Having bought my first stock when I was just a teenager, I can honestly say that, despite numerous stocks I have owned since then, none have had a situation quite like the one I (and other Teranga Gold shareholders) find myself in.
First, let me note that I became a Teranga Gold (TGCDD $2.25) shareholder when Teranga acquired a company I previously owned, Oromin Exploration. Normally I sell when a stock of mine receives a takeover bid, but I felt the new company was worthy to hold. I still do, but it’s been anything but easy to hold these last few months.
What has made it so challenging this time around is the fact (at least in my eyes) that I can’t contribute any legitimate bearish corporate factor for the sharp sell-off. In fact, as the CEO has stated both publicly and in recent conversations with me, the corporate outlook is very positive.
So why then is the share price down near its 52-week low?
IMHO, this article sheds great light on why. For several weeks now, the investment community has been all over the place on how this could play out and essentially there has been a “buyer’s strike”. None of the scenarios concluded a good period for any of these stocks, including Teranga Gold.
The additional factor, that the company went through a “much needed” share consolidation, only added to the share price pressure because 9 out of 10 times, a share price consolidation is done during a company’s weakest corporate history. Ironically, this is the 1 time out of 10 that it’s not, however, the GDXJ scenario has overwhelmed any and all “current” good reasons to buy stock in TGZ or any of the juniors in the GDXJ for that matter.
But like the old saying, “adversity creates opportunity”, and such should be the case between now and June 16th for new buyers of Teranga Gold shares. On June 9th, the official GDXJ rebalancing is to be announced, followed by the actual undertaking at the close of market on June 16th.
Should one wait until after the rebalancing is complete before buying Teranga shares? Safe than sorry, absolutely. But like the article I referred to says:
“…We get the official index announcement next Friday, and I am sure there will be lots of chatter about the rebalance, but be weary of the hyperbolic predictions of doom. There is a good chance this is all built into the price of the stocks, and the surprise will be how much these names rally into the rebalance, not the other way round…”
What I can risk on whatever reputation I have left when it comes to individual stock selection over many decades is, if I’m right like the author of the article believes, that stocks being reduced have been overdone on the downside, the CEO is indeed correct about the company outlook, and gold is indeed heading to $1400 or more by the year’s-end, whatever price one pays between now and June 16th, should be nicely higher not too long after this “once in a lifetime adversity” (please God) is behind us.