Has the Junior Gold Penny Stocks on TSX Venture Finally Hit Bottom?
Tue, Apr 23, 2013
List of Companies On The Tsx Venture Exchange
The city is the home of many of the companies that list on the TSX Venture Exchange. Most of them are junior exploration companies which either hit it big with a gold or oil discovery or go completely bust. There isn’t much in between for these stocks.
Over the last two years the TSX Venture stocks as a whole have been clobbered. Now with the TSX Venture Index down nearly 70%, gold prices falling, and commodities out of favor in general, we have to analyze whether the TSX Venture and the junior gold stocks which populate it are hitting bottom. Because if they are hitting bottom, there’s a fortune waiting on the other side.
Junior Gold Stocks: When the Time is Right
Timing is one of the most important factors when it comes to invest in these companies.
I’m not talking about picking bottoms and selling at the top of a single company’s shares ups and downs. But getting in when the market is hitting lows and riding a rising tide that has and will lift all boats.
After all, there are great times and terrible times to invest in these companies. And it has a tremendous impact on your returns.
Just take a look at one of the most recent big discoveries on the TSX Venture Exchange. Fission Energy (TSXV:FIS) owns a stake in a recently discovered high-grade uranium deposit in the prolific Athabasca Basin, Saskatchewan, Canada.
By most accounts, this deposit could be worth well over $1 billion once it’s fully drilled out.
However, if you look at a chart of Fission Energy shares, the real impact of the discovery is very disappointing.
The current price of Fission Energy shares are still well below their 2007 highs (granted, that was the heart of the uranium bubble).
More importantly, the shares are still below their highs set in 2010 and 2011 when this company was part of other significant uranium discoveries.
That’s why we’re more than hesitant to declare a bottom in junior resource stocks right now. There’s just not much reason to buy aggressively and turn the downtrend around.
But there’s another major reason too – overwhelming investor confidence during the current downturn.
The survey below is from Stockhouse. It’s the most-visited website for junior gold stock investors.
Although hardly scientific, the survey shows there’s still a lot of confidence in gold mining and Junior Gold Stocks:
Again, there are all sorts of biases inherent here. For example, the web site is mostly trafficked by those already invested in junior resource stocks. And anyone throwing in the towel isn’t likely to spend a lot of time researching these stocks at the moment.
But it still illustrates a major point in the current gold correction we’re still wondering about.
That is: When in the history of financial markets was a bottom marked by record levels of interest and buying?
The answer is still never.
So yes, we all get the feeling things can’t get much worse from here. But the data and history shows there’s still a lot of risk left in Gold And Penny Gold Stocks.
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Executive Editor, Contrarian Insights
The Group of Big Investors in United States.
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