Scientific Metals (STM.V) races through a buck: Here’s why

Scientific Metals (STM.V) ran through its $1 stock price like a Richmond Maserati running through a red light at 3AM on a Monday, finishing trading at $1.08 in just the latest leap upward for one of the lithium-ion industry’s hardest runners.

Positioning itself as the cobalt sector’s ‘nearest to production’ play with two properties in the Idaho cobalt belt, there’s plenty to like about STM, but none of it explains the big jump Monday.

Except: This.

5 Companies Taking Advantage Of The Metal Boom

Commodities are surging and metals are loving their longest rally in seven years. Last year might have been a good one for metals, but this year will be even better.

For five straight quarters, six metals have risen, and this quarter’s spike turns all our attention back to the miners: Gold is up 8.8 percent; silver is up 15 percent; aluminum and lead are both up 16 percent; and palladium is up 17 percent. But that’s nothing compared to the run on lithium and cobalt.

Lithium is up over 400 percent and there is a veritable stampede to get in on this commodity that is feeding our electric vehicle hunger.

Cobalt stands to do even better, and because everyone’s been paying attention to lithium in this rush, the real money to be made is here. There isn’t enough, and what’s available is unethically sourced from the Democratic Republic of Congo (DRC). Cobalt has made gains for 24 straight weeks, and the sky is the limit on this one.

Here are our top 5 mining picks right now:

Among the top five? Scientific Metals. The rest of the list? All big fat TSX companies and majors that you’re not really interested in.

Stock promotion is an important element in any company attracting the interest of investors.

In fact, companies that don’t promote their deals, because they’re worried about looking seedy by hyping themselves, will inevitably face the reality of dealing with short sellers without a base of investor support at some later stage. And that’s generally not pretty. See the stock chart on Naturally Splendid (NSP.V) to get a sense of how that plays.

In the case of Scientific Metals, we actually really like the deal. There are those in the Cobalt, Ontario area who say the Idaho plays are small fry, but the Idaho plays are most assuredly further along. For much of last year, Scientific Metals didn’t promote itself, and the share price stuttered as a result. But once it got its marketing underway, the story resonated, and the stock climbed, and the milestones reached ended up in a lot of ears.

The Baystreet.ca piece above is called a piggybacker piece, at least in my circles. The formula is, if you just come out and talk about the company by itself, you’ll get a shrug from many who don’t read all the way to the bottom. But if you can place that company among a handful of other, bigger stories, that the penny stock investor will have less buying interest in but know already, you’ll give said company a legitimacy boost.

Added bonus: The bigger companies attract search traffic to the story, which may help you convert folks already invested in the sector.

Added added bonus: There’s a large section of investors who will jump aboard a stock they think has the big push behind it, no matter what the company. See Imagination Park (IP.C) recently, at least until we shone a light on it.

There’s no secret that STM paid for this Baystreet piece – their company name is in the title graphic, and though the disclosure at the bottom doesn’t say who paid for the story, it discloses it was indeed paid for, as is fair.

So what’s to be done about this? Well, nothing really. Use it to your advantage.

As an investor, you should know many things beyond the balance sheet fundamentals of a company you’re about to invest in, and the following four questions are REALLY important in the smallcap space because a small amount of concerted buying (or selling) can have a really big stock price impact.

  1. Is the company being actively marketed?
  2. Who is actively marketing it?
  3. Is the story a good one, and will it find an audience?
  4. Will the stock go up as a result of the first three?

In the case of STM, you’ve got a “Yes,” a “Baystreet”, another pair of yeahs, and we know now the final question was also answered in the affirmative.

So if you saw that piece come out this morning, you could either have believed it, that STM is in that elite company of majors, invested, and made money doing it – or you could disbelieve the story, but realize that many others will get behind it, invested, and made money doing it. Or you could sit it out because, hey, promo is bad. In which case you didn’t make money but, hey, you’ve got your dignity.

Regular readers of Equity.Guru will have seen us write pieces in which we tie one company into the dealings of many before. It’s pretty standard marketing fare. We’re usually a little less obvious about it, and there’s usually more reason to do so than ‘just cuz’ (a big push into cobalt as a sector, as an example, or the recent flooding of companies into the Cobalt, Ontario area as another), but if I were to guess, I’d say half the money I made last year personally came by investing in companies that I could see through like they were made of rice paper, didn’t think would be strong investments in a year’s time, but realized were likely to rise in interest, confidence, newsflow and, yes, paid promotion for the next three months – so let’s make hay while that’s happening.

STM shouldn’t need the marketing help. It’s a real company and its people are doing things the right way and it has future promise. But with the markets as they are today, with short sellers and misinformation campaigns to back them running rampant, having the right people talking about you is a pretty damn smart strategy.

— Chris Parry

PS: Scientific Metals is a marketing client of Equity.Guru. See what we just did there? 🙂

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