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Some of the most exciting stock market news of recent times has been the performance of mining stocks. Companies that mine precious metals, and other natural resources, represent some of the best investments anyway, but they are one of the biggest stories in stock market news as they are wildly benefitting from the huge increases in spot metal prices, and they are among the best stocks to buy now. Such companies often have relatively fixed production costs, so increased metal prices add nicely to the bottom line and rapidly grow what’s known as the internal rate of return. In their own right, exploration companies benefit as they locate some of the best resource deposits on the planet, making them some of the best stocks to buy.
Stock Market News When Little-Known Companies Make It Big
As alluded to, the companies leading the stock market new are both exploration companies, known as junior resource companies, and the larger producers. Invariably, you’ll find the biggest, legendary winners amongst the explorers. This is simply because these companies are largely unknown to the bulk of the investing public.
Money managers really cannot even pay much attention to them, as they cannot invest in them. Many money managers are prohibited from getting involved in companies with such small market cap. Even if they could invest in them, they would have a difficult time getting a large enough position. And the bid-ask spread can be wide, leading to wild price swings and much higher prices quickly. Moreover, even assuming there was a large stake in such a small company, getting out could be difficult where stocks are thinly traded. So, long story short, these oft-undiscovered stocks are great potential profit rockets when news is favorable.
Keep in mind, of course, that the big winners are the ones that make stock market news, but there are plenty of losers along the way too. You cannot get that king of leverage to potentially benefit you without some risk. Once the companies are up and producing metal, they are old news. The goal is to grab companies with the best chance of success, be it based on the ground they are exploring, the management at the helm, the cash on hand to weather the storms of bad results or otherwise.
Stock Market News Makers – Finding Tomorrow’s Stories Today
If you want to be a part of the stories that are making stock market news, there are a few bits of advice that can help. It takes a bit of research to sleuth out all the details, so you either want to prepare to do this yourself or else hire it out in some fashion. You can find a respectable newsletter, research service, or other advisory.
Either way, there are some factors that help stack the deck in your favor. For one, you’ll want to look out for companies that have several pieces of ground to poke holes on. A company with diverse properties stands a good chance of finding one that works out. In addition to having multiple properties, you can also find properties that are likely laden with a broad basket of goodies. For instance, you might have ground that’s likely to have both base and precious metals. In these instances, you benefit from a diversity of material to sell into the marketplace. It’s also beneficial because you can often process additional metals less expensively as by-products.
Stock Market News When Joint Ventures Are Formed
One of the most exciting nuggets of stock market news is what has to do with mining companies engaging in joint ventures. In many cases, the mining cycle is quite segregated. What this means is that exploration companies often remain exploration companies. If they discover an economically feasible plot of ground, it’s not uncommon for them to either sell out for a nice profit, or else to engage in a joint venture.
Stock market news of a joint venture can be a strong indication that something is brewing beneath the scenes. On the one hand, you have the validation of a second company that believes in what it sees so far as potential. On the other hand, you now have the vested interest of not one, but two different companies vying for the success of the project. Note that an extreme version of a joint venture would involve companies pairing up at the initial, exploration stage. This type of unified effort would signal strong belief in the ground being scouted.
Merely hearing stock market news about a joint venture, of course, is not enough to signal unqualified good news. It’s worth the time it takes to look into the terms of a joint venture. You want to make sure the deal isn’t skewed too far against your chosen company. Assuming all checks out, however, joint ventures can do fantastic things to share prices. The market, at least in time, will reward the news of the joint venture. What you have to watch out for, of course, is buying into a stock that has run up too far too fast. When this happens, you could see the stock pull back. Whether for profit-taking or otherwise, you could end up upside down on the position, at least for a while. Similarly, if future profits have been priced into the stock’s price, you could sit on the play for a period of time before it moves appreciably.
Stock Market News When Joint Ventures Are Absent
While the joint ventures can signal excellent forecasts for the company’s future, the avoidance of a joint venture could be even better. If prospective joint venture partners are turning down an explorer, that might not be good. By contrast, if an explorer is declining offers from larger development companies and producers, this can be extraordinary news. At times, a company will find a once in a lifetime deposit of minerals. When this happens, well-funded companies may choose to retain the ground and matriculate through the mining cycle on their own. Even if a company lacks funding, exceptional drill results can made it much easier to find the funds to move forward without selling the farm. In any event, companies in this position can simply continue to develop the project and hold out for higher prices if nothing else.
Stock market news of this type is not as common. Plus, to further show why using a trusted advisor is so key, there are also times when things are not what they seem. At various points in the economic cycle, cash is less available. So, when you think you’ve found a company that is going solo in pursuit of the best thing since sliced bread, it could only represent an average deposit. In actual fact, it may be that money is tight in the joint venture market. Joint venture offers may be scarce, or they may be too lean. The take home message is that stock market news of a joint venture, or lack thereof, can signal many different things, so a trained eye is needed to assess what role it plays in the current desirability of explosive resource stocks.
