Stocks of the Week — MML, FMG

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).

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 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.

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.

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

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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.