Portfolio Update – And Random Ramblings (June 17, 2016)

smeagol

These days, for the most part, I don’t provide too many portfolio updates unless I feel like I want to make a point about something. As a service to subscribers, I’ll still provide a snapshot of my portfolio on the e-mail updates so they can keep tabs on my latest wheelings and dealings, but on this blog, nah, there’s really no reason in doing it too frequently these days…

That is, unless my portfolio undergoes another significant metamorphosis, which would necessitate the need for a fresh update…

Anyway, it’s pretty boring, as I’m only focused on 3 investmentsGold, silver, and lithium. Although, I’ll probably add some graphite shares at some point in the future.

Here’s the portfolio as of market closing on June 17, 2016.

Screen Shot 2016-06-17 at 8.44.37 PM

Why am I providing an update today?

Because I want to make a point! 🙂

I Own Too Many Stocks

Looking back with the benefit of hindsight (don’t you just love hindsight), one thing I can say for certain is this:

I own way too many stocks.

My mining portfolio currently consists of 22 positions… Honestly, my own logic is telling me that I should probably trim that down to about 12, if I want to maximize my gains.

Why haven’t I done so?

 

Because I’m chicken shit… Just being honest…

 

And I think it’s due to human nature and human psychology. For whatever reason, I feel like I have more of a “safety blanket”, owning 22 positions… In theory, my funds are more spread out, and no individual holding is “too large”. But as gold demonstrated to me last year, a sinking ship is gonna take every last stock down under with it

There are no “safety nets” when the market hates your underlying investment thesis.

Back on January 19, I will recall looking like perhaps the most idiotic blogger out there on the blogosphere (I’m sure many of you thought that and maybe a few of you still do today)… I even remember receiving some comments from concerned readers asking, “When are you going to give up on this failed experiment?

 

Anyway, let me tell you, even though it’s my “full-time job” managing this portfolio, truthfully, it’s a nightmare trying to keep up with all the latest news and headlines with each stock that I own… For the most part, I just let the larger cap companies run on auto-pilot, and I don’t even tune in all that frequently to any updates (not a good idea, obviously)…

That’s why I think 12 stocks is “just about right”… With 22+, there’s no way in hell I could ever hope to keep up with everything… And that’s why I instinctively start looking to trim down whenever my portfolio gets over like 25+ stocks

When a portfolio is too large, it just becomes too damn bloated, the returns suffer (due to inevitable mean reversion), and I don’t really have that many good ideas, anyway. If I wanted real “diversification”, I’d be better off purchasing an index fund like GDX or GDXJ than trying to construct one of my own… and I’d save way more in commissions/fees too.

So, even at 22 stocks, I think that’s too much (and my odds of beating the indexes aren’t as good)… But I don’t always do what I think…

I probably don’t have as much conviction in my heart (I’m too emotional) as I have in my mind… or something like that.

Focus On Your Best Ideas

What else have I learned?

Go with your gut instincts and focus most of your time and efforts on your best ideas… If I didn’t have any “best ideas”, sure, I would look to divy up the stock positions into equally weighted positions, but oftentimes, I do have stock ideas that I like more than others

For instance, back in Fall 2015, I bought up shares of True Gold Mining (TGM.V)… But I didn’t allow myself the opportunity to buy anywhere near enough shares… Instead, I “diversified” and dumped a lot of capital into other gold stocks such as Eldorado Gold (EGO) and IAMGOLD (IAG).

I thought I was doing the right thing by “diversifying”…

Yeah, I was diversifying… into crappier ideas… and sadly, I knew that even when I was doing it…

With mining stocks, you really don’t need that many good ideas… You just have to bet right, sit tight, and be patient… No, it isn’t easy by any means trying to pick out the best mining stocks, but I mean, sometimes you just kinda know which companies/valuations make better sense and will provide significantly more upside potential.

 

True story here — There’s a reader on this blog who backed up the truck and bought up a ton of TGM.V shares… I believe he reached over 1,000,000 shares in total… Obviously, I’ll never have the courage to go that BIG, but the man had full conviction (kudos to him), and he was ultimately proven to be right. Today, shares of TGM.V trade under the symbol EDV.TO, which is Endeavour Mining, due to the acquisition/merger earlier this year… In my own situation, plugging in my original cost basis, I’m up 350% ($25,000 USD) on the original TGM.V position… Can you just imagine how much the other guy is up?

Last I heard, he quit his job (go figure)…

You can win really, really BIG if you know what you are doing and stick to your best ideas…

 

 

I’m trying hard to learn from my gold mistakes as I apply these lessons to lithium stocks now…

If you look at my portfolio, you’ll easily be able to see which lithium stocks are my current “best ideas”… For certain, subscribers are well in the loop with what I’m doing; I won’t stop rambling on and on and on about those companies… 😉

 

Please note – No question, it’s a lot “riskier” betting the farm on any single one idea (there are NEVER any guarantees that things will work out)… I am definitely NOT advocating anyone do that EVER! Never exceed your own tolerance level for risk and only speculate with money you can afford to lose.

Fundamentals Trump Price Action

Here’s the most important thing for new investors to know about mining stocks — They are insanely volatile.

Mining stocks will soar majestically, and then crash right back down to earth… for no reason whatsoever… That’s just their modus operandi… Either deal with it, or don’t play this sector at all.

For myself, seriously, I do not care one iota if my mining stocks are beet red.

If you look at my portfolio above, you’ll easily be able to see that ALL my Australian lithium stocks are currently, right now, beet red!

Here’s a snippet of a watchlist that I use to gauge market sentiment/behavior…

List

Do I care?

