When it comes to investing, I’ve dedicated the last 4 years going full assault, as has been documented on this blog… As I’ve mentioned previously, right now, the ONLY sector that I am remotely interested in is gold/silver mining stocks…
I’m a firm believer in looking for deep value and buying low… With gold’s relentless early surge so far this year, I can’t say that it’s gotten any easier looking for bargains.
They are still out there, but it’s starting to get just a tad bit more difficult…
In any case, as I’ve alluded to from the start, my strategy has always been to “load up on the dips”. I’ve always been a-ok with this technique because I rationalized that I was buying into a sector that was already in full blown liquidation, and that the further things fell, the more attractive the opportunities would become.
Let’s be clear on this point though — I am SPECIFICALLY talking about gold mining stocks ONLY; there is NO WAY I would “buy the dips” on the S&P 500 right now… I would “sell the rips”, instead, had I not already checked out of that overinflated bubble last summer.
What I have done, from time to time was to make sure to post “major” updates whenever my portfolio was down tremendously:
As you can see, the portfolio was particularly devastated during the last two instances… Since that time, my mining portfolio has recovered from -$60,000 to -$10,000…
This doesn’t even include all the short-term profits I’ve booked along the way… Recently, I sold off Richmont Mines (RIC) for another $2,000 or so in gains…
$50,000 delta in just a few weeks…
Like I’ve said so many times before, mining stocks are extremely volatile, so you better have an iron stomach if you’re going to play!
Anyway, just as it was true then, it remains ever more true now — Just like everyone else, I don’t have a crystal ball so I have no way of knowing where things will be headed next… When I first started loading up on mining shares, I got a lot of comments from people who would always question, “Why buy now?”
In their opinion, I was jumping the gun too early and putting myself at risk because I would most likely end up catching a bunch of falling knives…
But I reasoned, it was still worth doing because there were so many bargains out there… For instance, during the last sell-off, anyone had the opportunity to load up on:
- Pretium Resources (PVG) @ $4.00/share
- Yamana Gold (AUY) @ $1.40/share
- Endeavour Silver (EXK) @ $1.00/share
- First Majestic Silver (AG) @ $2.40/share
- Energy Fuels (UUUU) @ $1.85/share
- Ivanhoe Mines (IVN.TO) @ C$0.53/share
Many readers of this blog swooped in and are now making out like bandits.
Kudos to you all for having the courage to buy low!
Anyway, I bring this up only to point out how insanely difficult it is for anyone to pick out bottoms… Those standing on the sidelines are quick to critique others, but it’s really not that easy…
Pundits will say things like, “I’ll wait for the bottom to settle, and then buy on the upswing…”
Sounds like a good idea, right?
But my thinking has always been, how the heck do you know when it’s a real legitimate recovery and not YET ANOTHER head-fake?
Gold is now trading above its 200 day moving average… What next? Wait for it to break through $1,155/oz? Or over $1,200/oz?
At over $1,200/oz, where will the mining shares be trading at?
What if you buy then… only to find the shares and spot price come crashing back down again?
So much for your cost basis! That would be a BRUTAL blow…
Like I said, it ain’t easy!
So, now that gold is up again, I’ll tell you that my strategy hasn’t changed the least bit… I bought much lower, and I’m going to stick to my guns — Unless my portfolio is beet red again, I won’t be a buyer.
I’ve already got enough shares…
And contrary to what one might think, I don’t get shaken out, or scared the least bit when my portfolio is down BIG! As a matter of fact, I become outright giddy when I can dollar cost average (DCA) and improve my cost basis significantly… because my conviction only becomes that much stronger.
Anyway, just sharing my quick thoughts from this recent rally…
If I was a betting man, I would say that this run up is another head fake and not the start of a bull market in gold… Quite frankly, I still don’t see much fear from the masses, and the overall stock market is still way overpriced…
For gold to unleash itself, we need more negative interest rates, quantitative easing, currency devaluations, market crashes, etc.
Lastly, here is a portfolio update:
- Sold 2,500 shares of Richmont Mines (RIC)
- Sold 40,000 shares of Copper Mountain (CPPMF)
- Sold 7,000 shares of IAMGOLD (IAG)
- Purchased 1,990 shares of Endeavour Silver (EXK)
- Purchased 1,500 shares of B2Gold (BTG)
- Purchased 10,000 shares of Ivanhoe Mines (IVPAF)
Recently, I sold out of RIC to book some short-term gains. Kind of a shame, as I really do like this stock a lot. If it pulls back, I will definitely look to get back in. Otherwise, if it runs far away, as was the case of McEwen Mining (MUX) for me, I have no problems saying goodbye… Whenever you get the chance to book 30% gains, it’s never a bad thing!
I got out of the CPPMF trade when I realized that the deflation in base metals might persist for longer than I had originally thought; as such, I thought CPPMF would be too much risk for me since the company has a good amount of debt.
Lastly, I closed out my IAG position since this was never one of my favorite ideas (short-term trade was my thesis all along), and I was able to make a very small profit (good enough). I have no plans for the proceeds at this time, and like I mentioned earlier, unless my portfolio is beet red again, I’m probably done buying.
I used the proceeds from the CPPMF sale to buy more shares of IVPAF (by far my absolute most favorite copper/zinc/platinum idea). IVPAF is far less risky than CPPMF, since the former is not yet a producer; low metal prices have no bearing on the progress of their mine development programs (which are still a few years out). Also, IVPAF holds 3 world class assets, so this isn’t one of those speculative exploration stories. The only real risk with IVPAF is jurisdiction (South Africa and Congo)… But if metal prices rebound sharply over the next 5-10 years, I’m convinced that this will be THE stock to own to leverage on the rebound. IVPAF is my largest holding at 50,000 shares.
I also added some shares of EXK and BTG since they were so cheap! 🙂
I’m down to 18 holdings now. If I get the chance, I’ll probably look to exit out of Eldorado Gold (EGO) and Balmoral Resources (BAR.TO). EGO has the whole Greece headache to deal with and BAR.TO is probably too early stage development for my risk appetite (and I’ve already got too much PLG.TO, which I might also trim down).
So, still a work in progress, no doubt…
Congrats again to all the folks who got in a few weeks ago… Whether you decide to book profits or hang on for the ride, many of those shares are now up over 50%, and perhaps even 100%…
As for myself, I’m content with where I am in life (all things considered). As it pertains to investing, I’m happy to report that I’m just about done buying. No more: stocks, real estate, index funds, etc…
Not unless things hit the fan and become beet red again…
As I’ve learned from buying mining stocks, that’s the ONLY time I want to buy. 🙂