Portfolio Update: What Should I Buy? (January 14, 2016)

by FI Fighter on January 14, 2016

in Precious Metals Updates

bear - 1

The bear is out in full force this week! Mining stocks are getting smashed into oblivion, and I’ve got buddies who are now refusing to look at their portfolios!

Yes, I want to conserve some more cash, but I’ve got just enough spare change remaining from my last sale (BAR.TO and FF.V) to make a small purchase today.

Everywhere I look, I’m seeing bargains…

For anyone actively following the mining sector, what’s on your radar?

What would you buy today?

Here’ what I’m eyeing:

  • B2Gold (BTG) @ $0.80/share
  • Endeavour Silver (EXK) @ $1.12/share
  • Ivanhoe Mines (IVN.TO) @ C$0.57/share
  • Teranga Gold (TGZ.TO) @ C$0.455/share

Quite honestly, all these stocks look cheap to me… If my funds were unlimited and I didn’t think things might still potentially get worse, I would buy them all!

With BTG, there are concerns with an upcoming financing event, which probably explains the most recent sell-off…

EDR released production results that the market didn’t interpret favorably, with silver production declining 14% in Q4 2015. They are also not the lowest cost silver producer, so there have been (and there still are) concerns about the company’s ability to continue to weather this nasty bear market storm… Still, I like the management team (led by Bradford Cooke) and believe that they will ultimately be a survivor.

IVN.TO has world-class assets, no doubt, but with copper/platinum/palladium/zinc/etc. crashing HARD, it just really doesn’t matter right now… Currently, the consensus is that base metals will continue to nosedive into 2016, so I guess the question is, “What’s the rush to get in now?” Further, the final batch of escrowed shares will be released on January 23, so until that dust settles, everyone is speculating that the selling pressure will remain fierce for the near future… I really like this company, long-term, because you get to purchase a call option on not only copper/zinc, but also on platinum and palladium (should fuel cell technology ever take off)… The recent completed financing with Zijin Mining gives me reassurance that these mines will someday get built! I guess the dark clouds hovering over this company will always be South Africa and Congo…

TGZ.TO is a low-cost gold producer ($964 AISC) operating out of Senegal… With this company, you’re getting 200,000 oz/year production, strong cash balance ($55.1 million), minimal debt (recent revolver drawdown of $15 million), reasonably safe jurisdiction, etc… Most investors prefer Endeavour Mining (EDV.TO), but that stock has run up quite a bit in recent months… and I’ve already got enough Burkina Faso plays in motion…

 

What would you buy? And are you buying?

 

I’m leaning towards TGZ.TO.

 

Most of my friends who are playing in this space are electing, instead, to close their eyes and hope for things to get better soon… It’s tough to stomach this much pain!

 

It’s been an absolutely devastating week so far for mining stocks, but I remain steadfast in my belief that I’m doing the right thing; I like to buy low even if the popular narrative is that the ship will just keep on sinking…

 

If it’s going down, I’m gonna go down right with it…

 

Happy Hunting!

Related Posts :

{ 18 comments… read them below or add one }

1 joeNo Gravatar January 14, 2016 at 10:05 am

I would buy an index fun 🙂 tax, cost, and capital gains efficiency and you will beat nearly 90% of other investors over the long term.. it is an easy ticket to make more in the long term than almost everyone you know.

Reply

2 FI FighterNo Gravatar January 14, 2016 at 10:10 am

Joe,

Index funds are great; I just prefer to load up during a bear market, not while they are still near record highs.

And I would argue your point that index funds are the “easy ticket” to make more than everyone you know… Most everyone I know who are multi-millionaires accomplished that feat by buying real estate at the bottom of the market…

Real estate teaches you what happens when you “buy low”. You retire overnight…

Real estate also warns you about being careful and not to “buy high”. Every investor I’ve met who has filed for bankruptcy ran into trouble at the top of the market… like right now.

Reply

3 ReepekgNo Gravatar January 14, 2016 at 11:31 am

I’m closing my eyes and hoping for things to get worse…

I’m looking to initiate my first ever gold position (in GDX), but it is a deflationary dilemma. What’s the rush to get in now, indeed. As I commented 11/24, I’m still not fashionably late for this party. I’ll reevaluate around March.

