Video Showcase

Resource juniors should not expect a Christmas miracle: Stockhouse TickerTrax

11/23/2012 5:38:00 PM | Danny Deadlock, TickerTrax

6643 Reads | 14 Comments

Rate this

clarity
2

clarity : 2
Rate this:

overall quality
2 overall quality : 2
Average quality rating by the Stockhouse community.

credibility
2

credibility : 2
Rate this:

usefulness
2

usefulness : 2
Rate this:

For beaten down investors and speculators, a few charts to benchmark your portfolio

Stockhouse Ticker Trax is equity specific research (Canadian listed and market cap < $300 million) published every Monday to paid subscribers. Our free Friday column may feature companies previously featured to paid subscribers (with a minimum one month delay) or discuss topics of interest to the general investment community and relevant to overall portfolio management.

The past 18 months has been very tough on penny stock investors but the brunt of the force has been taken in 2012. This summer I heard from many veteran speculators who said this was one of the toughest markets they had experienced in decades – and I couldn’t agree more. Trying to determine fair value on the majority of these stocks (even the best ones), has proven extremely difficult.

The TSX Venture represents a broad range of industries but is heavily weighted to resource exploration and development. Pinetree Capital (TSX: T.PNP, Stock Forum; 96 cents) I have used for years as a benchmark as they hold a large portfolio of significantly “higher risk” junior resource stocks. I find PNP useful for gauging overall market sentiment and risk. Below you will see where the two track very closely.

Where the TSX Composite represents what large institutional investors may be buying, Pinetree would be more representative of the average retail investor.

You can also see where junior resource stock portfolios (for the average retail investor) would be down 20% since the first of October and 40% from the start of 2012.

This would compare to the best of the TSX Venture down 7% since October 1^st and approx. 17% from the start of 2012.

As you can see, we started a recovery from summer lows in early September but the window of opportunity this year was very small. Resource stocks stalled out a month later, stabilized, and then took another hard hit a week ago – with many falling 10 to 20%.

Junior gold stocks

For the popular junior gold stocks, the story was no different. Gold as a commodity continues to do very well but the junior exploration stocks refuse to cooperate.

Each month through the Ticker Trax newsletter I update a valuation table of 60 juniors with a minimum of one million ounces gold (43-101 compliant). We have used this table since 2011 to benchmark fair value for these small companies and it has worked extremely well.

A month ago I discussed in our weekend report where the takeover of Prodigy Gold was right in line with valuations we were seeing (this had also happened several months earlier).

http://www.stockhouse.com/opinion/ticker-trax/oct/19/october-junior-gold-valuation-validated-by-prodigy

Higher priced takeovers have occurred this past year but those only happen when a larger company is a regional neighbor or the project economics are very attractive – low capital cost and higher/shallow grades.

The current average I am seeing is $41 per gold ounce.

Between now and Christmas don’t look for any market miracles. Tax loss planning and selling will be the core theme and this will make it hard for prices to move higher. For the most part, it is the same every year – at least for the small stocks. Late November and December it is a buyer’s market.

_______________________________________________________________________

In addition to this weekend column and the bottom fishing research sent to paid Ticker Trax subscribers on Monday, I also provide free MicroCap alerts throughout the week. These are based upon News or Abnormal Price/Volume Activity on the several hundred stocks we track from our own research, brokerage analysts, or third-party newsletter writers.

http://www.stockhouse.com/Groups/GroupInfo.aspx?g=50540

http://twitter.com/TSXAlerts

_______________________________________________________________________

ABOUT THE AUTHOR

Danny Deadlock, TickerTrax

In addition to the editorial published on Stockhouse, Danny Deadock is lead analyst and publisher of MicroCap.com. With over 25 years experience speculating on penny stocks, their focus is Canadian juniors traded on the TSX and TSX.V. The service covers various sectors but is weighted towards natural resources. Annual cost is $163 Cdn. For details, please visit www.microcap.com

Danny Deadlock now writes and researches for Stockhouse's Ticker Trax once a week. Stockhouse launched the Ticker Trax service in November 2008. Please see www.tickertrax.com for more.

More Danny Deadlock via Stockhouse: Click Here

More Ticker Trax by Danny Deadlock via Stockhouse: Click Here

leave a comment

add to favorites

Comments

Johnny881

Danny, a great biotech can make you a ton of money. Be sure to check out Nupathe. http://www.stockhouse.com/blogs/viewdetailedpost.aspx?p=156433

2stereo

Downward Snake Look - LMAO.

