Red-Hot Resources

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Tuesday, November 28, 2006

Fronteer Development Group: Motley Fooled Again?

Anyone who bought my uranium report might have felt some consternation yesterday. Fronteer Development Group, one of the recommended stocks, plunged on the day. That looks bad. But what if I told you the people selling the stock were fools … Motley Fools.

On Friday, an analyst named Seth Jayson panned Fronteer and another uranium stock in the Motley Fool. You can read his article by
CLICKING HERE. Mr. Jayson called Fronteer a “revenue-free wonder” and said he had his doubts that the company could successfully execute its business strategy.

There’s little doubt in my mind that Mr. Jayson’s pan of Fronteer was the catalyst for the sell-off. On FRG message boards some angry shareholders speculated that Mr. Jayson either A) shorted FRG before publishing the article or B) was trying to knock the stock down so he could buy it on the cheap.

The angry FRG fans pointed out that Mr. Jayson was trying to value an exploration stock like a producing stock. Surely, their argument went, no one could be that much of an ignoramus!

Though I enjoy a good conspiracy theory as much as the next person, I have to come down on the side of ignorance, not ill will. Just because Mr. Jayson calls himself an analyst doesn’t mean he’s qualified to analyze anything. Just because Motley Fool publishes his writing doesn’t mean it is serious. Free analysis is worth what you pay for it (readers of this blog should keep that in mind as well).

Sure, the kind of obtuseness Mr. Jayson displayed is usually confined to political journalists – (examples: Candy Crowley, David Brooks, Peggy Noonan – the list is nearly endless). Natural resources analysts usually can at least read a company’s business strategy on its own website before spouting off. Apparently, Mr. Jayson was not able to do that. We really shouldn’t make fun of him -- perhaps he’s retarded. Perhaps Motley Fool is publishing him as part of a community outreach program for the mentally handicapped. We just don’t know.

All joking aside, there are other possibilities. Maybe Mr. Jayson is actually a good analyst and he simply made a mistake. That happens to the best of us. Or maybe HE'S right and I'M wrong -- a smart analyst should be prepared for any possibility.

The good news is it doesn’t look like Fronteer’s stock is suffering overly much. Take a look...

If you hold this move up to the cold, hard light of day, Fronteer enjoyed a great run recently, and it was inflated on speculative money. Mr. Jayson's Motley Fool piece was the prick that let some hot air out of the balloon. That’s all. If someone, say, who bought a certain uranium report recently, was looking for a good entry opportunity into a great stock … well, you know.

Hey, have you seen the price of uranium lately?

How about the price of gold?

Gold broke out of the downtrend that it was in since May and seems to be breaking out of short-term consolidation as well.

Does it give you a warm and fuzzy feeling? It does me.

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