First Purchase Under Mechanical Investment Plan

Tobias CarlisleStock Screener4 Comments

By Bruce Murison, June 8, 2015

On June 8 Tobias published on this site my mechanical investment plan using the Acquirer’s Multiple.  On June 4 I had established a dedicated account with $25,000 to trade the Plan.  On June 8 I made the first trade.

Specifically, I bought 594 shares of Nevsun Resources (NYSEMKT:NSU) at 4.21 on the close.  This cost $2500.74 plus commission ($4.95) for a total cost of $2505.69. This is about 10% of my starting balance and is in accordance with the plan to build a ten stock portfolio, one stock at a time, over the first year. Nevsun has the lowest Acquirer’s Multiple of any stock currently listed on the All Investable Screen.  This makes Nevsun the Qualifying Stock (QS), as defined in the Plan. Unless a completed takeover occurs in the meanwhile (we can only hope), I will hold Nevsun for a year before reviewing and probably selling.

Nevsun pays a cash dividend, currently $0.04 quarterly.  I did not state this in the Plan (I thought I had included everything), but I will not DRIP dividends into more shares of the paying company.

Rather, I will let dividends accumulate in the account’s cash balance and evenly reinvest them over time as new positions are taken.  Consider this Plan Rule #13.

Nevsun is a profitable mining company with a pristine balance sheet, a muscular cash position, low operating costs and a rich resource in Eritrea that has expansion potential.  Tobias has posted about the company.  He references an article by David Desjardins that you can find here.  Nicholas Bodnar, contributor, has also written about Nevsun here.  (It is worth reading the comments at the end of both articles.)

When it comes to number of news stories, Nevsun is not exactly as prolific as Apple Computer. That is why I was astonished that, exactly two minutes after I placed my buy order today (at 2:45 pm EDT), this story from Reuters appeared on Yahoo Finance (at 2:47 pm).  The article tells about a U.N. report criticizing Eritrea’s human rights record that includes an allegation that Nevsun’s mine was built with forced labor.  When this charge was made before, Nevsun had responded that the offending company was an Eritrean state-controlled subcontractor that the government had required Nevsun to use.  Whatever the case, operating in Eritrea is the sort of thing that causes a stock to trade at an Acquirer’s Multiple of 2.06.

I am not buying the stock, or avoiding it, because of articles on Seeking Alpha or Yahoo Finance.  I am buying it because it’s the cheapest stock on the screen and that’s what the Plan says I should do.  Period, end of story.

For purposes of performance measurement, the starting benchmark for the account will be the Russell 3000 Index closing value on June 4.  For performance measurement of the Nevsun position, the starting benchmark will be the R3K close on June 8.

The Plan provides for the next buy in 36 calendar days.  See you on July 14.

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4 Comments on “First Purchase Under Mechanical Investment Plan”

  1. Brent Collins and MammOn,

    Thank you both for your interest. The second stock is AGX, purchased on the close on July 14, in accordance with the plan. I will have a detailed post by early next week. Thank you again for following.


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