How we analyze key characteristics of resource stocks
Brian Leni, Founder of the Junior Stock Review website joins me today to dive into some of the key aspects of resources stocks and how he analyzes them. We also hear people say management is key, which we completely agree with. However there are a number of things to consider when looking at management. We discuss everything from track record to salaries.
Good interview Corey and Brian. I would take a difference of opinion on one point that was made though.
As far as using current metal prices this was the mantra last year when everybody said “I’m going to use $1,200 gold to be conservative and accurate.” The reality is that their valuations were not accurate, because they were using the wrong gold price for 2019 clearly. I’d submit that technical analysis does allow you to predict where gold could reach based target as an upside 50, the 2016 hi, would be taken out this year meaning gold would be closer to $1,400. So for people trying to do valuations at $1,200 gold, they got it flat out wrong. I think it’s far more accurate to project where price is going with technical analysis, and clearly defined mathematical and historical price targets, than to assume the metals prices going to stay exactly where it is, we’re no Market stay stagnant. Therefore trying to do valuations on company and keep continually moving the needle every time the metal prices move higher means there was little Worth to the initial valuations done at $1,200 gold.
Also if you believe we’re in a longer bull run now, then even using $1,300 gold for future valuation is also near-sighted, not conservative. If gold shoots up to the mid 1400 to 1500, then evaluation on companies and all that work at 1300 is flat-out wrong.
While nobody has a crystal ball or can tell you exactly where the price is going to go, technical analysis at least tells you if you’re in an uptrend or a downtrend, and a bear Market or a bull market. Do continually harp on using current Metals prices as the stagnant line in the stand for valuations misses the valuations where the companies will actually go based on where the metals prices are going. To invest in companies and not consider the direction of the metals prices underlying their assets is to completely Miss where the edges for retail investors.
To clarify this sentence above (which didn’t come out correctly with voice to text):
“I’d submit that technical analysis does allow you to predict where gold could reach based target as an upside above $1377.50 – the 2016 high, would be taken out this year meaning gold would be closer to $1,400. ”
The point I was getting at is that if investors want an edge, they need to “skate where the puck is going” to quote Wayne Gretzky.
If the puck (metals price) is going above $1400 based on TA, and that we were still in the bull market that started after Gold bottomed in Dec 2015, then a breakout was inevitable. Therefore, keeping valuations and where investors should be speculating based on $1200 gold last year and even earlier this year was an undervaluation by a landslide.
I’m not suggesting to use pie-in-the-sky figures of $5000 or $10,000 Gold, but valuations should have been made on Gold at $1400 was an obvious conclusion to draw once Gold never challenged the major low, kept putting in higher lows, and kept making a move at upper resistance at the 2016 high.
Being too conservative, will have one wrong-footed in a bull market where surprises are to the upside, not the downside. It also would have investors passing on smaller producers or advanced development projects that don’t look good at $1200 gold but start to break out at $1400+ gold.
It’s the exact same point right now with Silver prices and where they are headed.
There is little doubt that Silver will break up through resistance eventually, especially as Gold keeps trekking higher and drags it along. Using the current price in the low $15s makes no sense for valuing companies, when it clearly will be back above $17-$18+ (likely heading above $20 by next year). To pick companies to invest in based on the current price of $15 will have an investor missing the really leveraged plays and passing on companies that will crush their “safer” bets.
I look very closely at remuneration…..both salaries AND shares/options given.
I am often disgusted….probably more than 50% of companies, ehere the burn rate is too high. I look very carefully at insider trading also. How much insider trading is milking the company, getting low priced options and dumping shares. etc.
cfs:
Care to point out any good guys and a few bad ones. It would be helpful for many of us to look at examples to learn things to watch out for –
Thanks!
I don’t want to abuse my abilty to post at this website.
I’m not sure Big Al would like it.
At MUX Rob McEwen is paid $1 a year and gets no options, and bought almost 1/4 of the shares with his own money.
I heartily endorse Bob Mcewen’s attitude. He’s a good guy.
$1 Rob McEwen is a very solid CEO with skin in the game along side investors in his company. I wish more CEO’s would take a page from his playbook.
I am often disgusted at financing where too many options are given and where you just know brokerage houses are going to manipulate the share price.
or warrants
This is it? Silvers först baby steps in this young phase 2 gold bull market? Well then one might pull the trigger and buy some silver junior miners like IPT, DV 👌😀
IPT is up 8% today and the big picture keeps improving:
https://stockcharts.com/h-sc/ui?s=IPT.V&p=W&yr=3&mn=7&dy=0&id=p34807476229&a=642296042
💪😎
IPT up 10 % and I’m in, 0,34 cad. A little bit late, I was planning to buy after the fed meeting but by the way IPT behaved lately and SILV today I don’t wanna wait to long.
I remember 2016 I bought on the way down at 0,40-0,45 cad after it was up around 1,30 cad. But it kept going down, so I sold and decided to wait, until today, yihaa!!
This time Im in early and I will never let it run away from me.
Off Topic:
You think the Straits of Hormuz are just about 2 million barrels of oil?
Since Iran has no nuclear weapons program according to all 17 US intelligence agencies and poses no threat to the US perhaps we should stop conduction acts of war against them and leave them alone.
Iran would be the very best ally the US could want if we would just stop waging meaningless wars on behalf of Israel. They have conducted themselves with grace and restraint against the forces of lying and evil. Iran is not the enemy of the US and never was.
Very well said… Robert.
Irish, did you actually listen to what President Trump has said in speeches and read what he wrote in tweets.
He has repeatedly offer the hand of US friendship, if Iran is prepared not to develop a nuclear bomb.
Trump has offered to help Iran in oil and economic development.
This should be no problem, if they have no intention to develop a bomb.
Mr. Moriarty, perhaps you could explain Iran’s creation and storage of heavy water, since you claim (citing ancient reports) that Iran does not want to develop nuclear weapons.
Or Mr. Moriarty explain, for example, development of inter-continent ballistic missiles. Not known as economical delivery mechanisms for conventional explosives.
In fact, I cannot recall an inter-continental ballistic missile ever being used in war to deliver conventional explosive. Cruise missiles with a few hundred miles range have, but inter-continental missiles?
“RUBBISH”
Point of fact:
I believe that was 16 agencies in 2003 that said Iran had halted nuclear arms development.
I ask for proof that Iran has not changed its beliefs in 16 years.
Typical Irish behavior.
When you cannot use facts to explain behavior, just use an expletive.
You are stupid or ignorant, Irishtony, just like Mr. Moriarty.
Either explain:
1. Why Iran is storing Heavy Water, or,
2. How are intercontinental ballistic missiles used for non-nuclear war-fare.
The answer to both is that use is only for nuclear war-fare.
CFS, you’re ridiculously oblivious to your own blind spots and gullibility. Your goal has always been to defend your brainwashing and confirm your biases. A truth seeker you are not.
The ignorance and stupidity around here is all yours.
The only exception to the use of Heavy water that I can think of is that Brilliant Iranian research might be being performed for Fusion reactor design, but that rather strains credulity.
The silver-gold ratio is looking good versus the USDX (SLV:GLD:UUP):
https://stockcharts.com/h-sc/ui?s=SLV%3AGLD%3AUUP&p=W&yr=3&mn=9&dy=0&id=p07384326733&a=676464248