4_horsemen

Those charts seem to have that 'downward snake' look of the classic pumper and dumper. Funny how the aggregate charts look like individual ones, which begs the question, if you are going to get ripped off on one penny stock, why not get ripped off on them all. Perhaps if they are lucky they can put their press announcements on the Prime Minister's website: "Casserole Bunko Law Firm commences negotiations to act as advisors to the agent in the upcoming private placement underwriting of $379 million for the Shady Mining Company by a syndicate of financial institutions led by Go Fly a Kite Investments of Tortola, British Virgin Islands."

wwmeinc

Maybe if there was alot of doom and gloom around but after the US election in which the US did not fall apart and some great turkey dinners and shopping by all accounts it really does look like the mkt is about to roll higher this Christmas. The New Year might be different but I believe and willing to commit cash that the time to be in the mkt is now and out by the 28th or 31th of Dec. at the latest....then wait and "feel" out the late winter direction...China/Europe/USA. Good trading, wwmeinc

CONSTRUCTIVE_SUBVERSION

I wasnt counting on much for the year, three four months ago. Ill say the Chinese political table being set will be a help, and was a neccessary step in reinvigorating the commodities. I think when its sell in May time, the micros might be looking better. If you have some spare cash, there may be some nice companies with cash in the till and news around the corner. Those are the ones you want to be looking at, structure matters as well, as we are not in a market where supply for resource stocks is outstripping supply.. Its a waiting game..

2stereo

Climbing that wall of worry eh? Be greedy when others are fearful, fearful when others are greedy.

Johnny881

The stock you need to own for 2013 is PATH on Nasdaq. http://www.stockhouse.com/blogs/viewdetailedpost.aspx?p=156191

EaglesWings

Will juniors come back in favor? All industries come in an out of favor and nothing is different this time either. Of course, this is my own opinion and others should do their own analysis. However,..... The poster, Destinator, is correct. Too many posters (some are brokers and others are hired/encouraged by brokers) are writing to con those who read the message boards. While it may be hard to police this, an attempt should be made by public boards to do just that.

walkerville

With 2.6 million ounces confirmed (only 1 million of that in the inferred category), Gold Bullion Development Corp (GBB on the Venture) is one of those drastically underpriced companies that meet the criteria for serious investment (it has the ounces in the ground, with only 20 per cent of property explored; it is near mega producer Osisko; it has a huge near-surface low-cost bulk tonnage mine on its hands).

jordon3

Danny as usual I enjoy your articles. One junior that should be on our watch list is Canstar Resources (rox.v). After enduring 12 years of litigation, the property title has been restored. This company has a highly prospective property with spectacular historical drill results. Drilling commenced a week ago, with some assays expected before year end. Definitely do your DD on this one.

thedave2006

Lots of good resources names out there in market casino. many have weather the financial storm well as their SPs showed huge gains, collapse and a resurgence. However, with that said, during good times the tide carries all boats including the fluffy specs of which has had great rides and collapses too, but, they may never come back with any vigour unless there is another speculative cycle, even then they may have to change stories or sectors after reverse splitting the shares so the promotional cycle begins again. I will stick it out with the better names, sell the laggards as bubbles, cycles come and go since I got in market casino in mid 90s....seen much, learned a lot. Wish everyone well.

Destinator

It's too bad Danny that several of these juniors have fallen victim to a broker who posted regularly on the Stockhouse forum under several aliases. These were good companies with legitimate discoveries. Unfortunately, stockhouse readers along with several newsletter writers and their subscribers were duped into thinking that this promoter was sincere enough to hold his shares while promoting the stock. It is time that stockhouse helped to nail this imposter and protect it's audience instead of allowing itself to be used as a conduit for his own personal gain. Junior exploration companies are the ones who do much of the heavy lifting. Investors in junior exploration companies are the ones who take all the risk. These investors make up a good portion of the Stockhouse audience while the majors succeed in buying $1700 gold for $41. in part due to highly unethical practices by a broker that uses your site to destroy little guys. You can be part of the problem or part of the solution.

SchiffKnowsBest

Good article Danny. Agree completely. This is the time of year to find the juniors that have been performing well in 2012. These are few and far between, but they are out there. The people who own these won't be looking to sell before 2013, and since there are very few of them, it should bring some extra investors to them for that very reason.

elixerpolyweb

Many junior PM's are about to hit a fiscal cliff. Ideally you'd like to own juniors with cash & production. UC resources would be one of those plays. Healthy cash reserves, improving cash position through production, no need for dilution, etc.. At 4 cents UC is very cheap in comparison to its peers. Do your DD.

Stockhouse Conflict and Disclosure Policy:

Stockhouse publishing Ltd., owners and operators of Stockhouse.com, has established the following rules to ensure that there is no appearance of impropriety on the part of any Stockhouse Editorial writers ("Writers"). The content of Stockhouse Editorial articles (the "Articles") are the opinion of the Writer and any reliance on the content of these articles is at your sole risk. Our Writers are not registered investment advisors. You should not make any kind of investment decision in relation to Articles or stocks discussed in them without obtaining advice from a registered investment advisor.

Facts relied upon by our Writers are generally provided by the subject companies or gathered by our Writers from other public and/or private sources. These facts may be in error and if so, the opinions of our Writers may be materially different.

Writers may own, buy, or sell shares in public companies mentioned in their Articles, but in the Article they must prominently state their ownership position. Thus, a conflict may exist. Writers are not permitted to write Articles that attempt to benefit persons connected to the Writer, such as family or friends, except where disclosure is made in the same way as if the Writer him/herself owns stock.

Writers cannot solicit, accept, or agree to receive anything of value given or paid with the intent of influencing their Articles.

Stockhouse notifies each Writer about these rules, and we rely on the integrity of our Writers to ensure that our rules are followed.