TSX Venture Exchange Full of Opportunity!

TSX Venture Exchange Full of Opportunity!

By VultureAlert.com

Yes, you read correctly! The TSX Venture Exchange is full of investment opportunities...just watch out a pick carefully! This exchange has lost all of its past 5 year gains and then some! In November of 2003 the exchange was just above the 1600 point mark and today its not much more than 900 points after recently hitting the 800 point mark. With the little bear market rally and Obama love-in we all had last week it immediately bounced up from 800 to 975. Recoveries always seem faster than the slides downward which seem painfully long! 

The TSX Venture exchange is mostly made up of mining juniors and these have faced huge problems due to the credit crunch. Mining juniors do all the exploration and discovery dirty work for the intermediates and majors not a good business model when there is not credit to turn a discovery into a mine! As a consequence, these juniors have faced a huge deleveraging leaving many of these once over-inflated companies at between 2 to 10 centsand at all time lows. There are even a number of juniors trading at large discounts to cash, some as much as 50% or 60% below breakup value!

If you are a patient investor, and who isn't in these markets? Then there are abundant opportunities available in this exchange and within the junior mining sector. Focus on:

• Cash is KING! Make sure companies have at least 2 years worth of capital and that they have reduced their burn rates
• Management! Focus on companies where management has a track record of success and has been through a few market cycles
• M&A Activity! You'll know where the bottom is once you start seeing more activity on the Merger and Acquisition side. Investment bankers are done as frar as equity deals right now so they have refocused their attention on M&A. The activity is just starting to heat up so don't rush out and buy all your positions today!  
• Assets! Looks for companies that have good projects, projects that may be able to entice a major. That means they have to be big, high-grade and completely out of favour right now OR they have to be very economically robust with low cap-costs (under $75M)! With commodity prices in the toilet, economics play an even more important role and the only projects that will see production are those that have high grades and large annual output or those that have extremely low capital costs.
• Volume! Be very careful when acquiring your position. You don't want to be the only buyer of a stock, acquiring a postion that you won't be able to easy unwind. That is why so many hedge funds when out of business...lack of liquidity! Focus on acquiring positions that don't exceed 1 days average volume. You don't want to own 1 million shares of a company that only trades 20,000 shares per day!

Eventually, as the credit markets thaw out and projects can again be financed, you should be sitting pretty with a nice combination of stocks with cash, projects and the management needed to do deals.

Thanks,

VultureAlert.com