The process of disclosure to investors of all material information pertinent to an issue.Essentially - you will want to understand all you can about a company, its management, its history, share structures, its projects, pending lawsuits/liabilities, outstanding issues in the geological/political area, and more.
The careful investigation by the underwriters that is necessary to ensure that all material information pertinent to an issue has been disclosed to prospective investors
The performance of those actions that are generally regarded as prudent, responsible and necessary to conduct a thorough and objective investigation, review and/or analysis. In the thrift industry, the term is used to describe the preacquisition analysis of a savings association by a potential acquirer. The analysis includes a review of the institution's franchise value, an identification of its assets and liabilities, an evaluation of its management, and a determination of its purchase price.
After all, would you want to invest in a company that is mannaged by less-than-reputable people who have blackmarks at TSX and frequently file their financial statements late?
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While everyone has their own standards of how thorough a checklist is - an interesting approach to take would be one from the shoes of an Analyst or Newsletter Analyst such as J.Taylor and Canaccord Senior Mining Analyst Wendell Zerb.
J.Taylor is known to have been a large gold stock following - and rightly so if the returns are as promised. (see below)
On the other side of the fence - the brokerage firm analyst has known to be wrong - as in the case of Aurelian Resources ARU.v - suffered a political strike and the stock plummeted. Mr. Zerb was making comments to withdraw from his pick as I'm sure it has affected many of his client's portfolios. Keep in mind ARU is down to less than $5 today.
Price TargetsCertainly one has to appreciate the amount of data and unpredictable factors (remember Bear Sterns and various credit rating agencies...?) that goes into a price prediction. No amount of CFA, MBA, or other assorted three letter designations will guarantee a stock analyst's picks are correct - often times - it's common sense that spots the undervalued superstars of tomorrow.
Canaccord Adams analyst, Wendell Zerb upped his target from C$11.00/share to C$13.00/share citing “We believe the FDN prospect has the potential to develop into a large high-margin mining operation and, as such, we feel justified in applying a premium in-situ valuation to the FDN resources of US$115/oz. To account for what we view is excellent exploration potential, which we believe remains both at the FDN zone and on additional targets within the Condor Project, we have chosen to apply a 1.1 growth multiple to our in-situ valuation.”
A copy of Jay Taylor's Due Dilligence Summary can be found by emailing his assistant, Mr. Bassi or calling him at 1.718.457.1426. Seeing as how the man has publicly beaten S&P for years! - surely there must be something to his system. Let's get right to it:
Things J. Taylor focus on for his own due dilligence before investing in a company (and telling his readers to as well!):
1) Management, management, & management
- Who are they? Are they industry-recognized professionals or just a bunch of accountants and lawyers thinking of going into mining because gold is at $900/ounce?
What are some of their past accomplishments and successes? Being a successful entrepreneur and explorationist requires a large network of well-informed investors and businesspeople who understands mining exploration is a constant hit/miss. The juniors that DO survive longterm and beat the odds - see huge success. (Lundin buyout of Tenke)
2) Technical Background / Staff
- Mining isn't just about drilling holes and calling it a day! When you have a huge property that's squared kilometers in area... how are you going to angle and place the holes? Who can read the geophysicals and interpret it in accordance to the landscape and obvious mineralization?
Bottomline - Talented geologists mean the difference between wasting $200,000/hole and finding rocks versus striking it rich and hitting a high grade intercept. It takes YEARS of experience in the field and seeing different alteration types to specialize in this field. Professional Geologists (P.Geos) are the designation you would want to see, along with past famous discoveries and involvements in large projects.
Going back to NovaGold from a few days ago - their VP of Exploration - Greg Johnson was credited as part of the original taem that found the huge deposit in Alaska - as well as its recent expansion. Keep in mind Donlin Creek is famed to have close to 30 million ounces of gold... at $900/ounce that's certainly alot of coins! Another great sign of faith and confidence would be to follow what other projects Mr. Greg Johnson also works on (likely as a director).
3. Share Structure
- Going back to a point made earlier in 1. above, the type of investor owning the company is important as well. Sophisticated investors understand speculative plays fluctuate.
ALOT. and OFTEN.
Retail investors (your mom and pops) may not understand that and could sell en mass on the odd occasion and result in even more erratic stock charts.
Thus knowing what your retail versus institutional mix is important. Institutions buy big - which is a great thing not only for your shares - but also for visibility. In this example we see RAB Capital taking down several million shares of a mining explorationist. Keep in mind this is the same RAB that has recorded returns in the 1000%.
Yes, the thousand percentage returns. That's 10X your money in one year.
The FT says that there is no reliable data on how many other funds have made 1,000 per cent, or ten times the investment, in a year. But RAB Capital, London hedge fund manager, shot to prominence in 2003 when it returned 1,475.5 per cent in its Special Situations fund, which now runs $2.4bn and is the biggest shareholder in troubled bank Northern RockMore on DD tomorrow. Happy investing, comments / feedback welcome!
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