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The Warrant Report |
Most Analysts Still Don’t Get It
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However, it is how some of these analysts approach their stock selections that are the subject of our thoughts today. How do they decide which companies to research and to ultimately recommend? We could probably write volumes on this subject but we will try and focus our views for the sake of brevity. Everyone talks about People and Properties, People and Properties, People and Properties……… Sounds so damn simple doesn’t? But many in the business would not know what it means to go with Good People/Good Management. What the heck does it really mean? Good Management does not mean just being approached at an investment conference by management of a resource company looking for an analyst/newsletter writer to tell their story. Good Management/People does not necessarily mean just having 20 plus years in the business, but rather have they actually accomplished something, i.e., were they responsible for discovering a significant resource, taking a company into the development and/or producing stage and possibility selling ‘their’ company to a major mining company and thus creating great shareholder value for their shareholders? So now let me contrast this statement above with what I just read from another analyst just recommending the shares of a new company to their subscribers. Obviously, all names will not be mentioned, but the facts are correct. The President of this small exploration company was being interviewed. Initially, I liked what I heard. A small share structure of less than 40 million shares outstanding and a market price of less than $0.25 and a property in Mexico, ah tell me more…. But we before I even read more, here is what I did, and what I do for all new company names which I hear. Immediately, I look at a price chart with the idea of seeing if the stock is near its high or its low, i.e., have the shares just doubled in value? I want to be buying low. Also, within 2 minutes more, I know exactly what share positions that the management has in ‘their’ company. This can be the most telling factor of all in a search for new opportunities. Ok, now back to our interview, the analyst refers to the strong management team of this small exploration company and what a good job they are doing. Really? What I already know from my two minutes of research is that; Why? First, the President of this company owns only 12,500 shares of stock with a current value of appropriately $2,400. I wish I was kidding but I am not. The other members of that ‘strong management’ also have a small or no position in the company’s shares. Sure, they were issued some stock options, but it didn’t cost them anything. Folks, stock options do not count, not in my opinion. I want to see management with ‘skin in the game’, real money they have invested in the company and they should they have a significant stake….a lot more than I would be investing, assuming that I liked the story. So, I am already turned off on this story and then see that the company has virtually no cash, hell I have more cash in my account that this company currently does, and the President is wearing many different hats, other consulting jobs, other companies, and well, in my opinion, not focused on advancing this alleged interesting new opportunity being presented to the subscribers of this other service. Why another newsletter would want to recommend shares in a story like this is frankly beyond my comprehension. End of Story. All of us in the business as well as you as readers and investors in this resource sector need to be able to cut through the B.S. and get to the facts. Our service is here to assist our subscribers with making money and reducing risk by reasonable research which is at our finger tips and which we enjoy. |
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Dudley
Dudley Pierce Baker
Founder and Editor
Guadalajara-Ajijic, Mexico