Loading ...Another contrarian indicator is the negative sentiment connected to the GDXJ ETF. Adam Hamilton wrote a non- compelling critique of GDXJ and made the assertion that GDXJ was diverting the flow of capital away from junior companies that deserve to get funding. The problem with this analysis is that retail investor buying of junior mining stocks on the secondary market is not a source of capital for junior mining companies. The secondary trading of stocks is not a source of capital for any stock, for that matter. ETFs are a “derivative” of the secondary trading market and thus are also not a source of capital for companies.
Junior mining stocks get their capital from new share issuance or from direct investment by strategic investors. If Hamilton bothered to call on the companies themselves rather than take quarterly filings and throw numbers into a spreadsheet as his primary tool of analysis, he would discover that many junior exploration CEO’s would tell him that they are getting a lot interest from strategic investors. Furthermore, many junior mining companies with investment-worthy stories are having no problem raising capital through primary share-issuance, notwithstanding the recent turmoil connected to GDXJ. GDXJ is a derivative security. Derivatives are a source of fees for their issuer/sponsors, not a capital raising conduit for companies.
The Mining Stock Journal focuses on the emerging junior exploration mining companies that are seeing an elevated level of investment interest from sophisticated private investment funds and from strategic investors. These are the stocks that offer the greatest upside- potential in the junior segment of the sector – not the larger-cap, developed companies in the GDXJ Trust. The latest issue features a company with a potentially prolific gold property that is in negotiations with a strategic investor. Two juniors featured in the Mining Stock Journal were acquired recently. Looking at companies one-by-one, not en masse, is how you find the potential home run stocks. You can learn more about investing in these opportunities here: Mining Stock Journal information.