Wednesday, 24 June 2009

Small "Cap" Corner

Some of my recent trading has been into smaller caps than I used to try with. These are much higher risk investments than others, so I try to keep the sums down to a few hundred in each one. My worst one managed to lose me 75% of money money in a few days!
On the other hand, African Copper made 300% in a few days a month or two later, so what goes round comes round.

Most small cap stocks on AIM or the FTSE main market are total dogs, the key is trying to find the few who are not. In addition, because of the very small amount of shares available, there are big pump and dump operations built up to screw private investors by persuading them to buy into an already overpriced stock.

Finally, the market makers hold a whip hand with so few shares and little volume available; they can to some extent manipulate the price of shares for their own profits.

All the above should serve as a warning that investing in small caps is just gambling, hence the need to keep stakes low. However, below are some of the companies I have either investments in or are on my watch list:

African Eagle Resources - This company has discovered a huge mine in Africa and is looking to confirm in the near future its potential. Plus it has the benefit of being well connected to transport which makes the mine viable, unlike many other African projects. The share price is currently 9p, although this week has been very volatile as investors await news on the quality of the find.
African Copper - An African company that owns a mine which it is looking to try to re-open after flooding, it currently has secured financing and if and when the mine opens the shares valuation will be much higher than the current 6p. This share has been pumped and dumped, so maybe wait until the price finds its new level before buying in.

Braemore Resources - This company has run out of money developing mining technology and could well go bust. Hence a share price of 3.5p. However, there are known to be several suitors for its leading technology - will they buy the company or just the technology from the administrators? One for the very brave only!

Heritage Oil - OK, so this is quite a big company now, but it was not a few months ago when i looked at it. With a huge oil find in Iraq, plus production too, this a a stable company. A recent announced merger with Turkish company Genel could propel it into the FTSE100. A share price of under £5 is a bargain.

Addax petroleum - Lots of M&A in the oil sector and this is another not so small firm about to get gobbled up by China or Indian state businesses. The share price has risen aplenty, but in my view there is still a decent premium from the £25 per share to an offer which should be roundabout £30. Short-term bet only this one.

Minerva - Property company with £600 million of debts, trying to re-finance and there should be an annoucement this week. At 13p per share it is priced to go bust, if they get the refi away then the share will go on a major rally, if not then it will head toward zero. Another one for the brave.

Right, I am always open to offers - anyone care to share their tips?

16 comments:

Anonymous said...

TRY,
PGD, GFM, CEY, MML, GGG, SOLG, NGL, POG, FML, AMI, CHL, EBG, CFM, CZA, ENK, AFE, FXPO, PVCS, ROM, CWP, AFR, TLW, HOIL, WSM, CYAN, IQE, GNG, VEL, RWA.

Do your own DD

Anonymous said...

Polo resources - trades heavily discounted to sum of the parts in uranium explorers. hit a wall near 5p last week now stabilising at 3.75pence.CEO Dattles has a past success...sold uramin to Areva.

CityUnslicker said...

re anon - Polo - what is the rights issue price?

other anon - the point is to help peopl out dy doing some here...

Steven_L said...

I'm playing long term at the moment. I'll probably want to replace my car in a couple of years so I'm looking towards that.

I've got Vodafone shares which I bought before they went ex-dividend and I've got long cfd positions in Voda and RSA on about 85% leverage.

I'm kicking myself for listening to the doom-mongers and putting a stop-loss on my Man Group stock a couple of months back (bought 198.5p, stopped out 222.8p now 276p and recently hit 300p) but I still think they are a good long-term buy, they go ex-dividend on 1st July so hurry!

I've started saving monthly in the new Odey absolute return fund (at last, long/short funds for the little guy!) and in the Ruffer total return fund. Best leave it to the pros I reckon. I'm also eyeing up the Octopus absolute return fund which has made a killing so far.

I might look to buy some cyclicals soon, perhaps DSG and another struggling retailer, although I haven't done any research yet, is Game Group going to survive?

CityUnslicker said...

SL - I bought some small man recently too - at 275.

No idea on game, I stay well away from retailing and transport - two long term dog sectors IMHO.

Today was a day - AFE have blown up as the news was not as good as expected whilst addax have an offer and we await a bid war.

dex said...

Think you're onto one with Heritage. Have been following them for the last couple of months from their low back in March. Actually quite suprised they weren't bought out and a merger was pulled off.

Reckon it could eb a little risky with their Iraq postion but reckon if they are able to fast track the stuff in Africa it could provide some good news.

Have always kept my eye on FOGL. If they ever manage to secure a rig and commit to a drillign shedule i reckon they are worth a punt. If you believe their press releases tehy are sitting on some pretty good potential and ir eckon all it would need is some positive notices that they have hit something for the price to jump a fair bit. but like i said they need to secure a rig first.

Houdini said...

Empyrean Energy...ssshhhhhh :-)

dex said...

-Houdini , really about empyrean energy. went to their website. they haven't been all that successful. the stuff they are targeting in the states, aren't one hit wonders, you'll see if they are doing a good job when they start putting hundreds of holes in the ground, and the stuff in Germany is hardly huge either. its not like addax or heritage who are doing E&P in new basins.

Romilly Cocking said...

Sadly, I don't think Braemore own the technology the use; they license it from the South African Gov't. But they do have experience of applying it.

Anonymous said...

RNS Number : 8541U Braemore Resources PLC 01 July 2009


Braemore Resources Plc

("Braemore" or "the Company")

Braemore strengthens ConRoast technology position

Braemore Resources (AIM: BRR, JSE: BRE) is pleased to announce revisions to its ConRoast Technology Agreement with Mintek.

The revised ConRoast agreement further strengthens the technology partnership formed between Mintek and Braemore which provides for the commercial exploitation of the ConRoast technology through the smelting and refining of platinum group metals ("PGMs").

The amended agreement comes at an important juncture in Braemore's growth with the development phase drawing to a conclusion and plans for the accelerated commercialisation of the ConRoast technology.

Two key points within the amended agreement are as follows:


BRAEMORE PLATINUM HAS CONSOLIDATED ITS SOLE, EXCLUSIVE RIGHT TO USE AND COMMERCIALLY EXPLOIT THE CONROAST TECHNOLOGY WITHIN THE PGM INDUSTRY ON A GLOBAL BASIS.

AN EXTENSION OF THE EXCLUSIVITY PERIOD IS AVAILABLE TO BRAEMORE FOR THE LIFE OF THE CONROAST PATENTS WHICH EXPIRE IN 2020 AND CAN BE NOMINATED AT BRAEMORE' S ELECTION BY GIVING NOTICE PRIOR TO REACHING THE END OF THE CURRENT EXCLUSIVITY PERIOD.
Leon Coetzer, CEO of Braemore, commented, "This extension and continuing exclusivity reflects the considerable progress we have made and the results we have achieved to date in the development and application of the ConRoast technology. The revised agreement represents a strengthened foundation from which to accelerate the commercialisation of the technology through further partnerships or joint ventures with PGM producers."

Enquiries:

Braemore Resources Plc

Cris P said...

CityUnslicker,

Minerva looked like a good tip, and I've been digging around the numbers. Minerva is currently trading at 14p on a PBV of 0.69, based on their interim result balance sheet. This seems good value, until you look at their PBVs in previous years:

June 2003: 0.59
June 2004: 0.80
June 2005: 0.75
June 2006: 0.92
June 2007: 0.69
June 2008: 0.18

What makes you think that their PBV is going to increase dramatically from here?

Thanks!

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