When you invest in smaller company stocks you can end up jumpingonto anyoddscrap ofnews that appears from one monthto the next.
This is particularly true forstocks such asRare Earth Minerals(LSE: REM)andSirius Minerals(LSE: SXX), neither of which are actually earning any revenues at the moment. Instead, they have a large planning and investment programme ahead of them, and investors can only cross their fingers, keep the faith andhope it all works out in the end.
Silent storms
The lack of major news or announcements, aside from the odd semi-conclusive drilling update, oughtto leave the share price becalmedbut often the opposite happens. The merestscrapof information sendsinvestorsinto a whirl andblows the share price violently in all sorts ofdirections. Also, stocks like these riskgetting damaged by commodity sector storms, even if they have little bearing ontheir own performance.
REMs share price is down 20% year-to-date, from around 80p to 67p, despite the lack of serious news. Stocks like this can really stretch your patience. While it got a major boost lastyear following its dealto supplyTesla Motorswithlithium hydroxide, this has lednowhereas we wait to hear whether it meets Teslas stiff two-year performance milestones.
This years slide downwards was reversedwhenEuropean Metals Holdings, in which it has an 11.9% stake, released an optimistic update on drilling results from its Cinovec project in the Czech Republic. If you believe in the long-term case for lithium, rare earth elements and clean battery power, then you might want to take advantage of the disconcerting effect of the lack of news flow from Rare Earth Minerals. Just make sure that you have the patience to stick around while very little happens,and the courage to keep your nervewhen a lot happens all at once.
Fertile ground
AIM-listedpotash miner Sirius Minerals has also been sunkby the widerstorms afflicting the commodities sector, as well as one or two squalls of its own. Sentiment took a knock in January after management announced a two-month delay of thedefinitive feasibility study onits York Potash Project, which it claims isthe worlds largest and highest grade deposit of polyhalite. One concern is thatit will struggle to raise the 2bn it needs to fund adeep mine beneaththe North York Moorsnational parkand develop export facilities at Teesside, giventhe troubledcommodities climate.
Another worry is that fertiliser costs have fallen along with economic sentiment, hitting the potential future value of potash and further deterring investors. Yet nobody can say what will happen to the price of potash (or anything else in the notoriously cyclical agricultural sector) by the time Sirius finally starts shipping, assumingit ever does. Its merely idle talk that servestoplug the gap while investors wait for something more substantial.
Investors have rallied to the cause, forcing up the share price by 8% over the last week, although at todays 13p its still less than halfits 52-week high of 29p. Like REM, I would ratherinvest in SXXon no news thanfollowinga share price spike aftera burst of good news. But youwill still need courage and patience to see it through to the end.
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Harvey Jones has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.