Stick With Underworld Resources – Avoid The Area Plays

by Olivier on June 18, 2009

Yesterday I added an annotation to UW.V – Underworld Resources on my public list. I stated it is one of my favourites. Today’s action confirms my assumption. Again odds are rather high this is going to be a huge winner. Strength is simply incredible. The stock was up almost 10% while most gold mining stocks were down. The recent private placement is scheduled to close tomorrow. Judging from today’s action it sure looks like there is more to come.

Why is UW.V one of my favourites? It’s because of all the companies claiming stakes like crazy all around their property. Like CRAZY. Not a single day goes by without a news release of another company staking claims and citing UW.V’s recent drill results in the Yukon as the reason.

This is exactly what happened with NOT.V – Noront Resources in 2007 and with GXS.V – Goldsource Mines in 2008 and their subsequent more than 10-fold share price increase. The lesson I’ve learned over the years is to stick to the leader with the initial discovery. Area plays can do very well. Still I would recommend to avoid them like the plague.

The leading stock – in this case UW.V – Underworld Resources – will attract money of the bigger players. Keep in mind KGC – Kinross Gold already owns a 10% stake. The wannabes will most likely fail. Their price action will be much more volatile and their stock won’t offer the liquidity to get out easily just in case something goes wrong.

Stick with the leader. Stick with UW.V – Underworld Resources.

Have a great evening!

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