During the second week of May 2011 some of us interviewed for the role of 'equity analyst', and as a part of such interview we were requested to prepare and present an investment valuation for Paladin Energy Limited (PDN). The concensus from the presentations appeared to favour a strong 'buy' decision. For some, the sooner PDN was added to a respective portfolio the better. In fact, some candidates when questioned impressed upon the panel such confidence if they were to decide upon the parcel size more than 50% of a $100,000 portfolio could be safely placed on a long-position in PDN.
The presentations possessed a broad range of approaches in justifying the strong 'buy' decision pitched to the panel. Some focused heavily upon technical analysis of an alleged suppport level of approximately AUD$3.30. Others focused upon a comprehensive elaboration as to the underlying fundamental economics of the uranium industry and its undeniable place in the future of global energy. Within this group some took a macro approach and focused upon the broad need to move towards more 'green' energy sources, while others took a micro approach and considered the price of uranium and the structure of PDN itself. Some presentations attempted to postulate the decision quantitatively with a DCF valuation, while others relied upon a more qualitative approach where it was impressed upon the panel that the writing was pretty obviously 'on the wall' where this industry was heading despite the Japan disaster.
Upon the first day of interviews, 11 May 2011, PDN closed at AUD$3.44. Today, 6 June 2011, PDN closed at AUD$2.99. That's a 13.1% fall in under a month. If I4C had invested $50,000 on 11 May 2011, today the portfolio would be worth $43,459.30 before costs. Furthermore, if the portfolio were to return to par PDN would need to grow approximately 15.1% excluding costs. However, let's remember before the Japan disaster when the price of uranium was approximately USD$70/pound, PDN was closing on average at approximately AUD$5.00. If I4C invested $50,000 today and PDN were to return to pre-Japan disaster levels, the portfolio could grow to a handsome $83,612.04 excluding costs. That would equal a 67.2% increase in the value of the portfolio.
Questions to any and all: (1) Why has PDN continued to fall an additional 13.1% since 11 May 2011? (2) Under what circumstances will PDN start trending upwards again? (3) Where is PDN going in the next 6 months?
According to the CEO of PDN, the current industry climate can be summed up as follows: http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/05/17/bloomberg1376-LLC04B0YHQ0X01-1C2DT1PLF727RQ56CB6VP17MQF.DTL.
I like to describe this industry as purely competitive, and by that I mean it's all about the price of uranium. So I'm not surprised to read: http://oilprice.com/Alternative-Energy/Nuclear-Power/Are-Uranium-Prices-Ready-to-Rally.html.
The purpose of this thread is to encourage discussion and debate. It's also an opportunity for anyone to get involved in collaborating on understanding a company, in this case our good friend PDN. Please note: This is not a criticism of anyone's presentations or recommendations during the interview process. They were all valid and of a high quality. This discussion is about moving forward.
"A public opinion poll is no substitute for thought." - Warren Buffett
The presentations possessed a broad range of approaches in justifying the strong 'buy' decision pitched to the panel. Some focused heavily upon technical analysis of an alleged suppport level of approximately AUD$3.30. Others focused upon a comprehensive elaboration as to the underlying fundamental economics of the uranium industry and its undeniable place in the future of global energy. Within this group some took a macro approach and focused upon the broad need to move towards more 'green' energy sources, while others took a micro approach and considered the price of uranium and the structure of PDN itself. Some presentations attempted to postulate the decision quantitatively with a DCF valuation, while others relied upon a more qualitative approach where it was impressed upon the panel that the writing was pretty obviously 'on the wall' where this industry was heading despite the Japan disaster.
Upon the first day of interviews, 11 May 2011, PDN closed at AUD$3.44. Today, 6 June 2011, PDN closed at AUD$2.99. That's a 13.1% fall in under a month. If I4C had invested $50,000 on 11 May 2011, today the portfolio would be worth $43,459.30 before costs. Furthermore, if the portfolio were to return to par PDN would need to grow approximately 15.1% excluding costs. However, let's remember before the Japan disaster when the price of uranium was approximately USD$70/pound, PDN was closing on average at approximately AUD$5.00. If I4C invested $50,000 today and PDN were to return to pre-Japan disaster levels, the portfolio could grow to a handsome $83,612.04 excluding costs. That would equal a 67.2% increase in the value of the portfolio.
Questions to any and all: (1) Why has PDN continued to fall an additional 13.1% since 11 May 2011? (2) Under what circumstances will PDN start trending upwards again? (3) Where is PDN going in the next 6 months?
According to the CEO of PDN, the current industry climate can be summed up as follows: http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/05/17/bloomberg1376-LLC04B0YHQ0X01-1C2DT1PLF727RQ56CB6VP17MQF.DTL.
I like to describe this industry as purely competitive, and by that I mean it's all about the price of uranium. So I'm not surprised to read: http://oilprice.com/Alternative-Energy/Nuclear-Power/Are-Uranium-Prices-Ready-to-Rally.html.
The purpose of this thread is to encourage discussion and debate. It's also an opportunity for anyone to get involved in collaborating on understanding a company, in this case our good friend PDN. Please note: This is not a criticism of anyone's presentations or recommendations during the interview process. They were all valid and of a high quality. This discussion is about moving forward.
"A public opinion poll is no substitute for thought." - Warren Buffett