As gold, silver and many commodities continue higher the shares of the penny stocks traded on the Toronto Venture Exchange are starting to explode.
Many investors have some of these penny stocks in their portfolio and some have probably been held for a long time and some have not recovered from the meltdown in 2008. We like to say the boat is starting to float and even the dogs and cats are beginning to rise.
Some would define a penny stock as one that is selling for less than $5.00. Frankly, we would define a penny share as shares selling for $1.00 or less. Traditional investors watching CNBC would think it insane to purchase penny stocks but if investors do their homework they can still find some excellent values. Your selection process should always include the quality of management, location of properties, insider buying or selling, etc. This is not that difficult but does take some time to accumulate this information.
To get a handle on how penny stocks are performing we like to look at the CDNX, the Venture Composite Index.
The first chart below shows that the Venture stocks are performing well and the second chart shows that we are still substantially below the highs reached in the first half of 2007.
The next chart shows Venture stocks outperforming the strong move in gold.
However, even with the strong move in the Venture stocks they are still lagging the HUI (Gold Bugs Index) and currently consolidating.
We are of the opinion this major move up will continue into the first of the year and investors still have time to capture some excellent gains.
We are being given the rare possibility of a once-in-a-lifetime-opportunity, what will you do with it?
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