Monday, June 20, 2011

Precious Metal Stocks - Nano Caps (<$5m M/Cap)

Disclaimer: Unlike many of my posts on precious metals stocks which look at buying based on value, the below post and examples are largely speculative. A reminder that no posts of mine should be considered advice and all investment decisions you make should be your own.

In February 2010 I started a thread on an Australian investment forum about speculatively purchasing 'Nano Cap' precious metal stocks.

If you are a member of the Hot Copper Forums you can view the thread HERE.

Investopedia suggests that Nano Caps are those with a market capitalisation of less than $50m, however given Australia's stock market in general has much smaller sized companies I was looking at those that have a market cap under $5m.

Further to the market cap I narrowed down the selection of precious metal stocks to mainly those that had a JORC defined resource already.

Here is a list of those I came up with:

CLICK IMAGE TO VIEW LARGER VERSION

From the list you can see that some were identified in February, some in April and then a few more in May (all early 2010).

Over time I measured how each of the companies traded and based profit calculations on having put $1000 into each of the stocks on the starting dates listed (a virtual portfolio so to speak). 

I actually also bought and sold some of the stocks as part of my real personal portfolio (those I've held at times from the above list are SVL, MNM, CMY, CVG & WCN, with mixed results but overall profited well).

If someone had purchased $1000 worth of each stocks as they were listed then $18,000 would have been spent all up (18 x $1000). The portfolio today would be worth $53,099 (almost 200% profit).
Some of the stocks have traded much higher than their current prices (given we are in the midst of a reasonably severe market correction this is not surprising). If you had sold out at the peak of each stocks trade (between purchase date and today) the portfolio would have netted $101,708 (of course selling at the absolute peak for each of the 18 companies is extremely unlikely).

The above figures include payment for, but no return from RBX which is currently suspended from trade (obviously some value may end up being drawn from that company as well).

Shares in this sort of market cap range are extremely risky. Many of these companies have small cash reserves and if they were not able to raise cash when required then they could quickly end up in administration. However with great risk comes the potential of great reward.


As many of you would know I am currently (mostly) out of the stock market, but I keep an eye out for opportunities and I think there is still plenty to be made from precious metal stocks in the medium term.

I will be starting a new virtual portfolio of Nano Cap precious metal stocks at some point in the near future (assuming we get the market correction that I am expecting), so keep an eye out for that. It's likely I will change the selection criteria slightly and will be more picky about the stocks I select (as opposed to the above list which was all those I could find on the ASX that met the criteria).



BB.

2 comments:

  1. SVL seems to be doing well these days with more good drilling results being released recently. I first read about them on this site so thanks for the headsup.

    Dimes

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  2. SVL is certainly worth a look. I sold at 35.5c after the study showed little profit based on $30 Silver price, but an expanded resource will help, as does the current lower share price. BB.

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