting either of these. I’m hearing talk that there’s a hedgie out there that needs to cover this week due to a major margin call that they might not be able to meet. Wouldn’t that mean PAL goes up when they cover?

    Thanks for your input!

  4. Comment by admin — March 9, 2008 @ 9:30 am

    I don’t know where you heard that from but it sounds like a sad rumor from a scared long. If there was an overextended hedge fund they wouldn’t of just initiated in a new short position in PAL. If they had already had a short position during the run-up they would of covered by now. I could list a bunch of other reasons why this is a pretty absurd but bottom line is you shouldn’t even consider rumors such as this in your investment decision. The stock price of SWC made a ridiculous run because speculators drove platinum and palladium prices to all time highs. Platinum and palladium prices are now crashing and SWC is going down in tandem. If you look at the price SWC was trading at before the run you will see SWC has a long way to fall before it hits previous support levels.

    http://finance.yahoo.com/q/bc?s=SWC&t=1y

  5. Comment by Eve — April 1, 2008 @ 9:08 am

    On Mar 7, you recommended SWC at $18.37, but it has been dropping ever since, now it’s around $14.

    Same with PAL.

    Do you think you were wrong?

  6. Comment by admin — April 1, 2008 @ 9:43 pm

    Hello Eve,

    I recommended to short PAL and SWC. That means you make money when the stock goes down. It is a little bit complicated to explain how shorting works but I plan on writing a post about shorting in the near future.

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