I came up with the word everhang one day when I was chatting with my pals on CEO.CA and I accidently spelled everhang instead of overhang. When I saw it, I didn’t correct it because it helped me stress a point about when a stock has a lot of overhang that is keeping it from moving higher.
The difference between overhang and everhang is that there is a chance that a stock can move through the overhang and breakout to higher prices. Everhang, on the other hand, is when there is so much stock out that it makes the task extremely hard.
There is another element to the difference between everhang and overhang. When there is a mountain of stock out and it is held by people that trade through Vancouver stock brokerage houses and often hide their trades by going through the anonymous broker when selling.
I call these the Vancouver types, think Howe Street sharks wearing their leisure suits and gold chains left over from the distant past. Peddling their pump and dump stock plays with their used car salesman stock pitches.
When these folks get a hold of a lot of stock in a deal that has a couple hundred million or more shares outstanding with little actual projects to justify their valuation, it is everhung. They often have so much everhang that they go into a death spiral that is almost impossible to get out of. They are everhung, avoid these stocks like the plague, chasing them is a boulevard of broken dreams.
We started a new bull market for gold earlier this year that was well covered and predicted in the reports. Throughout the year, as I’ve been bullish on gold, I’ve also added that in this new gold bull market I expect fewer companies will participate.
My argument is that after a bull market from 2001 through 2011, followed by a bear market that lasted until December 2015, that investors the next time around will be more discerning. I also believe there is an upcoming renaissance for exploration primarily because the supply chain on gold is so weakened from chronic under-spending on exploration over the past couple decades.
Considering the bullish outlook for gold, and a narrow focus on quality combined with a drastic need for more exploration success. It is also important to remember to pay attention to how much stock is out on a deal. As well as the valuation relative to the quality of the people and projects.
Finding winners is hard enough, chasing stocks when they have everhang and are likely on their way to being everhung must be avoided. Deals with all those attributes and not a lot of stock out have much better chances of success.
All the best,
Allan Barry Laboucan
P.S. my reports are for information purposes only, before making any investment decisions it is important to do your homework and speak with your financial advisers.