A $200 plunge in the price of gold over two days in April heightened fears that more miners will be forced to write down the value of their reserves.SEAN KILPATRICK/The Canadian Press
Insiders continue to snap up Canadian junior mining stocks - though their enthusiasm may be waning a bit as the gold sector rebounds from depressed levels.
INK Research's Venture Indicator this week is close to 500 per cent, meaning there are five stocks with key insider buying for every one with selling. This spring, the indicator rose to more than 800 per cent as both the S&P/TSX Venture composite index and gold prices were hitting multi-year lows.
"In July and August, it was a lot easier to find junior miners trading near cash value per share," Ted Dixon, CEO of INK Research, which monitors the buying and selling of shares by officers and executives within their own business, told Inside the Market. "Those bargains are much harder to find now as insiders and other value-oriented investors snapped them up."
"That doesn't mean the rally has to stall. While some bargains may still be found, we will eventually need growth and sentiment driven investors to participate in order to fuel junior stock prices higher."
Insiders tend to be value-oriented and early when it comes to executing trades, so investors may be wise to follow their moves with a bit of a lag, rather than moving in lockstep.
But the next leg up may very well depend on growth investors and their perceptions of whether gold and junior miners can grow for the longer term into profitable businesses, suggests Mr. Dixon.
INK's indicators are calculated by taking the number of companies with buy-only transactions involving officers and directors and dividing them by companies with sell-only transactions in the public market over the last 60 days.
We'll be continuing to follow the latest actions of insiders in the junior mining sector in the weeks ahead at Inside the Market.
Darcy Keith