Looking Forward
by Lawrence Roulston | December 15, 2008
PrintFacing the worst financial crisis in decades, it's difficult to know exactly what to do. Forced liquidations and panic selling resulting from the financial crisis have brought stock prices around the world down by 50% or more. Resource companies are the biggest victims of the economic chaos, especially the juniors. Many companies in that sector have seen their share prices tumble by more than 90%.
Investors in junior resource companies facing margin calls, along with funds facing redemptions, are pushing shares onto markets with few or no buyers. The collapsing price levels have led many investors to simply dump their shares, adding further pressure to markets that have already been wiped out.
The resulting severely depressed share prices bear no relation to any sort of fundamental value. One list shows 118 junior resource companies trading at less than cash value. In addition to buying cash at a discount, investors in many of those companies also get gold or other metal deposits and a committed management team.
As painful as the past few months have been, all we can do at this time is look forward. Almost all of the companies in the sector have been sold down to absurdly low levels. In the rubble of that destroyed industry are many companies that represent outstanding value. Our focus now is to sift through the rubble and identify those companies that are most likely to rebound quickly.
It may be some time yet before the economy is on a firm uptrend. Long before that time, many of the companies that have been so badly oversold will begin to rebound. For those investors with sufficient nerve, this dark time represents a chance to buy shares in good companies at extremely attractive prices.
Copyright © 2008 Lawrence Roulston
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Lawrence Roulston, editor of Resource Opportunities, is a geologist, with engineering and business training, and more than 20 years of hands-on experience in the resource industry. Lawrence conducts frequent property visits as part of his due diligence and has toured mining and exploration projects in many parts of the world. Lawrence is frequently quoted and interviewed in the media, including national television. He is renowned as a headline speaker at mining and investment conferences around the world. Mr. Roulston's years of hands-on experience and extensive personal contacts in the industry provide unique insights that have generated an impressive track record for Resource Opportunities.
After completing his studies at the University of British Columbia in 1975, Mr. Roulston worked as an analyst for the major mining company Cominco Ltd. He also worked in a management role for several years with a mid-sized Calgary oil group. In 1984 he became the vice-president of a group of mineral exploration companies. He was also vice-president of an investment management firm focused on the resource industry. From 1994 to 1997, he was president and CEO of a mineral exploration company. Since then, he has been a resource industry consultant and independent mining analyst. He began writing Resource Opportunities in 1998.
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Lawrence Roulston | Vancouver, Canada | Website