No…

Well, yes, actually…

Yes… because…

I ABSOLUTELY LOVE IT!

As readers are well aware, I believe wholeheartedly in the clean energy/electric vehicle revolution and I strongly feel that lithium-ion batteries will be a part of the solution. Further, I don’t see any competition realistically emerging anytime soon (within the next 10 years at least). So, I’m going to do my absolute best to take advantage of this window of opportunity, and what I feel like is another one of those “once in a decade” kind of investment opportunities…

So, as I always like to say — Buy right, sit tight, and don’t sweat the technique.

As long as the underlying investment thesis for lithium doesn’t change for the worst, and the companies that I’m investing in don’t all release some terrible news event that damages/destroys fundamentals, why bother worrying about daily price action at all?

Currently, lithium stocks are selling off due to fears over Brexit…

*Yawn*

Next time around, there will be some other kind of event causing havoc…

Really, the only time I’d ever be concerned with a sell-off event is if every other mining stock in the sector is soaring, and ONLY the stock(s) that I hold is (are) tanking…

But if the entire sector is taking it on the chin, who really cares?!?

Again, back to my lithium portfolio… My “favorite idea” is currently deep in the red, even though the fundamentals are extremely strong and the story just keeps on getting better and better… I made 3 separate purchases last week to add more shares of this company… And after I did that, the stock tanked some more…

Loving it!

That means next week, I should be able to buy even more shares at an even larger “discount” which will only help me lower my cost basis further… 🙂

 

I can’t repeat this enough times — Buy low and sell high!

 

You guys all know very well that I detest expensive merchandise when I’m an active buyer…

 

Why else do you think I stopped buying Bay Area real estate?!?

Sell Partial Positions

Because I know that I’m chicken shit, the only way that I can ease my own fears is to implement the following strategy — Sell partial positions.

For instance, if I have an idea I really, really, really like, I’ve learned that it’s probably a good idea to “overload” on the initial purchase… That means, buy up more shares than I’m reasonably comfortable with holding for the long haul…

Why do that?

Well, should the share price run up, then I’ll have an opportunity to liquidate a few parcels for a profit and take some chips off the table. This in turn will help reduce my overall cost basis (sometime significantly!) and the net result is that I’ll end up trimming what was initially an overweight position into one that is now just the “right size”… The original plan all along!

The most popular approach to selling a partial portion is to take a “free ride”.

Basically, that means that on the first double (2x), you sell 1/2 of your original position. For example, in my own portfolio, I’m currently up over 100% (2x) on Richmont Mines (RIC). If I wanted to mitigate risks and ease my mind, I could sell 750 shares out of my total lot of 1,500 shares. By doing so, my effective “skin in the game” would fall to $0. The remaining 750 shares I would own would be like playing with the “house’s money”…

So far, I haven’t sold any RIC, but I have sold partials of other holdings before.

  • B2Gold (BTG)
  • Teranga Gold (TGZ.TO)
  • Pilot Gold (PLG.TO)
  • Klondex Mines (KLDX)
  • Pretium Resources (PVG)
  • Etc.

 

For example, by selling partial positions (a few transactions) in BTG, my overall cost basis has been reduced to just $0.665/share… I still own 20,000 shares which carry a current market value of $44,000.

 

That’s cool with me…

 

No, I haven’t taken a “free ride” yet, but I’m open-minded to the idea, of course…

In general, the “free ride” approach works best with speculative juniors (early-stage exploration stories), which are by far the most volatile and riskiest of all mining stocks out there…

Summary

I’m simply using today’s update to share with readers my own thoughts as it pertains to mining stocks.

Please Note – As always, please do your own due diligence and research before making any kind of investment decision. These are just my own crazy ideas, and they probably won’t be suitable/applicable to your own situation. I NEVER have and NEVER will offer any kind of investment advice, whatsoever!

 

With all that said, it’s still very much a learning process for me…

 

As always, I’m still learning as I go…

 

Fight On!

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JanBaltimoreReaderFI FighterRoadmap2Retirebeth Recent comment authors
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beth
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beth

I bought American Lithium Corp last week and I am considering buying either Lithium Americas Corp or Pure Energy Minerals before the end of June.

I am a very small investor and I can’t afford to take too many risks. I don’t make a lot of money at my job so I put most of my money in to less risky dividend paying stocks and ETFs.

Roadmap2Retire
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Research has shown that investors can achieve enough diversification to protect against downside risk by investing in 12 companies. So, you are right on the ball there when you say that you dont wnat to own more than 12 companies. Anything more than that, is not going to provide anymore downside protection and will simply dilute your holdings.
My number of holdings has exceeded too much and until a few weeks ago had reached 30. As you know, I am starting to liquidate some of my holdings and looking to bring that number down.

cheers
R2R

Jan
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Jan

Hi, it looks like you have sold Energy Fuels (UUUU)? Why?
I have UUUU in my portfolio.

Thanks.

Jan
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Jan

Thanks, very interesting.
I actually sold UUUU this morning(!) because of the news of them refinancing their loans (the procedure sounds complicated and I really don’t understand it except I know it’s definitely not good news). My cost basis was actually $2.00 exactly! Funny you should say it was a good buy at $2. So I did make a nice profit. The stock sunk mid-day but has now rebounded. Perhaps I will get in if it goes back down again, I’m not sure. I think it’s very hard to know what’s going to happen now – dilution of shares coming perhaps?
I do have a lot of so-called “safe” stocks so I’m willing to venture into some unusual sectors. Your blog is very interesting.

Jan
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Jan

Fifighter, what are your favourite lithium companies/stocks?

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