We must say it again: Today’s investors must recognize that we no longer have the comprehensive brokerage house research support for stocks as in the past; research has declined for over thirty years and that lack of analysis continues. Why? For one reason because the spreads between stocks’ bid and offer prices have become so narrow that the brokerage houses’ and banks’ market makers’ profits are minimal if not totally non-existent. The profitable wide spreads in the past paid for research and provided capital for brokerage houses’ market makers to support their stocks and trading. Gone! Thus computerized trading coupled with today’s tiny spreads between the bids and offers shattered the profitability of “making markets” by market makers. Those “now lost profits” did provide enormous support for research and provided trading capital for years.  

The key to understanding the present situation is this: In the past, we saw market makers often holding 200,000 to more than 500,000 shares and often more of the small caps and junior mining stocks that they made markets in. It was normal to keep $20,000-$50,000 worth of stocks individually and often more in total inventory. Brokerage analysts’ research reports would at the same time recommend the stocks for investors and hold inventory in the shares. Yes brokerages and market makers often have shares being bought by investors.   

Today our research still finds many precious metals and resource stocks that are at prices that may be exceptionally undervalued. Investors can take advantage by accumulating stocks that research indicates as undervalued. Lack of market maker buying support coupled with the fact that research coverage is almost non-existent for small caps creates extraordinary opportunities. Today many stocks drop to price levels that are far below their bottoming price levels of the past. The lack of market maker buying support makes declines even larger.

Since today there is very limited research coverage for most companies, investors are generally unaware of many undervalued stocks. At present, investors typically see the same narrow universe of stocks that the brokerage houses recommend. Few are undervalued…very few!  That is not going to change. Investors should look for other sources of investment information and research. There are numerous research sites available covering the metals and mining industry and many are free. We like to regularly review the officers buying and selling of their own companies’ shares.For many companies insider reports are the only research reports available.

Unlike the industreal stock market that has shown heavy insider selling, the Canadian mining stocks show heavy buying and ownership with little selling.

Our research indicates and we believe that many stocks in Canada and the US offer the potential for exceptonal capital gains. The most undervalued sector would be the precious metals and many of the mining stocks.