Stockbullz.com Weekly Stock Newsletter #16
Stockbullz.com Weekly Stock Newsletter #16
June 30, 2006
“It’s my opinion but it’s your money!”
Dear Canadian Stock Investor,
Today I flashed a speculative buy on Bayswater Ventures (BVE.V). Why?
Well because it experienced a huge volume and price spike that suggests to me that someone might know something big might happen soon in the future.
At the close, the stock ended up almost 51% and on volume that was good enough to be the fifth most active stock on the TSX Venture exchange. I should also mention that this volume was more than 50 times the volume of the day before. Very intriguing indeed.
There was a quite positive and detailed news release today that may have accounted for some of the volume but I think there is more to it than that. (read the entire news release here: http://biz.yahoo.com/ccn/060630/200606300336021001.html?.v=1&printer=1)
A fact that makes me quite excited for the profit potential for this stock is that when looking over ARU’s breathtaking ascent, it also began with an enormous volume and price spike.
BVE’s volume spike is actually even more distinct than the ARU one. Does that mean BVE will perform as well as ARU?
I seriously don’t know. This is a speculative buy for me that I am extremely interested in seeing how it plays out.
Being a trend follower too, I bought partly because the stock was in a downtrend but with the price spike today it broke right through the 30 day Moving Average.
In case you are interested, the 30 day Moving Average currently stands at $0.73. This is my current mental stop loss. Although is should keep moving up so it will be a sliding stop loss that will help me avoid large losses but letting me let this winner fly until it runs out of steam at which point I sell.
Looking over the very simple company website, I can see that this tiny little company owns a ton of land and there will be a lot of money going into the ground all summer long.
If we get significant drill results we continue moving higher just like ARU did. If we don’t, I think we will continue moving higher just based on rumors and speculation.
So this tightly held stock I think has great potential to give us some nice short term returns. Take up a speculative position if you like but check daily to make sure the price is trending higher. Because if it does go below the trend line, we will have to sell it all, no matter how good the potential may look. If you don’t want to do this, just remember what happened with Nova!
I covered my small CUX short position because the trend reversed this week. My theory was right but I guess I was just too late. That is ok because I know that about 60% of my trades won’t be profitable. I am still short A.TO and KRY.TO.
As long as the other 40% are large gains and the 60% are small loses, then I’ll be ahead in the long term.
I just finished reading a book by the name of “The Stock Promotion Business: The Inside Story of Canadian Mining Deals and The People Behind Them”. This is a 30+ year old book written by Ivan Shaffer that attempted to expose the tricks promoters use to enrich themselves at the costs of gullible retail investors.
To tell you the truth, many of the things I just read in this book correspond with the promotion and recent demise of Nova Uranium, a stock we made large paper gains but lost much of them in recent months.
The promoter in this case seemed to be Don Moore. He formed this company just months ago and decided to take it public because this is the way to make big money. He hyped the property as having a very large potential historic uranium resource. Then he began to make the company’s name known to retail investors by advertising it everywhere he could. He even supposedly put the company’s logo in public transit buses!
The reason he did this was to get as wide as possible distribution of the stock. Promoters want to have retail investors to own their stock because they are the most gullible and the ones who have the most hope. Nova was positioned as a can’t lose scenario.
Then Moore got Wolverton and the Coffin Brothers to write very favorable reports on the stock as proof that the stock has potential.
Prior to all this, Moore and co maybe made sure to tuck away a bunch of stock in offshore accounts that would be untraceable to them. This way they could sell unnoticed. The accounts would probably been under a friend’s or family member’s name to further eliminate any detection.
Moore and co might have profited splendidly during the ten fold share price rise from $0.50 to nearly $5.00. In addition, the book also states that promoters often make even more money by shorting their own stock all the way down.
Now of course, this is just my hypothesis. I am very sorry if it’s totally wrong. But according to what I read in the book, that is what might have happened. And the Nova story may not be over either. Why? Well because insider still own a lot of shares (that are disclosed) and so if we have a uranium boom like some people are saying we will, the share price might go back over $5.00 and maybe even much higher.
One of the main pieces of advice from the author ironically is to not buy mining stocks! He says there are thousands of mining companies and inevitably 99% go bankrupt. Only 1% go from exploration to mine.
Perhaps we have a better chance of making money because this should be a big resource bull market but be aware that the odds are not in our favor in the long run. Despite tougher and tougher legislation, I am sure many small mining companies are still being manipulated to their promoter’s liking. If you don’t believe me, try finding this book at your city’s university library and read it because you will be in for a huge surprise!
I will try to do a more detailed book review and the things to watch out for from mining promoters in the coming weeks.
That’s about it for this week. Thank you for taking the time to read this and I wish you luck in your investing decisions,
Mike
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