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09:19
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Originally posted by MBG
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Hi Sulmar
Fair question. I don't think I can "enlighten" you but I can only make some reasonable guesses. So in no particular order:
Gold stocks are down generally. At a time when I see significant bubbles in other investments I think gold stocks generally are value buying at present. Nova is especially the case.
Gold stocks are very volatile compared to most other sectors. Peter Lynch says he likes volatility as this is how he makes his most lucrative investments - by buying when prices are low and don't reflect their true value this is how he gets his best returns.
With other gold shares I have seen significant improvements in a particular company's fundamentals but the share price does not move up correspondingly. Or if it does so, there is often a lag period before the market catches on. Put more simply, sentiment towards the company has not yet caught up with the fundamentals. This eventually turns. When the share price is depressed but fundamentals are good, astute investors invest on the fundamentals and not what the rest of the herd is doing.
Specifically in relation to Nova I think they have, at this point, done a first class job of developing the resource but I don't think their communication and management of expectations have been as good as investors would have liked. I believe this has not helped investor perception - you only have to read poster's comments on HC to see this. However there are indications that they will be trying to do this better. Gold explorers/developers are generally run by people with mining and technical knowledge - PR is not their strength, but there comes a point when the fundamentals just speak for themselves. I think we are at this point.
I think because the gold sector tends to attract a disproportionate number of traders looking for a quick return on their investment dollar, they become impatient and disgruntled much more rapidly than the investors with an eye to the long term. Delays on promised timelines cause them to become cheesed off, grumble on HC (repeatedly) and many of them sell off to chase quick returns elsewhere. This does not help the share price.
Delays are endemic in most industries at present but especially in this sector. However management need to better manage expectations in relation to this, which I think they are trying to do. I should also point out that investors are best served by making decisions based on the big picture developments not on the day-to-day delays and frustrations. I believe the big picture for Nova is very positive.
Hope my thoughts are of some benefit.
MBG
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Thought it might be a good time to post Warren Buffet's Top 7 rules, from his latest video..
(20min delay)