Tag Archives: gold miners

Perspective on the Gold Miners; Management

Miners long term

SP long term

lt cape

Gold and Nixon

2Q 2016 Tocqueville Gold Strategy Letter – Final

The above charts came from this article.  I would ignore the conclusions but focus on the historical perspective.

http://seekingalpha.com/article/4003004-gold-mining-stocks-best-investment-asset-next-decade

GOOD MANANGEMENT

Enterprise Product Partners August 2016 Presentation

Note the information they give investors. How management communicates is important. Do they provide sufficient detail for you to assess their capital allocation skills and operational performance. Note page 5.

Celebrate when your stock gets downgraged

Analyst Recommendations Do they add value

Time to Sell Some Miners, But Not Much

Junior Miners

There is no training, classroom or otherwise, that can prepare for trading the last third of a move, whether it’s the end of a bull market or the end of a bear market. Paul Tudor Jones

I am selling about 1/5 to 1/6 of my speculative miners like Minco Silver. It was trading back in Jan. 2016 at about 30 cents.

Minco one yr

This miner didn’t fit all my criteria like jurisdiction and top-flight management, but it had $1 per share in cash and short-term investments and $2.00 per share (basic shares outstanding) in book value with no debt.  I viewed the stock as a cheap call option.  My position was not a full position but diversified in these type of exploration/pre-development type of companies.

MSV_2015YE_FS  Minco Financials

Minco Presentation

This bull market is starting to smell like the 1970 rally!

Bear-market-comparison-Gold-768x685

So, I expect this bull market to last perhaps years or for miners to multiply several times over.  You make your money SITTING.  But when you start feeling smart or, worse, other people think you are smart (where were you in 2015 when my accounts were down 35% to 40%?), it is time to peel some positions off.   Sell into strength. Note the past history of the miners.

bgmi

I wanna go back to the 70’s.

An educational video on the Federal Reserve or why you should own some gold

Have a Great Weekend!

Investment Strategy

Gold-vs-Gold-Miners-Ratio

Client Report Jan 29 2014

gold vs spy  Gold is money, not an investment.

Value Investing Videos (Manual of Ideas)

https://www.youtube.com/user/manualofideas?feature=watch

Pabrai lectures in India: https://www.youtube.com/watch?feature=player_embedded&v=Py95fWZV2Vo

Reader’s Questions

How much of your decision to not own stocks of businesses outside of the mining sector is based on a top-down or macro decision.  The reason that I as is because you mention that you owned COH in the past and that seems like a cheap stock at the moment.  I could understand that you might not want to own it because of it struggles in the US and possible brand erosion, but that seems more like a quality issue than a valuation issue.  Or is it a fear of a hurting consumer?

My reply: Actually, it is a bottom-up decision.  I have pawed through my 250 stocks that I target in Value-line but see little margin of safety. Yes, I owned COH many months ago but sold near $58 as I had about a $60 to $65 valuation on it.  I am very skeptical that the high end of their profit margins can be sustained because of their clientele and QE. But the undervaluations in miners gave me a better uses for my capital.  So bottom up on both sides push/pull. 

But I am certainly not suggesting anyone follow exactly what I am doing. I still own some non-miners like ESGR but I wouldn’t add to them. 
 
Question: Also, I’m still trying to understand the margin decline argument. I haven’t done enough homework on it myself to ask intelligent questions, but intuitively I don’t understand why a specific geography (in this case the US) couldn’t have more than average of the types of companies that generate higher margins.  The geographic lines on a map seem arbitrary to me.

My reply: Well, set aside geography, because the same principles apply to any country. The most mean reverting metric of companies in general would be profit margins.  Think about the inevitable law of competition and lack of barriers to entry.  But understanding this subject will make you a better investor and save you heaps of pain!  If an analyst projects an increase in multiples on top of today’s profit margins, then I suggest a mercy kill for that analyst and his boss/clients. We are in the death zone–a climber’s term for high altitude conditions. 

Cutting back on growth capex and returning excess capital to shareholders if there are no adequate opportunities to generate excess returns is the right thing to do, but how sustainable is it for large companies like IBM or CSCO? Also, buying stock today may not be below intrinsic value for every company that is doing it.