Stockhouse Ticker Trax
is published to subscribers every Monday (annual cost only $99
). We focus on best-in-class high growth
small companies trading on the TSX and TSX.V between 5 cents and $3 with a market cap below $300 million.
Equity Analyst Danny Deadlock has 30 years of experience speculating on Canadian penny stocks and targets capital gain opportunities and diversification in metals and minerals exploration, energy, and technology.
For the experienced investor, Ticker Trax provides an extra set of eyes and ears (idea generation) and for those learning to invest in micro cap stocks, we provide stock picks and market education.
; (1) new research (stock picks) weeks in advance of being featured on this weekend column (2) exclusive
access to our list of junior gold exploration companies (critical for peer valuation), (3) exclusive
access to our list of Cash Rich micro cap companies (our Virtual Vulture Fund) which contains 80 companies with almost $3 Billion.
Both tables are updated monthly.
The resource heavy TSX
has significantly underperformed the NYSE and NASDAQ this past year but (for the most part) still generated a positive return. The TSX Composite Index is up approx. 8% for the year.
The same cannot be said for the TSX Venture Exchange (TSX-V) where another year of big losses was recorded. The TSX-V Composite Index (the best of breed) is down almost 25%
The Misery on the TSX-V
is now approaching three years where the Composite Index is down 60% from the Q1/11 high.
Recent statistics on the TSX Venture Exchange
reflect the depth of the misery:
Almost 80% of the 2,152 listings were trading at or below 10 cents
Almost 50% of the listings were trading at or below 5 cents
Penny (micro cap) stocks are the black sheep of the investing world and while they can generate remarkable returns, they also have a very large “negative” stigma attached to them.
Both the TSX and TSX Venture have worked hard to have their Exchange viewed as “world class”. Yet it is very difficult to take that seriously when 80% of the listings are barely worth a dime.
A couple weeks ago I did a report suggesting the exchange needs to work harder to help companies interested in a change of business.
This means speeding up a ridiculously slow approval process (six to nine months on average) and cutting back on the burden of heavy accounting and legal fees. I recently received a change of business package in the mail for a 14 cent stock and it was literally two inches thick. You would think it was a multi-billion dollar merger or acquisition. I have little doubt the huge majority of shareholders just toss it in the garbage and shake their head in dismay.
The 2014 outlook for the resource sector is similar to 2013.
Without more diversification on the TSX and TSX Venture we are going to experience another year where companies disappear, dilute their share structure, and/or roll their stock back and grossly dilute shareholder value.
As the following graphic illustrates (sourced from LXV.V) the weighting to technology in Canada is very low - yet the sector’s outlook continues to reflect strong growth.
Diversification to technology is not going to be the cure and will not work for a large majority of companies who won’t have the ability to put together a skilled management team. But whatever the sector solution is, public companies need to have confidence that the exchange is going to try and work with them, and not against them
If the company suffers then hundreds (or sometimes thousands) of small retail shareholders also suffer who are grossly underwater on their investment. If the shareholder is already in a huge loss position, does he really want further “excessive” regulation that means his money is tied up even longer?
There is a line between regulation and doing something to help people recover their losses. When you have a world class stock exchange where 80% of the stocks are trading near or below 10 cents, SOMETHING needs to be done sooner than later.
The TSX and TSX Venture Exchange are owned and controlled by Canada’s largest financial institutions. One only needs to look at their recent earnings to know they have the financial resources to help try and turn this disaster around.
Sitting around waiting for commodity prices to save the day is not the answer. .