The AORD in the last week of 2021 was as excited as a seven-year old boy who got a new skateboard for Xmas (speaking from personal experience).

AORD 2022-01-04

This is despite skyrocketing Omicron cases around the country and people not being able to get PCR tests. I guess the consensus is that none of this is going to really affect the economy in 2022.

The top five stock tips we’ve made in the last few months include:

  • MHJ up 70% since recommended on 28/9/21
  • KRM is up 60% since we recommended it on 20/9/21
  • GWR up 33% since we recommended it on 13/12/21!
  • KIL up 25% since recommended on 26/10/21
  • CVW is up 14% since recommended on 4/10/21

Since we started publishing our stocks of the week in September, about 60% of our picks are either up or neutral, while the other 40% are down, some by a little, some by a lot, but if you’re following the QAV system, you’d have already replaced those in your portfolio (QAV Rule #1 – Never Lose Money). Our goal is to have 60% of our stocks perform well over the long term. Obviously, during turbulent markets, finding these is a little more difficult than it is during upbeat markets, but that’s why investing takes patience and a long-term strategy for riding out the cycles. 

We have two stocks to bring to your attention to this week. This recommendation is based on Tony’s analysis using data from Monday 3 Jan 2022.

1. Small Cap: MML

Medusa Mining Ltd (XASX:MML) is an Australian based gold producer, focusing on projects in the Philippines. MML’s flagship project is the Co-O project.

MML website

MML was one of our stocks of the week back in August 2021 (#428), when it was trading at 92c, but then it promptly crashed a week later (#431), down to 80c, when its quarterly results came out. And it’s been trading between 70c and 86c ever since. But that’s okay. You can’t win ’em all. And everyone deserves a second chance!

Some of the reasons we like still MML’s long-term prospects are:

  • Based on a share price of 71c, it has a QAV score of 0.49 and a quality score of 85%.
  • Average Daily Transaction of $121,000
  • Financial health strong and steady
  • Price-to-Operating Cash Flow is a low 1.72
  • Price is below our IV#1
  • Price is below Book + 30%
  • It has consistently increasing equity
  • The PE is less than the Yield
  • The Yield is higher than the bank rate

So it has great fundamentals, a nice chart, and it’s very reasonably priced. Let’s see what happens this time around.

That said, Gold is looking very close to its sell line, so keep an eye on that as well. If it breaches, we might put MML back on the chopping block next week.

2. Large Cap: FMG

Fortescue Metals Group Ltd (XASX:FMG) is an iron ore production and exploration company with assets located in the Pilbara region of Western Australia.

FMG website

Ah, our old friend at FMG. They were one of the killer stocks in our portfolio from 2019-2021, up 200% during the time we held it, but we sadly had to sell them when the Iron Ore price fell (see my end of 2021 recap for that story). But Iron Ore is back as a buy, and therefore so is FMG! It’s going through some changes, with the CEO Elizabeth Gaines recently announcing her resignation, and Twiggy Forrest’s movements towards green energy, but the core business continues to look strong.

Iron Ore chart

Some of the reasons we like FMG this week include:

  • At the price of $19.87, it has a QAV score of 0.26 and quality score of 90%
  • Average Daily Trade of $171.5m
  • Price-to-Operating Cash Flow is a reasonable 3.53
  • Financial health is strong and steady
  • It’s a “Star Income Stock” on Stock Doctor
  • The price is below our IV#1 and our IV#2
  • The current PE is the lowest in six reporting periods
  • It has consistently increasing equity
  • The PE is lower than the Yield
  • The Yield is higher than the bank rate
  • Management has a very high stock ownership

Please Note: 

Our recommendations are based on the share price as of the date of the download. If the share price changes, this will affect the QAV score and its ranking on our buy list, so please take price changes into account before making any investing decisions.

Also note that while we apply a high level of science in our selection process, some stocks may not perform well in the short term. Like Warren Buffett, we aim for a 60% success rate (meaning 60% of our stocks will do well in the short term, the other 40% will not). So it’s very important to monitor your portfolio and to sell the ones that don’t perform to your expectations. The way we do this in QAV is using Rule #1 and the 3PTL. If you’re not familiar with how to use those, please listen to the podcast and consider joining QAV Club

We have very strict guidelines about what we disclose about our own portfolios, and when we buy and sell stocks that appear as our stocks of the week. You can read our guidelines here

Finally, please also note that this isn’t personal financial advice and you should consult a financial planner before making any investment decisions.

Each Monday we publish our full buy list for QAV Club members.