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My Investing Days Are About Over… For Now

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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:

Staying the Course – January 19, 2016

Beet Red – January 12, 2016

Beet Red – November 12, 2015

 

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…

I did…

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?

Screen Shot 2016-02-04 at 7.29.06 AM

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! 🙂

Screen Shot 2016-02-04 at 7.59.55 AM

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…

Nope.

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. 🙂

 

Fight On!

{ 8 comments… add one }
  • Financial SamuraiNo Gravatar February 4, 2016, 10:57 am

    Good job having the discipline to limit your exposure! I’ve seen many people just keep on investing until they go broke.

    • The DudeNo Gravatar February 4, 2016, 11:13 am

      Still seems to be overexposed to this sector by any reasonable diversification measure, but I get your point about making the decision to not keep adding to the position.

  • VinitNo Gravatar February 4, 2016, 11:48 am

    Keep Killing it FI Fighter. Very nice article and perfectly justifies your recent buying. One thing I noticed that most of your holdings are PFIC. Usually IRS has very high rate of tax for these kinds of investments. Refer http://thunfinancial.com/why-americans-should-never-ever-own-shares-in-a-non-us-incorporated-mutual-fund/

    Are you not concerned with the higher tax you might have to pay on these investments.

  • HristoNo Gravatar February 4, 2016, 12:22 pm

    Hi,

    Despite cash is having 0% nominal return and negative real return over long-term, one of my investment pillars is that I should keep at least 10% cash always.

    You don’t know when an opportunity or a necessity of money will come. And when that moment comes, it’s better to have some liquidity. So, I admire your decision. Cash also reduces the ups and downs of the total wallet performance. And you are very well position even without any new additions. As of now, it seems god is heading north.

    Regards!

  • Res @ Happylater.comNo Gravatar February 5, 2016, 4:04 am

    Hi FI fighter,

    This blog post enshrined why diversification is key. This is what you have done by buying rental property and the like and invested only a small portion in stocks. I thank you for being honest and let these lessons echo throughout the investing community. I have bought VDE in December just before oil started to tumble, luckily it was not individual stocks as most likely I would have picked the wrong ones.

    Take the foot of the accelerator for a while 🙂
    Res

  • AndrewNo Gravatar February 5, 2016, 2:32 pm

    I was able to stumble upon your blog a few weeks ago. And glad I did! I have time on my side as far as investing goes but have been thinking that stocks are overpriced for a while now and havent been able to find to many bargins. I put a good % of my investments in BND from vanguard which since I bought in early 2014 has gone up and down but pays a decent dividend every month. Since Ive read various blog posts here I really looked at gold miners. specifically AUY. when it went down to $1.50 last week i pulled the trigger. with USD so strong and global markets been hurting it was a matter of time before US markets start getting hurt with poor earnings from companies as 30% of earnigns in the S&P come from international markets. Which in return should help the USD come back down to earth further driving Gold up. If not ill be happy to book my profits if it starts heading down and then rebuy below $2.00 for AUY or look at another company.

    Enjoy your posts and thoughts!

  • No Nonsense LandlordNo Gravatar February 5, 2016, 3:46 pm

    Getting out of the winners now will be a great idea. Gold and the miners are having their heyday, but global recession and deflation are still in play.

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