There was a time when I was a big commodity bull.
Now just to clarify, I am still somewhat of a commodity bull. I like some oil stocks, I like a gold stock or two, I think natural gas is going to surprise to the upside and I’m looking at the lumber stocks. But there was a time, back in 2004 and 2005 and even 2006 when I was a real China growth story commodity bull. I was all about copper and zinc and nickel and demand for those metals from China.
Well that was another time but there are lessons to be learned. Here is an anecdote that has relevance today. Around the end of 2004 I was trying to figure out if I should get into Aur Resources. Aur was a Canadian stock mined copper in Chile. I remember it was around this time of year that I was looking at the stock, and it had just moved higher yet again. So I liked what I saw about the company, and I really liked the idea that we were near the beginning of a super-cycle in the base metals, but there was this problem – the stocks had jumped significantly. Aur Resources was a $2 stock that had quickly become a $6 stock in the past year.
And what’s more, the insiders were selling.
I remember this, because at the time I was pretty new to investing and from what I had read insider selling was a really bad red flag. If the insiders didn’t want the stock, and I mean they knew everything there was to know right, there must be a disaster around the corner.
I don’t have all the statistics from 2004, but here is a list of insider sales I dug up from January 2005, available from the Northern Miner. Take a look; its mining company after mining company, some of them with directors and executives selling hundreds of thousands or millions of dollars worth of shares. It was a rush to the exit. There is Aur Resources, along with other names like Inmet Mining, Teck Cominco, Inco and so on, all with big sales. Read more
Reminiscences of a Stockblogger 