July 5, 2019

You can do it! Buying Peñoles-Stocks on the Pink Sheet



Do you remember how Dr. Stern couldn't buy the Peñoles stock? It was listed on the Mexican stock exchange, which his broker did not carry. He asked again and behold, there is a way to buy Peñoles anyway. On a pink sheet. What is a pink sheet, you may ask.

The name goes back to so-called OTC securities. These are stocks that are traded off-exchange and not on a large stock exchange. The portfolio is divided between people who are connected via telephone and computer networks. The securities are traded "over the counter" (OTC). The term pink sheet comes from the earlier practice of issuing information about these securities on pink paper.

Companies can choose to test the OTC waters and use it as a springboard before venturing into the larger exchanges and markets. There are certain security and trading requirements imposed on companies by the US Securities and Exchange Commission (SEC) and FIRNA. Nevertheless, these minimum requirements are much lower than those on the major stock exchanges.

Is this a problem for us? Not really, because Peñoles is listed on the Mexican stock exchange. It is the second largest stock exchange in Latin America with corresponding safety standards.

That's why Dr. Stern continues his research. Unfortunately, the website is quite bad, difficult to read, and technically outdated. The news about Peñoles suggests that the company is trying to attract international investors. The reporting currency was changed to US dollars. They may want to open up to a wider audience.

Strangely, analysts' recommendations have fallen since last year. But why, when the current share price is only half as high today? At that time, analysts were still recommending buying the stock. Today, Peñoles has hardly changed at all, with the only difference that the company's share costs only half as much. Shouldn't this be an incentive to buy more than ever?

Admittedly, gold prices have fallen, making the gold industry less sexy. Perhaps that could be the reason for the downgrading of Peñoles. Analysts usually swim with the current, but Dr. Stern doesn't want that. For him, gold is supposed to be a hedge in times of recession. As soon as it hits, gold prices will go up again. That's why, and because it seems to him that Peñoles is trying to attract international investors, he's buying the stock!



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