Support Forming?

As many of you know from watching your investment and researching over the past year, CanWest has seen better days as well as worse. Currently, we believe that CWPC is in a very comfortable and stable area at its current price of around $4. This area was a level of resistance earlier when going up. First it very briefly paused the stock, and then lent its support before a very powerful move to the upside. Now we have broken through the very important $4 mark and quickly come back.

Those risk takers who have been able to ride out this nasty storm in the small-cap resource stocks probably believe that CWPC (among others) is worth a heck of a lot more than what it is trading at, as do we. Now 250 million barrells of oil from their bitumen strikes is a heck of a lot of oil. Granted their margins will be smaller (should they be able to produce this oil, and not including any extra finds) than that of a traditional oil company, but that is the nature of their specialized industry. Their economical resource discovered on their first phase of drilling is more oil than many other companies out there right now...and they are still exploring! I believe that this stock is going higher, whether they find anymore oil or not!

This may sound ridiculous to many, but by my calculations the company is trading around a $450 million market cap. The sum-of-the-parts is much more than this as Eagles Nest should be conservatively valued at $75 million (this is deduced from the recent prices paid for even less promising claims in the Basin) which puts the rest of their assets at around $375 million. That means that you could have 250 million barrells of oil for roughly $1.50 each AND get a very promising oil shale claim in Pasquia Hills, and a less certain one in Venezuela. Granted you must build the infrastructure to extract the oil, we see this as some of the cheapest oil in the world and its in one of the safest regions!

For those of you without a short-term view and a long-term horizon, CanWest could become that Homerun stock that everyone searches for, but few find. Patience will be key here as the stock consolidates before its next run, which will most likely result in it going north of $10. Although the stock appears cheap here, our market knowledge makes us believe that the stock is possibly a better buy at $5 than at its current $4 due to certain market conditions beyond holders' control (margin requirements and market psychology...among others).