a few trading rules/observations, page-2

gizard, nicely put, great rules, +tu

can I add some extra mining stock info

this is a excerpt from and interview with Stuart Baker, head of macbank mining/resources research
( http://whatheheckaboom.wordpress.com/ )

Picking Mining Stocks

Small companies

- For small companies, if they have a good ore body but they do not have the expertise to build and operate, they need to engage consultants or do a JV, and they have a good chance to be taken over (e.g. Anaconda). The time to get out is before they turn on the plant. Any cash flows if not returned will be burnt.

- The prices for single-mine start-ups peak 3-6 months before the mine starts producing. That is when the analysts have written their research and big funds have bought the stock. You buy on a bet and sell into the certainty.
Don’t buy a company when they are about to start production and there is lots of hype.

- For a small company to go to the next level, they need to invest seriously to grow their staff’s operational and production skill sets, and exploration capabilities. Or they can choose to exit. If they continue to explore without building up, they will destroy capital.

Speculative companies

- There will always be stories of a company that is going to drill a batch of wells, and backed by an NTA of say $1, which you can buy for 80 cents. If you make 20% in a week, don’t buy more, sell. Regardless of the NTA, it will go back to 80 cents less whatever they spent.

- Know where absolute, not relative, value exists.