Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
We are in the dog days of December. This is a phenomenon that occurs per annum in the junior resource markets. To wit: there is a significant decline in stock valuations during the middle of the final month of the year. These annual downticks are driven mainly by tax-loss selling, but a contributing factor is an otherwise disinterested investor base as folks ready for the gifting and party season.
In the series of Toronto Venture Exchange Index charts that follow, I document these mid-December declines since a rising gold price resurrected the junior resource market in 2003. Note that each chart covers a period from November 20 to January 10, equaling 33 to 35 trading days:
The conclusion from these charts is that a short-term low for the Toronto Venture Exchange almost always occurs in mid-December. This is particularly so in bear market years, when tax-loss selling is at its strongest and investor interest is at its lowest. Only one of the past 11 years has bucked this trend and that happened during the raging bull market of 2005-2006.
Finally, here’s the chart from November 20 to Thursday December 18, 2014:
Though the current chart is incomplete, I will make some short-term predictions based on previous bear market years:
While hitting the late afternoon holiday party scene in Vancouver’s financial district this week, I have noticed markedly smaller crowds filled with many long faces and listened to too many woeful tales regarding the state of the junior stock market.
Personally however, I dig the dog days of December. We are now in the middle of a very short window of five to ten trading days that presents the year’s best opportunity to bottom fish for undervalued companies.
If chosen carefully using strong due diligence and thorough research, these will be the stocks that lead a typical rally into the New Year. If past is prologue, I can confidently forecast that the fortunes in a fortnight will appear rosier for a number of the best junior resource companies.
Whether the predicted rally in early 2015 will have any sort of staying power in the current bear market is equivocal. That may simply be a function of future commodities prices and in particular, for gold, oil, and copper.
2 Comments
Brian Flavin
These are real places being ripped apart by companies that you are funding, even short term, with your money. Please evaluate whether your selfishness in trying to make money for *yourself* and your total concern with that one entity will be something that future generations will pay dearly for. Its not other people destroying this earth, its YOU.
el chico 73
where do you think the steel in your vw bus comes from brian? what does it run on? how about the buckles on your birkenstocks? do you live in an igloo? the cornerstone of our civilization was founded on mining and the oil and gas industry. i agree that we have become hedonistic and decadent as a culture in north america, but that is also somewhat dictated by geography. we like warm comfortable places in the winter. unless you live in a cave and make no waste and only eat what you kill and farm then you should watch who you are criticizing. remember for every finger you point there are three of your own pointing right back at you. put things in perspective and grow up son.