re: where are the nickelheads? When sentiment is bullish, then...

re: where are the nickelheads? When sentiment is bullish, then suddenly turns bearish its a bit difficult for people to start feeling bullish again. Investors are nervous, they been burnt buying these companies at higher prices and seeing them do nothing and fall a year. Many feel that the nickel surge of 2003 was a one off event.

I feel that when there is nervousness and doubt that this is exactly the time to buy. When the trade seems the hardest.

Lets see why people bought up nickel stocks (the SMY,MCR, IGO's) during 2003. Are these conditions still valid? Lets also remember that since 2003 these companies have consolidated their operations, increased reserves, increased production, increased exploration, repaid debt, strengthened their balance sheets, began paying dividends (SMY not yet I believe).

So the main reasons for the bull market then were: China factor, falling nickel inventories, rising prices, increased world demand and supply constraints. Were these issues one-off events that came together at one point in time very conveniently and will not repeat themselves again? Possibly, but I believe that many of these issues are still present.

Falling nickel inventories is the big one. Demand is still high and as nickel stocks fall it is just putting more and more strain on the nickel price. It has to move to the upside. If we are to believe the management of BHP, the Chinese factor is still strong. CSM is another company that sees nickel as a commodity it wants to be involved in.

I believe that the re-rating of MCR, IGO and SMY and these junior/mid cap stars of 2003 will be one of the themes of 2005. MCR (like last time) led the pack. It has already been somewhat re-rated upwards. SMY has started. IGO is just about to start its run.