Portfolio Update: Reshuffling the Deck (August 18, 2017)

by FI Fighter on August 19, 2017

in Precious Metals, Precious Metals Updates

Similar to last week, not much going on with the portfolio this week… I made a minor swap which I will discuss below.

  • Sold 6,000 shares of Fortuna Silver (FSM) @ $4.42/share
  • Bought 40,000 shares of GFG Resources (GFGSF) @ $0.453/share (~C$0.58/share)

Fortuna Silver

Well, I never like to “sell low” but I pretty much went and did that yesterday when I decided to exit out of my position in Fortuna Silver (FSM). No, there’s nothing wrong with the company at all, but after several months of holding FSM stock, I had to ask myself:

Is this the best place to park my capital to achieve the goals that I am after?

When I originally loaded up on shares of FSM, this was back in February, and I was fully convinced that the spot price of silver would imminently smash through $20/oz. Using such naive assumptions, I thought I could conceivably make a quick 25-50% gain or so on shares of FSM.

Relatively speaking, FSM is a “proven and safe” company…

Unfortunately, the “silver bull” that I had envisioned earlier this year failed to materialize, so in the process, I saw my share of FSM shredded by -30%.

Such is life.

 

In the world of mining stocks, you will never win them all!

 

Simply accept that universal truth up front, never get too emotional, and move on…

So, I did.

I booked a realized loss of $11,348.22, which quite frankly might be my biggest loss ever.

Big deal… Who cares? The market surely doesn’t give a damn how much money you lose…

Again, no need to get all emotional about things…

I just asked myself:

If I was starting out with fresh capital today, would I buy FSM or something else?

No matter how many times I asked myself that very question, I always came back with the same answer:

Something else.

GFG Resources

At this particular moment in time, one stock that I’m really liking is GFG Resources (GFG.V/GFGSF).

As bad as Fortuna Silver has been doing, GFG Resources is doing that much worse…

FSM is off -21.8% year-to-date, but GFG.V has crashed a staggering -49.1%!

If buying shares of FSM are “buying low” today, well, snatching up shares of GFG.V must be akin to “buying really freekin low!”

Honestly, I really don’t care if I book HUGE losses in the process when playing the Game of Rocks, provided I can learn from my mistakes and get positioned into even better ideas…

Again, I still really, really like FSM, but I am just that much more enamored with GFG.V right now.

For ~C$25 million market cap (with $4.5 million of cash in the bank), I seriously feel like gold investors would be hard pressed to locate alternatives that provide such immense deep value as GFG Resources.

For those who want to learn a lot more about GFG Resources, please check out this excellent post put together by my good friend The Hedgeless Horseman.

I’m never one to steal somebody else’s thunder, so all the credit goes to Horseman for putting this stock idea on my radar… He really went above and beyond and did a tremendous amount of high quality research on GFG Resources…

I didn’t even know GFG Resources existed until just a few weeks ago.

Anyway, I would really encourage anyone who is even remote interested in deep value ideas to check out that post.

I initiated just a small first tranche on Friday, but I may be on the hunt for some more cheap shares…

There are a ton of reasons to really like the GFG Resources story, for me, what really did it and made me buy shares was when I took a close look at the strong management team that GFG Resources was somehow able to put together (in stealth too, since the market is really tuned out at the moment and has almost no clue this story even exists):

Talk about a stacked lineup…

Silver Standard (now SSR Mining; SSRM) acquired Claude Resources for C$337 million in March 2016.

From Market Wired.

Eldorado Gold (EGO) acquired Integra Gold for C$590 million in May 2017.

From Market Wired.

I own a lot of Orezone Gold (ORE.V/ORZCF) shares too, which I think is a top takeover candidate and I hope will get bought out next!

Etc.

Simply, there are too many all-stars onboard GFG Resources for me to ignore…

Conclusion

A relatively uneventful week for me… I traded out of shares of Fortuna Silver for GFG Resources… Eventually, I do feel like I need to invest some more capital into silver plays since the Gold-to-Silver ratio is so out of whack right now and silver is such a bargain… At this time, I don’t know which silver stock I will get into, but I’ll be keeping my eyes open, no doubt.

With GFG Resources, I’m thrilled to be getting in at these low prices, so even though I realized a big loss with FSM, it’s all good…

I’m expecting to make at least 2-3x gains on GFG Resources in the future (in a neutral/decent gold market). If gold can get back to say $1,400/oz or $1,500/oz, I can easily see GFG Resources rising 5-10x from these depressed levels.

As much as I like FSM, I really have trouble seeing it doing much more than doubling from here (unless we get an absolutely insane bull market in silver); the law of large numbers (market cap) will inevitably hold back FSM from multiplying too much…

 

Risk vs. Reward.

I will gladly risk 50% of my capital if I can realistically envision gains of 500-1000%.

 

I love these type of asymmetric bets.

 

No guarantees of course, so please do your own research and due diligence, as always.

 

Here’s the latest…

 

Until next time…

 

Happy Hunting!

{ 6 comments… read them below or add one }

1 Roadmap2RetireNo Gravatar August 19, 2017 at 5:51 pm

Thanks for sharing, FIF. GFG popped up on my radar last week after Horseman’s raving….definitely something to take a closer look at.

All the best with this trade.

cheers
R2R

Reply

2 FI FighterNo Gravatar August 19, 2017 at 6:05 pm

Sabeel,

Yeah, that Horseman guy likes to pump his stock ideas to the moon… 😉

All joking aside, we had a really long discussion and spent a lot of time trying to nitpick the stock, looking for red flags and fatal flaws and all that… There is currently no published initial resource and in terms of metallurgy it might be a tad complex since there are oxides (probably recoverable through simple heap leaching), but also sulphides that may require roasting?

It’s too early to say for certain and I’m just speculating, but those are the concerns that immediately come to mind…

For C$25 million market cap, you can do a lot, lot, lot worse than GFG Resources.

Cheers!

Reply

3 MrDoublingDollarsNo Gravatar August 19, 2017 at 6:06 pm

I love gold and silver miners and hold shares in a few. I have been expecting precious metals to shoot up, but that has not happened.

I have been in lithium miners, so at least got that going for me which is nice.

Reply

4 FI FighterNo Gravatar August 19, 2017 at 6:43 pm

MDD,

Always good to diversify! Lithium has been on a tear this year, congrats on the big wins.

Precious metals are really cheap right now, but eventually at some point the sector will recover again… I hope!

All the best!

Reply

5 Manny MNo Gravatar August 20, 2017 at 7:01 am

Hopefully an eventful week coming with BGS (hopefully) coming out of suspension!

Reply

6 FI FighterNo Gravatar August 20, 2017 at 10:05 am

Manny,

Sure hope so! It’s been a loooooooong time coming!

BGS is far and away my top stock pick for the remainder of this year. It’s got a ton of ground to make up to catch up to peers: AVZ, Critical Elements, Altura, Kidman, etc.

Let’s go! 🙂

Reply

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