Wednesday 4 October 2017

WTF? (Why The Fall) - Golden Queen Mining

The junior mining sector can be enigmatic.  Shares of Golden Queen Mining (TSX:GQM / OTC:GQMNF) closed yesterday at $0.57 and the stock trades an average of 57,000 shares a day on the TSX.  Without any news, or at least anything formally disclosed, the stock opened this morning at $0.33, down 42%!  At 1:01pm EDT, the company issued a release indicating that there is no undisclosed information.  The stock finished the day at $0.41, down 28%, with over six million shares trading hands in Canada and 6.9 million shares in the US, roughly 80 times the average daily volume.  WTF?
One rumor I heard is that a newsletter writer was responsible with a sell recommendation.  The chart below shows the GQM share price for the past two years.  If the massive sell-off today was due to a newsletter writer's recommendation and you are a subscriber, ask yourself if you really should follow his or her advice on small cap stocks with limited liquidity.  You'll overpay to establish the position and you'll get crushed when the herd heads for the exit, which may explain the action today.  This type of market action also shakes the confidence of other investors who are left wondering if there is something they are missing.  The Golden Queen is looking rather tarnished!

Let this also be a lesson for the investors who repeatedly tell me that my clients should get more newsletter writers involved.  Sure, the extra buying is great, but newsletter followers don't tend to be long-term investors and seeing them sell is not so much fun or, as GQM saw today, can be very destructive.

Trying to Build a 10-Bagger

Evolve or Die This blog started as an experiment when I was toying with the idea of starting a mining newsletter.  I figured that if I was r...