It has been a lot of fun and quite exciting to watch your story. My greatest strengths, however, remain patience and an investment horizon of forever.

Reply

4 FI FighterNo Gravatar January 14, 2016 at 11:41 am

Reepekg,

Certainly, there’s no rush to get into base metals, or oil… In a deflation, I agree that any excess supply out there will be difficult to drain out (it’ll take a few years at best).

As it pertains to gold/silver, that very much may also apply, but these precious metals are somewhat unique in the sense that they also serve as money.

With China’s stock market crashing, many locals are getting out of dodge and selling out of everything and converting into USD and gold… I think I understand Chinese people pretty well (having been around them my entire life), and when they get scared, they get uber conservative.

http://www.reuters.com/article/us-china-markets-retail-idUSKCN0US0JS20160114

“The stock market is in a mess,” said a 48-year-old woman from Kunshan, a city near Shanghai, working in the accounting department of a bank, who said she had bought 500,000 yuan ($76,000) worth of U.S. currency. “Dollar is far less risky.”

That has also fueled demand for gold.

“Except for gold, all other assets are just bubbles to me,” said a 24-year-old female investor in Beijing. “I guess I am a pessimist. If there are really some global conflicts, even dollars and bonds could not buy a meal.”

In just seven trading days at the start of this year, assets under management at HuaAn Gold ETF, China’s biggest gold ETF, jumped 8 percent, after doubling during the previous six months.

“We notice a rise in gold investment whenever there’s concern over yuan depreciation,” said Richard Xu, the fund’s manager. “Buying gold also helps investors avoid risks in equities. It serves double purposes.”

As China goes, so does the rest of the world. Most investors are so fixated on what’s going on domestically in the states (gold is weak; dollars is strong), but my point of view has been to look at things from a global perspective. Outside of USD, gold is soaring in most other currencies (AUD, CAD, ZAR, even CNY with all the devaluation and more to come…).

Gold could spike sooner than we expect to the upside (let’s see how many bad earnings reports the Fed can stomach before they change their tightening gameplan)… My weakness is I’m like Janet Yellen and like to arrive at the airport 2 hours early… It’s a personality thing… If I wasn’t wired that way, I would certainly wait things out longer before jumping in.

But that’s why we hedge… And that’s why I make sure to maintain at a minimum $120k for post-deflation buying…

Obviously, I’ve made a lot of bad decisions… But where I’m not patient to get in, I’m more than patient to ride things out until the tide turns.

I will not get shaken out of this trade.

Cheers!

Reply

5 mikeNo Gravatar January 14, 2016 at 1:12 pm

ETF: DUST. lol im jk, giving you a hard time 😉

Reply

6 FI FighterNo Gravatar January 14, 2016 at 1:31 pm

Mike,

When it rains, it pours…

I sure coulda used some DUST or JDST this week!!!

Take care!

Reply

7 TonNo Gravatar January 14, 2016 at 2:15 pm

I’m so glad that I pretty much sold all my index funds out. Right now, I’m an options investor and focusing on volatility as an asset class with directional neutral assumption. With this increasing volatility environment, it’s an a dream and abundance opportunity for options investor to sell calls and puts against index ETF in believing that everything will revert back to the mean.

Quick question though, in some of the accounts that I couldn’t trade or it gets expensive to trade such as HSA. Do you think it’s a good idea to DCA on gold for entire fund. My HSA is relatively low compared to my total NW?

Reply

8 FI FighterNo Gravatar January 14, 2016 at 4:16 pm

Ton,

I’m with you on exiting out of index funds; far more risk than reward at this point.

For a gold fund, the most popular one is GDX ETF. I’ve been DCA on my positions but who really knows if now is a good time or if prices will keep going lower…

I wish I knew, but I like where valuations are right now… 0.5 P/B, 2.0 EV/EBITDA, 1.0 EV/Revenue, etc…

Not sure what other sector (maybe deepwater drilling?) is gonna give you similar metrics…

Take care!

