Erik Wetterling – Having The Patience To Allow Probable Growth Stories To Unfold
Erik Wetterling, Founder and Editor of The Hedgeless Horseman website, joins us unpack how he approaches value investing in “probable growth” companies his portfolio of junior gold and silver mining stocks. A key point covered is that most investors are not really longer-term buy and hold investors, and instead the vast majority of market players are trying to time the markets for entries and exits. In contrast a value investor finds a competent management team with a defined strategy to grow value in their project, then has the patience to sit tight through market volatility to let the thesis play out.
This value creation, as it unfolds, will then bail out any mistimed entries with regards to sector metals prices and the corresponding growth in market cap will happen regardless of the macroeconomic backdrop, when sentiment inevitably shifts back up for the resources. Erik finds this simpler approach to blocking out most of the market noise key, but it is a more nuanced art as far as isolating which companies & teams are actually going to be building enough intrinsic value to outpace financing dilution.
Yep. This was a good short but sweet interview with Erik, pointing out the power of being patient with probable growth stories to allow their strategies to compound and play out.
Lakedweller2:
As always I am glad if I make any sense at all when I go ranting! :). There are a lot of things to consider when thinking about probable growth for example and am in no way done learning myself. Trying to get a bit better every day and just keep making mistakes and learning from them.
Best regards
FREAKY FRIDAY………. is upon on us……………. drive carefully……..
As Yogi used to say “when you come to the fork in the road, take it”, and I have.
Erik is a glutton for punishment…I have a rule…Never ever buy gold or silver junior miners…I broke that rule yesterday…Bought some EQX ..A stock that has been badly beaten down. Although it still can’t hold its gains… I shall be selling EQX, first thing tomorrow morning.. AT ANY PRICE…Sincerely..Once again…Lesson learned.. Poppie*…
I don’t think most stocks will prove themselves out in 2 days. But Joe knows.
Great point Lakedweller2. Ironically, one of the main takeaways from Erik’s interview up above is that most investors are not good at market timing, and struggle with the concept of buying low, and then holding on long enough for the uptrend to ensue. Why someone would think they could come in and do well in a stock in just 2 days and then sell in disgust if it didn’t work out is the epitome of his example of the impatient retail trader that isn’t good at market timing; and then predictably blames the sector, instead of their own poor entries and exits, and inability to hold onto a position long enough for the prize.
There are so many ways to make money at this game but equally there are so many ways to lose money. Sometimes I will follow the herd into a stock and exit shortly thereafter, taking something from the punchbowl before it gets drained. LOL! DT
I do a fair amount of Due Diligence but when I find a stock that I really like I will rarely buy in at that time. If I think I have just stumbled onto something that turns my head than maybe other traders have seen the same thing, so I will wait to see how the stock in mention trades out over the next few weeks. If I am still interested I may buy in. Sometimes I am cautious and sometimes I am reckless but that comes from persistence at leaning the craft by many years of hard work, and keeping an open mind. DT
That is a good point DT, because I often do the same thing and will track a stock or or wait for a time where a good project and good team and popular narrative has been sold off with the rest of the sector and then pounce on it.
I will also follow a very large stock that has quality but that recently had a challenge or bad news release and then I wait for it to tank in share price and then grab it while it’s cheap and way oversold, and then ride it back up when people cime to their senses and rerate it higher again.
I just did this with GATO Gato’s Silver and it was one of my better trades of the year. I had been watching it since inception and always felt it was too pricey. Then the opportunity for a quick swing trade of 21% presented itself from Jan to Feb, when their bad news first broke about their resource calculations being unreliable and it had taken a nosedive plunge down. Finally it had a shakeup. Then I got back into GATO during May and traded out in July for a 45% gain. (So a total of 66% gains just this year in that stock).
Now I’m scaling back into GATO again because they still have a lot of silver and base metals in the ground, even if the resource isn’t as reliable and the stock is trading for a fraction of where it was a year ago. They are still operating the mine just fine, and have a crapload of exploration upside on their land package that is not being considered by most of their haters. Now people don’t trust them and they’ve lost investor confidence. Other people’s squeamishness is an opportunity to buy it when it is unloved.
I did the exact same thing with Orezone a few years back when they had a resource calculation misfire. I had been watching it with keen interest for a while, and then blam! It sunk like a stone in a pond, and I pounced, figuring they’d get it sorted and noting the market had way over-reacted. When everyone went running for the exit doors, I was there buying their shares. Thank you fickle retail investors! 🤑🤑🤑
Recently I’ve been adding to a few more “Ugly Duckling” trades in other good companies that hit a rough patch and investors sold them off too hard in Kinross, Equinox, and this week in Fortuna.
Poppie:
Your are not wrong. The corrections in juniors seem to last 3 times as long as the legs up last several years. So most of the time it’s a grind down but now and then there is a spurt higher. The 2011-2015 bear market was even a lot worse market than from 2015 to today. But then again there are runs like 2009 to 2011. I have no idea when the market will go up or down which is the reason why I don’t even try to time the market. EQX has Beaty which has proved to be a very good steward of capital quite a few times. I would rather own EQX than GDX because of this (and I do own some).
Best regards
I haven’t bought eqx yet, but it’s on my list. Will it maybe get 10 percent cheaper?
Unless it goes bankrupt would it not be a take out candidate next year?
Steve
I’ve started back up an EQX position lately, and have no fears of them going bankrupt.
While they could always get acquired, it is far more likely that they will be the ones doing the acquiring… like they have 3 different times thus far in their existence. Ross had mentioned they would grow through acquisitions, and that is precisely what they’ve done.
I’m slowly taking a position in EQX –it’ll grow over time.
Agreed Doc. I have no doubt that in 2 years Equinox will be producing over a million ounces of gold annually, it will graduate to become a Major, and its value will be up at least double or triple from where it is currently. Easy peasy…
Added to Empress and Stillwater Critical today as well as a few Nine Mile Ceo.ca had a posting on their Empress site of a Sedar report that indicated Sprott Asset Management and American Capital Management were either buying in or adding to their positions. I added to Stillwater just because they have a lot of stuff going on.
Picked up a few more Brunswick Exploration. Volume currently over 551K for the day when normal volume about 94K. Don’t know why. Supposedly John Kaiser has as one of his recommended. Lithium search but pending drill results. Pegmatite target. ????
Erik covered a lot of ground in a few minutes. Great insight. Thanks for the roadmap.