It's the wild, wild west of investing in Canada. Some say it's Las Vegas - without the cocktails.
And that's why many investors shun the TSX Venture, Canada's junior exchange.
Yet with its 2,218 listings and heavy weighting in energy and mining stocks, the Venture is where the action is for active traders, not the TSX senior exchange.
And statistics show that this is what more and more traders are discovering. Trading on the Venture is on an upswing. In March, 2.4 billion shares were traded there, and the total value of those transactions was $2 billion. Both represent almost a 50-per-cent increase from the same period a year ago.
In the first quarter of this year, 6.4 billion shares worth a total of $4.8 billion traded on the Venture, and equity financings for Venture companies during that period totalled $1.27 billion.
There's no doubt that microcap stocks on the Venture generally come with greater risk than stocks on the TSX. Yet, the Venture is actually tame compared to the notorious U.S. penny-stock exchange, the Over The Counter Bulletin Board. That's Las Vegas WITH cocktails - Molotov cocktails.
Sure, the Venture has had its share of scams, such as the VisuaLabs scandal, but if you're scouting for stocks with home-run potential, it's the place to go. I can't remember a TSX 10-bagger (stocks that go up 10-fold), but the Venture has had several in recent years and numerous Venture stocks have graduated to the TSX.
Of course, traders swinging for the fences should remember the old mantra that you shouldn't marry a stock - especially a microcap.
In fact, just going steady with a microcap or small-cap stock can be treacherous, so the key is to lock in some profits from those huge gainers that are always just one press release away from a nasty crash.
The Venture has been the home to some of the most compelling stories in recent years.
For example, check out the phenomenal story of CV Technologies (CVQ), the manufacturer of Cold-fX flu/cold products. The Calgary company has seen its stock rocket from a nickel to $3.75, a 75-bagger, in just over two years (it's now at $2.65). This is a real company, with Don Cherry as a pitchman to boot.
Then, there's another Alberta-based Venture play that has been drawing national attention and envy from TSX traders. That's Tyler Resources (TYS), a sizzling copper play that zoomed from 10 cents to $2 in a one-year span, a 10-bagger (it's now at $1.65, which proves how volatile these stocks can be). But that's only one of numerous resource plays that have chalked up obscene returns.
On a recent trading day, there were a measly eight stocks on the entire TSX that moved up 10 per cent or more on decent volume (50,000 or more shares).
That's hardly an inspiration to those who day-trade or swing trade the markets. On the same day, there were 43 Venture stocks that rose 10 per cent or more with volume of at least 50,000 shares.
If you scan the top 10 winners in Canada this year, all but one are Venture stocks. The lone TSX stock to crack the top 10 was Epic Data (EKD).
These days, a TSX trader can't even get a decent dead-cat bounce out of the old TSX Mexican jumping bean, Nortel Networks (NT).
A couple of months ago, your sanity would have come into question if you'd bought shares in a sleepy mining play called Newmex Minerals (NMM).
But now Jed Clampett's banker, Mr. Drysdale, wants to talk to you, and here's why. Year to date, in just over three months, Calgary-based Newmex is up 829 per cent for the biggest gain of the year in Canada, largely on speculation. The only news the company has had this year has been on financings and executive and board announcements.
Just when you thought all the dot-coms were dead and buried, here comes a red-hot Venture play called iFuture.com (IFU). So what's the big deal with iFuture.com? If you go to the website, iFuture is trumpeting its relationship with Eugenia Last, the renowned astrologist.
But I doubt if even Last could have foreseen iFuture's stock shooting to the stars for a year-to-date return of 775 per cent.
This company's also based in Toronto, which shows Venture CEO Linda Hohol has been making some headway in her mission to garner interest from the East in the junior exchange.
Just when you thought you'd seen it all on the Venture, along comes a company that makes bibs and money.
Not just any kind of bibs but Tidy Turtle baby bibs and, according to an A.C. Neilson survey, the best- selling washable bibs in U.S. supermarkets.
That's Priva Inc., a Montreal-based bib-maker that has seen its stock clean up with a 725-per-cent return this year. Yet, the company still is a million miles off Bay Street's radar screen.
On the Venture, sometimes you can never be sure exactly what you're buying into and, if you loaded up on shares in Patent Enforcement and Royalties (PAL), you probably don't care anyway.
PAL wasn't exactly lighting it up in the patent enforcement business, so the company lit a fire under its stock by acquiring a molybdenum mining property just in time to ride a wave of molybdenum market mania.
Since the start of the year, PAL is up 637 per cent and, just in case you were wondering, it is changing its name to Blue Pearl Mining. But why mess with a good thing?
Another hot Venture play, H2O Entertainment (HTO.H) is "currently inactive," according to the company snapshot at Globeinvestor.com. But that hasn't stopped the stock from shooting to a nickel for a 400-per-cent return this year.
On an H2O chatboard, a lonely poster is continually asking questions.
"Is this price increase justified?" "Who would be buying this stock?" "Why is this stock even trading?" Such is life on the Venture.
Many questions.
Few answers.
And oodles of action. TSX traders, eat your hearts out.
* SAGE WORDS: "Of course stocks are risky. Nowhere is it written that a stock owes us anything, as it's been proven to me on hundreds of sorry occasions."
- Peter Lynch, legendary fund manager in his first book, One Up On Wall Street.
HOT STOCK: TIR Systems
TSX:TIR $2.60
Up 50 cents (+23.5%) on 1.18 million shares (based on Canadian stocks over $1 for week ending April 15)
Hey, who said everything went down? Amid the carnage on a horrendous red-letter week on the TSX, we managed to unearth an obscure small cap that was actually going up. Burnaby-based TIR rallied on the unveiling of its high-tech lighting system at a trade show, but still couldn't sustain any momentum. After shooting up 50 per cent on the news, the shares settled back on profit taking.
COLD STOCK: UEX Corporation
TSX:UEX $1.40
Down 69 cents (-33.0%) on 14.28 million shares (based on Canadian stocks over $1 for week ending April 15)
That flaming love affair with sexy uranium plays has cooled. But UEX shareholders just plain dumped the stock on massive volume, raising concerns that this may be much more than a sector correction. UEX is now a whopping 60 per cent off its March high of $3.60. Of course, if you were picking away at this one at a dime in 2003, you're still sitting pretty.
(Gyle Konotopetz can be reached at gyle@businessedge.ca)