Reply

9 SeanNo Gravatar January 14, 2016 at 2:33 pm

What do you think of lakeshore gold and eldorado at these levels.
Even without Greece I think ego looks pretty cheap.

Reply

10 FI FighterNo Gravatar January 14, 2016 at 4:21 pm

Sean,

I really like LSG. Around $0.75 to $0.80 would be a nice grab… I bought too high at $0.93 or so. Great jurisdiction, lots of cash in the bank, minimal debt, exploration potential (144 Gap), solid management, low cash costs/AISC, etc.

Eldorado is basically at 52 week lows. This is a really solid company. Strong balance sheet and some of the lowest costs in the industry. The problem is they operate in “riskier” places like Greece… Although Greece really doesn’t matter much to the current bottom line; it’s mostly development-stage projects at this point in time. Much of their revenue is derived from Turkey, and even though they are in the western part, it’s close enough to some bad neighbors that investors have fears… China, I have no clue how “safe” that environment is… But I sure wouldn’t put it up there with Ontario…

Really, there is no perfect gold stock… There’s always a trade-off somewhere.

Happy hunting!

Reply

11 bethNo Gravatar January 14, 2016 at 2:33 pm

I bought Crescent Point Energy yesterday. I had planned to buy it when it went under $15 and it went down to $13 yesterday. They reduced the size of their dividend last year but I am hopeful the dividend and stock price will rise in the future. This is a medium term hold for me. I think I will have it for 2 or 3 years.

Bank Of Nova Scotia is down and if I had any more cash I would be all over it too.

Reply

12 FI FighterNo Gravatar January 14, 2016 at 4:23 pm

Beth,

Best of luck! Lots of bargains in the energy/commodity space right now.

Take care!

Reply

13 SriniNo Gravatar January 14, 2016 at 5:13 pm

Jay,
I took a dip into Klondex , pretium, first majestic, Alexco, Kirkland lake. Have been aggressive from the start of 2016.

Now running low on dry powder in my trading acc and aligning funds to convert to USD & CAD for the next dip.

Sold a portion of FF @ .435 and looking to re- enter at early .3 and iam amazed by its strength in holding the gains
All the best.

Reply

14 FI FighterNo Gravatar January 14, 2016 at 5:25 pm

Srini,

Great buys! I like them all, except I know nothing about Alexco. What are your thoughts with this one?

I would love to buy some more Pretium at these levels. Unfortunately, I probably have a large enough allocation to this development story, and without revenue flowing in yet, you just never know for sure with these “high grade” stories…

Excellent timing with FF.V! I sold a few at C$0.395… Too early, but I can never time these things. Yeah, I’m very surprised with how well that stock is holding up right now…

Low 30’s is a great entry point back in… We think very much alike!

Cheers!

Reply

15 SriniNo Gravatar January 14, 2016 at 7:53 pm

Pretium, my acquisition cost is high and using less than 5$ to average down. I am 80% invested in what I wanted to buy into Pretium. 20% more to go and hope I get good entry points.

FF I got lucky with timing. I saw a technical resistance I hoped to catch and was lucky.

on Alexco. have a sent a separate mail to your inbox using contact us option.

cheers ~Srini

Reply

16 JasonNo Gravatar January 14, 2016 at 5:53 pm

I love reading your site. I picked up 6000 shares of B2Gold @ $0.80/share today. I am trying to add, on the drops.

Reply

17 FI FighterNo Gravatar January 14, 2016 at 7:33 pm

Jason,

Awesome! You got in at a much better price than I did, congrats!

B2Gold is still on my radar and I may need to make another purchase at this rate… Even with another round of financing probably in the works, at $0.70/share or so, it’s way too tempting for me to ignore.

This is one of my favorite mid-tier producers.

Cheers!

Reply

18 DivHutNo Gravatar January 15, 2016 at 11:36 pm

I’m liking the Canadian banks a lot these days. TD, BNS and RY. They have fallen on some really hard times and are sporting some compelling prices value and yields. These are the times to buy when seemingly everyone else is selling. Thanks for sharing your considerations.

Reply

Leave a Comment

 

{ 5 trackbacks }

Previous post:

Next post:

Copyright © 2012 FI Fighter