Opportunity on the Rebound
– Momentum Public Relations –
It is tempting to spin a number of mining clichés when referring to the somewhat surprising rise in the TSX-Venture exchange. Are savvy investors in these stocks “sitting on a gold mine”? Could the truth behind the recent strength of the embattled junior exchange be “buried somewhere”? Enough with the clichés.
At this point many investors are, at the very least, sitting up and taking notice. It would be easy to dismiss the recent rebound of the Venture exchange if it could be explained by a general rise in worldwide markets or a discernible spike in commodity pricing. However the upward trend in the Venture index is occurring at a time when the Dow and the TSX have not shown sustained gains and when overall commodity pricing is volatile at best.
The upward momentum at the Venture exchange is a relatively recent phenomenon. In the past few years the index, weighted to some degree by under-performing mining and resource companies, has declined precipitously moving from around 2200 down to lows that breached the 480 mark. The index has risen from the 490 range up to levels of 530 and higher in the last 30 days. This would appear to defy conventional wisdom.
Throughout 2015, there were a number of market observers predicting everything from further steep declines to a complete collapse of the exchange.
http://business.financialpost.com/news/energy/tsx-venture-index-sinks-below-500-as-long-march-downwards-shows-no-signs-of-letting-up?__lsa=4d9c-332c
The recent strength of the Venture exchange could be dismissed as a mild correction; undervalued markets frequently adjust to respond to a perceived over-correction. There is no doubt that this resource-heavy exchange has suffered from investor fatigue. It has always been a place to take risks. However, the appetite of high-risk investors became much less robust post-2008.
Overall, most experts are cautiously optimistic about the Venture’s future because everyone recognizes that the resource sector always bounces back. The recent shift in fortune may signal that the appetite for risk is returning and that investors are prepared to own some small-cap stocks again. Meanwhile, this may be the right time to seek out undervalued stocks that have solid assets and reasonable growth prospects.
Investors may want to examine a number of individual smaller gold mining prospects that have begun to exploit reserves. Observers are starting to identify gold plays that, at current bullion prices, provide plenty of reason for optimism. Gold mining operations with solid resources and low cost of extraction can generate solid profit and create shareholder value when the commodity is trading in the area of USD$1200 to $1300 per ounce.
http://www.midasletter.com/2016/02/sptsx-venture-composite-index-gold-is-the-breath-of-life/
When it comes to investing, averages can be moderately helpful. Averages are a widely-used metric that provide general information and illuminate big-picture trends. However, averages can mask a number of important realities. In any investment portfolio that, “on average”, is in decline there are almost always stocks that are gaining.
The current rebound of the Venture exchange offers an opportunity to do two things simultaneously. First, it may be possible to ride the general wave of upward movement. Second, by scrutiny, it may be possible to find stocks that will rise more rapidly than the averages.
An experienced miner knows that it is often necessary to dig beneath the surface to find gold. Similarly, investors who make the effort to dig beneath the surface may discover hidden gems or uncover golden opportunities.