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Time to get Sirius

Thursday, August 16, 2012
The recent stellar performance of Sirius Resources from 5.7 cents to yesterday’s high of $1.25 has shown there is plenty of life left in the junior exploration sector.

Not only do we now know that major hits will be rewarded, the best news is that the fear of missing out (FOMO) is also alive and well and when you throw in greed I think it spells recovery.

Based on the lack of movement in base and precious metals sectors a regional mini-bubble was always going to be one of the favourites when it came to a catalyst.

With the amount of high risk/high reward drilling a number of my covered companies are undertaking or planning it would have been nice for one of them to take the lead but regardless of this I have been watching the Sirius story unfold and mentioned to a client advisor that it felt like a repeat of what occurred at Ventnor Resources in August 2011.

The two most profitable phases for junior resource investors includes the initial discovery excitement and the final ramp up phase towards production.

Buying at the height of the exploration madness may turn out to be profitable but it can be a perfectly good waste of three to five years of your investment career.

Those buying Sirius now are exposed to a number of risks as the fact remains there is considerable work ahead and, as we have seen this week, the company will have to go back to the market in the short-term.

The trading conditions also become far more dangerous and despite the massive rise I am sure that many day and short-term traders would have been stopped out along the way and some on the first day of the release when the stock touched a low of 19c.

I have no idea how high Sirius could go before the frenzy settles down and even though I would have loved to have held some (Sirius was the old Croesus so many of us would have held it at some stage prior to administration and the recon) I do not feel the urge to start chasing it either.

 

Source: Sirius company presentation

Over time I have learnt to become less anxious about intra-day price movements and buying a stock in the hope that it goes higher straight away is only going to lead to future bad habits that are very difficult to turn around. (From my experience as a broker).

Sirius’ success and the implications will go well beyond the lucky shareholders and management/technical team that must feel as chuffed as the South Australian who won $50 million in powerball last week.

Although, I have been involved in a number of major growth stories since, I will still never forget the day that Ramelius announced 48 metres at 152 grams per tonne gold and my clients were holding a sizeable chunk of the company at the time.

For some who braved the savage tax loss selling of June 2004 and didn’t watch the stock every few minutes the ultimate reward was six cents to a return greater than $3.00 per share with bonus options, capital return and a dividend.
 
I have noticed that in some of my recent commentary I may have been guilty of overusing the “Multiple share price upside” stamp just like mining companies wore out the “We are seeking new investment opportunities in the technology sector to enhance shareholder value” during the Dotcom bubble or “Olympic Dam” style target when interest returned.

When perfectly sounds stocks are being belted (especially the ones you hold) it isn’t hard to let the market get to you, however you learn to either switch of the computer, buy where possible or do nothing.

Over the last week or so not only have I been reminiscing about the ten-baggers of old but I have also been breaking down a number of stocks and am stunned at the value I am now seeing.

I tend to make plenty of noise in the early stages of the recovery and am now asking other market participants, to steal a line from Lara, “Where the bloody hell are ya?”.
 
Regards
 

Tony Locantro