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Pumpers & Probabilities
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@wtibull is well known among EFT & COM for his trenchant humour. He’s a favourite follow of mine, not just for his sharp takes on the energy industry, but usually he succeeds in making me laugh at least twice a day. His tweet today regarding “investment advice” was one that everyone should take some time to consider.

Several companies that I have invested in were names that I had seen discussed on social media. Information is abundant and sometimes FOMO can be a real struggle, even for experienced investors. I wrote about the dangers of blindly following suggestions without performing proper due diligence in my August 6th Commonstock post, “O’Hare & the 80%” (link below). However, between WTI’s clever tweet & numerous questions I have had posed to me lately, I felt the topic was certainly deserving of another post.

If you invest in the junior mining sector, I hope you don’t have to learn the hard way – because I did, and painful lessons are the ones you remember the most. It’s great to discover interesting opportunities but no one wants to get burned and I’m hoping this information will improve your odds of success. (Not investment advice) 😉



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Occasionally I am shocked and dismayed to meet an investor who is unaware of the infamous “Pump & Dump”. If you are such an individual, please read Investopedia’s article on it and do the best you can to familiarize yourself with the scheme:

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We all like to talk about our investments and discuss them with others or we wouldn’t be here. I often feel like trading without Twitter & Commonstock would have been a completely different and less positive experience for me – not nearly as entertaining and likely not as profitable. Unfortunately, there are dangers that lurk, it's up to us to spot them and we all need to accept personal responsibility when we hit the buy or sell button.


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If 43% of the world's public mining companies are listed on the TSX/TSX-V and extractive industries are the most prone to corruption, you can see that statistically there is a need for extra vigilance here.

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Here are my TOP 10 suggestions for avoiding the traps that many easily fall for:

  1. Work under the assumption, correct or not, that 90% of the juniors you are considering are “lifestyle companies” (see below). Work hard to find the 10%.
  2. Use SEDI. Religiously.
  3. Read this: https://www.cruxinvestor.com/articles/junior-mining-companies-failure
  4. Use SEDI. Religiously.
  5. Keep a database of both reputable and disreputable names and ensure you consult it before you invest. This includes names of management as well as social media accounts prone to suggesting poor investments.
  6. Use SEDI. Religiously.
  7. Note tweets that use triple tickers. If I tweet about a stock, I won’t be including its OTC ticker or American counterpart.
  8. View chat board negatives as a positive. Lots of stock promoters lurk on chat boards and do some vigorous cheerleading. Ignore the positives and focus on negative comments that can raise red flags.
  9. Watch for press releases that include LOI’s or MOU’s that state they are non-binding. If it’s not legally binding, it is not worth the paper it is written on.
  10. If insiders are selling, then you need to seriously consider selling too. If they aren’t a believer in the future of the company then why are you?

What’s a lifestyle company?
Basically it’s one where management is living off of shareholders’ money. They’re easy to spot because they frequently grant themselves options and then sell shares on the public market at a higher price. I understand the argument regarding the value of executive compensation or occasional personal expenses, such as a new home. However, “lifestyle company” often includes management where this becomes a regular practice – and not just at one company but at several.

See my post regarding SEDI here:


Have you ever seen something and once your eyes have been opened, you can’t unsee it?

Like the arrow in the FedEx logo?

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Or Cookie Monster hiding in this religious icon?

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Once your eyes have seen the telltale signs of a P&D, it’s very hard to unsee. By learning what to spot, your probability of success is significantly improved.

Best of luck with your investments, I’m happy to share ideas but none of it should be construed as investment advice.

Cheers!

Jennifer's avatar
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