BitGold added to database as subscriber ‘new stock request’. Stock is caught up in “speculative frenzy”.

Bulletin: BitGold today announced a CAD 51.9 m acquisition of GoldMoney.com. Check the news feed in VectorVest for more details.

The Financial Post reported yesterday, “Shares of BitGold are caught up in a speculative frenzy that has some onlookers recalling the heady days at the top of the tech bubble in the late 1990’s.”

The article went on to quote John Kaiser, a veteran junior resource analyst: “This thing has a technology spin to it. Nobody understands what it’s potentially worth, so it can be worth whatever you want it to be.”

BitGold is described in the article as a pioneering financial services platform built around gold. In addition to allowing users to buy and store gold, BitGold lets them pay for products and services online using gold as the currency.

Some analysts are giving BitGold praise for trying to make gold ownership more liquid so that people can spend it like currency. BitGold only opened for business a couple of weeks ago, but it has already signed up thousands of users. Gold bugs currently make up less than 10% of the user base.

BitGold began trading last Wednesday, May 13 on the TSX Venture Exchange, symbol XAU. Price has fluctuated wildly, intraday and end-of-day, despite volume of well over 1m shares each day. Opening at .90 cents last week, price tripled on the first day, closing at $2.70. It climbed to $4.19 on day 2 and peaked at $6.68 at the close day 3, although it touched $8.00 briefly intraday.  Price has settled back and after another volatile session today, it closed at $4.65, down another $1.53 or 24.76%.

VECTORVEST ADDS BITGOLD TO DATABASE. BitGold was added to our database today after at least one subscriber made a ‘new stock request. Who wouldn’t want to see what VectorVest has to say about such an interesting stock? Unfortunately, it’s still too early to have a lot of data, but BitGold’s SELL rating would seem to be good guidance. The Sell is based largely on the speculative nature of the stock taking into account RT (short term price direction and strength of trend) and VST (Value, Safety and Timing). The company doesn’t have enough history of earnings to have a high RS. I would say RT is your best indicator for a new stock like XAU, or any stock with low RV, RS and VST. If RT and price are rising, the aggressive or speculator in you may want to jump on the bandwagon for a ride despite weak or uncertain fundamentals. Just be prepared to jump off at the earliest downturn if you’re not convinced the business model has a bright future.

Below is VectorVest’s line on BitGold. Again, just be aware that with a new issue like BitGold with no history, not even as a privately held company, in earnings, sales and other key data, indicators will open on the low side, a good thing for the risk-averse investor. Price is well below the current STOP price. It will take some time for our indicators to normalize, but it will as more data becomes available.

Two Takeaways:
1. New IPO’s are risky, especially a new issue like BitGold with no earnings and sales track record. Often there’s initial excitement, even euphoria that drives prices up to unreasonable levels. For all but the Speculative investor, it’s generally best to wait and see how a new IPO fares after several days and even weeks before diving in. If it’s a solid business with great earnings potential, there will be lots of time to make good money with less risk. Need proof?  Just look at VectorVest graphs in ‘all data’ mode for Facebook (FB) Twitter (TWTR) and Alibaba (BABA) .

2. How to make a New Stock Request. If you’re like me, you never want to buy a stock or ETF without being able to check it out first with VectorVest. You will save yourself a lot of grief most of the time. So, if you become aware of a ‘hot stock’ or just a solid performer that we don’t have in our database, here’s how you make ‘a new stock request’. Just email our Database Manager, [email protected]. Her email and phone number is posted in the Views tab every Friday. The stock will be added reasonably quickly as long as VectorVest can get data from it’s data providers, mainly Thomson Reuters.

See what VectorVest has to say about your favourite stocks. Try it out for 5-weeks for just $9.95 USD. You get both Canada and US databases. Call 1-888-658-7638 for details.

– Stan Heller, Consultant, VectorVest