Rick Honsinger provides on update on one of Al’s favorite companies, Formation Metals
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Hi Matthew,
I happen to personally agree with you.
Big Al
I read the press releases March 22. I personally think Formation made the right decision, for the reason Rick explains (to keep banks happy, since they’re lending rules are evolving with the last 4 years of muck), and because it buys flexibility in future financing, versus the terms of the bonds.
Obviously the markets didn’t agree with Rick or myself. You could have bought Formation for .52 cents last Thursday…a price I wasn’t sure would be available a month ago. Agree with Matthew…time to buy more.
I think the move to .52 had a lot to do with the weakness of the entire junior mining space. Formation is TSX listed (good!), but I think it is best compared to the S&P/TSX Venture Composite ($CDNX), which it tracks quite closely. The relationship has not broken down. I watch the action on the exchanges every day, and for the last couple of weeks, most of the buying has been passive. That is, the buyers have been sitting on their hands while sellers hit the bid.
I think the base we’re building is very constructive, as is the volume pattern. Volume on up days consistently exceeds the volume on down days. The big volume in November suggests that smart money has marked the bottom. Capital flows rule the price, not the other way around.
It’s also good to see that the options issued on December 5 to insiders have a strike price of 80 cents. Of course, higher would be better, but since they’re not at or in the money, they are “performance” options. This shows confidence on the part of the management that a higher share price is likely.
This stock needs to triple just to return to book value! New buyers are going to be very happy with their price. Are we the only ones here?
Mary-Ann, Scott and Rick continue to do a hell-of-a-job.
I am very glad to be working with them.
Big Al
Yep, I agree, this tracks the TSX, and that does help explain much of the drop. I’ve also noticed the volume as you say — increasing up days, and well below average in most down days. Now that the stock is OTCBB in the US, I think some slow awareness will build. It is like an early stage Molycorp, and low price point notwithstanding, I don’t know why someone hasn’t come and swallowed it up. I’d buy the entire company if I could.
To clarify for anyone else who might be reading, I noticed that Formation tracks the TSX Venture more closely than the senior TSX. The TSX has outperformed the TSX Venture since the beginning of the year. The Venture exchange, as the name implies, is composed of the smaller, more speculative issues. For increased credibility and visibility, I’m glad Formation trades on the senior exchange (.TO vs .V after the ticker symbol).
The risk/reward profile of Formation Metals is fantastic in my opinion.
I own it and might own more soon.