When it comes to investing these days, I’ve got to tell you, I’m not sure if I have ever seen anything quite like this before… Most investors who I speak to are completely petrified to be playing carefree in the ever-so-frothy markets right now. In fact, most of my closest friends, family, and colleagues are sitting mostly in cash right now… The ones who are daring enough to play, have all gone conservative, focused on buying up the beaten-down commodities and strong cash flowing real estate (which are somewhat sheltered from any extreme market meltdowns since they are already so cheap!).
At this point in time, my thoughts very much resonate with them. And in fact, they are inspiring me to do much the same…
Perhaps we are all just taking a page out of the book written by Stanley Druckenmiller and David Tepper?
Some of the world’s top hedge fund managers scaled back their U.S. stock investments last quarter as markets tumbled.
The value of Stan Druckenmiller’s disclosed U.S.-listed equity holdings dropped 41 percent to $868 million, according to a filing from the billionaire’s family office. The listed holdings at Louis Bacon’s Moore Capital Management fell 39 percent to $1.65 billion, while at David Tepper’s Appaloosa Management, they dropped 30 percent to $2.82 billion.
The money managers retreated from U.S. stocks after the market has more than tripled from its 2009 low. Druckenmiller, who produced average annual returns of 30 percent from 1986 through 2010 at his Duquesne Capital Management, told an investor conference earlier this month that his outlook on equities could turn negative. Tepper, Appaloosa’s billionaire founder, said in September that he’s not as optimistic on the stock market as he could be because expectations for corporate earnings were high.
“I could see myself getting bearish, and I can’t see myself getting bullish,” Druckenmiller, a longtime hedge fund manager who worked for George Soros for more than a decade, said on Nov. 3 at the New York Times DealBook conference.
“I’m not as bullish as I could be because I have problems with earnings growth, problems with multiples,” Tepper told CNBC in the September interview, referring to price-to-earnings ratios. “I can’t really call myself a bull.”
Since I’ve been out of the markets (outside of the August scare), it looks like stocks are only continuing to soar UP, UP, and UP!
Maybe I’m dead wrong about this and there’s nothing to be worried about?
In any case, on a just about everyday basis, I’m hearing more and more investors interested in buying shares of: Freeport-McMoRan (FCX), First Quantum Minerals (FM.TO), BHP Billiton (BBL), Exxon Mobil (XOM), etc.
I can’t even begin to count how many times I’ve been recommended to buy FCX these past few months…
I would agree that the aforementioned stocks are all uber cheap right now… and they might possibly get even cheaper (hard to believe, right?). Long-term, I don’t think you’ll do wrong going with any of those selections…
Why haven’t I bought shares myself?
I have… sort of… My own preference has been to dabble more in the junior mining space… So, substitute out FCX and insert Ivanhoe Mines (IVPAF/IVN.TO)… The former is a proven producer, and the latter is an exploration/development company… The latter is obviously more risky, but in a super-depressed market, it can also offer more leverage to the upside on the rebound… Ivanhoe holds 3 world class projects (Kamoa, Platreef, Kipushi), and shares are so depressed right now, you can essentially “buy 1 and get 2 free”.
Again, more risk, but perhaps more reward as well…
These days, my emphasis has been on buying the most battered and bruised junior mining stocks, along with physical gold and silver. And just like my buddies, my current favorite investment is also cold-hard cash! 🙂
Right now, if I didn’t already have eight mortgages to account for, I would probably also look into buying more cash flowing real estate…
So, at this point, I would like to ask readers — Has the current market environment altered your investment thesis at all? What are you buying these days? Are you sticking to the “tried and true” approach, or are you also doing some garage sale shopping? Or both?
Here are some of my favorite investment ideas right now:
- Cash, Cash, Cash
- Endeavour Silver @ $1.41/share
- Ivanhoe Mines (IVN.TO) @ C$0.62/share
- Pilot Gold (PLG.TO) @ C$0.31/share
- True Gold Mining (TGM.V) @ C$0.20/share
- Alterra Power (AXY.TO) @ C$0.42/share
- Energy Fuels (UUUU) @ $2.27/share
I haven’t spoken much about uranium on this blog (yet), but long-term, it’s one of my favorite investment ideas (along with copper)… The reason I haven’t gone overboard and bought up a bunch of shares of the leading uranium companies is that I strongly feel that a turnaround story isn’t in the cards at this time…
Currently, there is more supply than demand, so there’s no real catalyst for share prices to take off immediately…
A turnaround story may realistically take anywhere between 5, 10, and maybe even 15 years to play out… So, there’s no real appeal for an investor/speculator to sink a ton of money into this play just yet… which is why I’ve elected to concentrate mostly on gold and silver, so far.
But markets tend to move when you least expect them to, so the uranium story is on my watchlist, no doubt… Currently, I have light exposure to Energy Fuels (UUUU) and Fission Uranium (FCU.TO) shares.
Here are some interesting facts for you:
From Uranium Energy Corp:
Today there are some 437 nuclear power reactors operating in 31 countries plus Taiwan, with a combined capacity of over 380 GWe. In 2014 these provided 2411 billion kWh, over 11% of the world’s electricity.
Over 60 power reactors are currently being constructed in 13 countries plus Taiwan (see Table below), notably China, South Korea, UAE and Russia.
For 2015 and 2016:
From Uranium Energy Corp:
Yet most of the world’s fuel is produced in Kazakhstan alone… The U.S. only constitutes 2.7% of global production!
From Energy Fuels:
That’s a lot of future growth outlined, with a good bulk of it coming from China (who else?)!
Energy Fuels (UUUU) is probably my favorite producer play at the moment because the company has a ton of resources in the ground (96.9 MM Lbs. in Measured & Indicated), and the current market cap is dwindling down to only ~$100 million. Shares have fallen hard since the summer, down almost 50% to about $2.27/share, from a recent high of $4.26/share on August 12.
The recent smackdown is what makes this story most compelling…
I like UUUU because the company is currently hedged into a few (6) long-term contracts with multiple utility companies, so they are able to generate consistent revenue… Hopefully enough to avoid dilution in the short-term. With a good balance of both exploration and development projects, along with the capability to scale both conventional and in-situ recovery (ISR) production (recent merger with Uranerz Energy), I like this “non-expiring call option” on the future rise in uranium prices (which is bound to happen at some point!).
At the right time, when prices finally spike back upward, the company should be well positioned to crank up production and generate much better profit margins!
From Energy Fuels:
Uranium Energy Corp (UEC) is a more popular pick (much better promotion), and they are purely a low-cost ISR producer… But at comparable market caps/enterprise values, I’ve got to favor the company with more resources in the ground, and in this case, that’s UUUU.
As for copper, we’ll get into those details next time! But like I said, with both uranium and copper, I don’t feel the need to rush heavily into those speculations right this very moment (I’ve got a few positions established, though)… Commodities across the board have been getting crushed… Let’s see how long this trend can continue on for…
So, those are some of my favorite ideas…
What are YOU buying right now!?!