RE:RE:Freegold Acquires Prospective Lands at Golden SummitA good read for all of us!!! We all make mistakes at some times.
for others a total loss
The Importance Of Due Diligence1
Monday April 14, 2014, 3:38pm PDT
By Vivien Diniz2 - Exclusive to Resource Investing News3
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Dear Readers,
I owe you an apology.
As you may well know, at Resource Investing News, we pride ourselves on our unbiased editorial. We do not write overly promotional content urging investors to buy specific stocks, and most importantly, if a piece of content on our network falls into the category of paid-for content, we will disclose that information. Our goal is to help educate our readers on what is going on in the market and the small-cap companies operating within the resource sector. That being said, we also do our best to be diligent in our own reporting, aiming to stay away from blatantly biased and paid-for stock promotion. It is on that count that we –more specifically, I– recently failed you, and for that, I’m truly sorry.
While normally I would be very excited to receive a call from the Wall Street Journal, this week’s call drew my attention to an article
published4 on in March on Potash Investing News that was not as unbiased and independent as I had originally thought. And as a result, I was forced to learn a long, hard lesson in due diligence, disclosure statements and just how easy it is to be misled.
Reader beware
As investors, performing due diligence should be almost second nature to any one seriously considering putting money down on an investment. Especially in the age of the internet when anything can be posted anonymously and investors are constantly flooded with information from numerous sources. Understandably it can be difficult to know who is right and who is telling tales.
The lesson I learned this week was that the “boring-but-necessary” paragraphs at the end of analyst research is not always boiler plate information. Disclosure statements are added for a reason and they can be the first indicator as to what the actual purpose of the information being presented is.
For instance, a disclosure statement might unveil that the research has been paid for by a third-party who is also shareholder. If this case, it is very likely not unbiased. For starters, the shareholder will directly benefit from any uptick in stock prices, and furthermore, this “pseudo-independent” research is likely not being written with the interests of long term investors in mind. Investors who are looking to benefit from intraday trading activity will, however, appreciate the heads up of a stock on a move in any direction throughout the day.
It’s important to understand that not all research is paid-for-research, but in the vast majority of cases, there is likely going to be some kind of bias. Once you have figured out where that bias is leaning, it is easier to navigate through the information.
Unfortunately, disclosure statements should not be the only stop when doing your due diligence.
As
Seeking Alpha5 recently highlighted, disclosures are not always honest. In Seeking Alpha’s case, the authors “skipped” the part where they disclosed being paid by IR companies for their articles. Which emphasizes the importance of not taking all information found on the internet at face value.
What does this mean?
Not to go all Mulder and Scully on you with warnings of ”Trust No One,” but I cannot emphasize enough that any second-hand information on stocks should always be taken with a grain of salt. Paid-promotion of stocks is characteristic of the investment industry that investors need to recognize.
Do your research, reach out to the companies you are interested in, look at financial statements on
SEDAR6 and use the media as a stepping stone, not the gospel truth. Because as I’ve just outlined, not all information is transparent.
As for how this relates back to Resource Investing News, we will try our best to do the same and keep delivering the independent, unbiased editorial you have come to expect.
Thanks for keeping us (me) on the straight and narrow.
Happy investing,
Vivien Diniz, Editor
Resource Investing News