Trading: Marathon Gold bought out
At the beginning of October I took a look at the beaten up shares of Newfoundland gold developer, Marathon Gold (MOZ.T). I had been following the company for years and have always believed it would be a mine, someday. I pulled the trigger bought a trading position at $0.56.
Today, Marathon Gold was acquired by Calibre Mining. I sold my MOZ shares and booked a solid profit on a 35 day hold. (And, yes, it is more fun to talk about wins than losses.)
I have no doubt that Calibre (CXB.T) is a fine company and that, long run, people who have invested in MOZ will make out well. But the point about trading is that your time horizon is days, maybe weeks, rather than years.
Now, having sold my position, with my luck, no doubt another large company will come in with a better offer and the shares will go to $1.50. I will be sorry to have missed that, but 23% on a 35 day hold means I will get over it.
If I had decided to hold the position it would mean having to do a deep dive on Calibre - which I will likely do in any event. But, time is money and a couple of days research on a company not on my radar for any other reason is more than I want to invest. However, today’s transaction has put Calibre on my radar.
The deal itself is a net positive for MOZ as it means that the Newfoundland project will become a mine without Marathon having to go to the market to raise money. For the long term MOZ shareholders the deal might be a bit disappointing. After all, “the consensus of analysts following the stock suggests it is: average target price in one year, $1.99 with a high of $3.50.”
Interestingly, while MOZ traded up 10.9% (as at noon, Pacific) Calibre traded down 12.8% and that has caught my interest.
If I have a trading strategy at all it is to look for oversold shares. A year ago Calibre traded as low as $0.72 and right now it is trading at $1.19 and falling. If the market does not like a proposed deal it often oversells the acquiring company. It is not a rational response and where there is irrationality there is the potential for trading profit.
I made a trading profit on MOZ because I spotted the fact it was grossly oversold relative to its value - a situation some have ascribed to rumour of today’s transaction leaking back in early October.
Might there be a similar opportunity building at CXB? Hard to say on 2/3rds of a day’s trading, but it will be interesting to see where Calibre is when my sale of MOZ settles in three days.
[Update: (15/11/2023) Ha, ha, ha…of course MOZ went to $0.74 today. Sold too soon? Yes, but no regrets. Booking a profit on a trade is what it is about. Missing the last nickel, it happens.]
[Disclaimer: This is not investment advice. I am not an investment professional. I am down about 30% at the moment. I will write about companies that I hold. I will disclose any holdings. Do your own due diligence. Do it hard. Call the CEO.
I currently do not hold shares in MOZ.T or CXB.T. ]