LONG SHOTS
John Gray. Canadian Business. Toronto: Summer 2005.Vol.78, Iss. 10; pg. 99, 1 pgs
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Abstract (Document Summary)
The recent commodity rally has not raised all the boats in the penny stock market. At
least not yet, says John Kaiser, publisher of Kaiser Bottom Fish, an online stock-picking
newsletter based in San Francisco, Calif., that concentrates on Canadian resource
stocks. The bears fear small junior companies will be left holding the bag once
commodity prices fall. The bulls, on the other hand, are convinced that increased
demand from China will keep commodity prices high-and ultimately push those penny
stocks higher, says Kaiser. One company poised for such a rally is Leeward Capital
Corp. - a stock that Kaiser personally holds - and is currently trading at around 30 cents
per share. Another resource company that could see a spike is Copper Fox Metals Inc.
Full Text (534 words)
Copyright Rogers Publishing Limited Summer 2005[Headnote]
Some penny stocks defy the odds
So you've done everything right for your portfolio. You've invested in those profitable
resource stocks, diversified with a bunch of stable, dividendgenerating companies and
even bought some boring old bonds. But what about gambling on a flyer? You know,
one of those "Hail Mary" penny stocks whose value can disappear in the blink of an eye
but, if the planets line up just right, maybe-just maybe-could hit it big and pay for the next
family vacation. It does happen. The shares of PetroKazakhstan Inc. (TSX: PKZ), the
Calgary-based producer of oil and gas in the former Soviet Union, reached a high of
more than $55 earlier this year, up from less than $4 just five years ago. A continuing
rally in commodity prices could see many other small Canadian companies experience
similar success.
The recent commodity rally has not raised all the boats in the penny stock market. At
least not yet, says John Kaiser, publisher of Kaiser Bottom Fish, an online stock-picking
newsletter based in San Francisco, Calif., that concentrates on Canadian resource
stocks. Many investors are still spooked by the Bre-X bogeyman, though some are
convinced that those high prices will last long enough for the junior exploration
companies to take advantage of the rally. "The market is still split between the cyclical
bears and the structural bulls," says Kaiser.
The bears fear small junior companies will be left holding the bag once commodity prices
fall. The bulls, on the other hand, are convinced that increased demand from China will
keep commodity prices high-and ultimately push those penny stocks higher, says Kaiser.
One company poised for such a rally is Calgary-based Leeward Capital Corp. (TSXV:
LWC)-a stock that Kaiser personally holds-and is currently trading at around 300 per
share. In addition to gold and diamond exploration, the company holds rights to a
potentially rich molybdenum deposit in northern British Columbia, near an existing "moly"
mine. Molybdenum prices have soared from about $3 per pound to about $30 in the past
two years alone. If the commodity price stays high-and if Leeward finds enough of the
metal-shareholders could make a tidy profit, says Kaiser.
Another resource company that could see a spike is Calgarybased Copper Fox Metals
Inc. (TSXV: COF.P). The base- and precious-metals exploration company is currently
trading at about 25¢ per share, but could go much higher if Chinese demand persists,
says Kaiser. "With the right news, it could easily trade at between $3 and $5 per share."
There are other cheap firms that actually generate revenue and have upside potential,
says Danny Deadlock, publisher of Microcap.com, an online newsletter. Montreal-based
Biophage Pharma (TSXV: BUG) is trading at about 130 per share, and supplements its
research with a revenue-generating testing lab. Biophage recently announced it has
developed a biosensor that detects bacteria in drinking water. If it can commercialize the
technology, its stock could take off, says Deadlock.
Even among firms that generate revenue, picking penny stocks is less like investing and
more like educated gambling. You can make a lot of money betting on the long shot.
You just have to love the risk as much as the potential reward. JOHN GRAY