Erik Wetterling – Looking At Position Sizing Within A Junior Mining Resource Portfolio

Erik Wetterling, Founder and Editor of The Hedgeless Horseman website,  joins us to unpack how he approaches position sizing within his portfolio of junior mining stocks.  We discuss which kinds of companies get their appropriate weighting within the portfolio, and how every stock doesn’t need to be a big winner for the overall portfolio value to continue to grow. Erik emphasizes the key attributes of both “probable growth” and “margin of safety” and how this allowed stocks like Eskay Mining (ESK) or Lion One (LIO) to grow in weighting as they had exploration success and have further derisked their projects.



Click here to visit Erik’s site.

    Jun 09, 2022 09:12 PM

    I trade similar to Eric. I have gotten into the habit of trying to buy a starting position of 10,000 shs rather than deal in percentages. If it starts being successful, I try to add in 5000 increments. I try to stay fully invested which forces me to add new positions or adf to existing positions at the ecpense of others. If that exchange proves wrong, I try to move back and/or move back, sell and add a new one. The glitch is that starting with 10,000 shs keeps you in lower priced stocks initially, and requires a lot of turn over. Share count varies widely from 10,000 to 200,000 in my account, but those that are successful, fund the others out of profits. My experience is that I have a lot of capital gains, but intervention volatility always walks the account back as fundamentals don’t matter in trying to achieve long term growth. I just have not found a safe place to put gains. I have real property but that too will have its bubble popped. I enjoy trading so that part of the system is rewarding. But, generally day to day miner movement is nonsensical. Or is it …. Depends on how much you believe there are free markets. Some of the best advice is on this board. I have none.

      Jun 10, 2022 10:11 AM

      Thanks for sharing your approach to position-sizing and portfolio management Lakedweller2. That’s an intereting approach to come at it by starting with 10,000 shares, and then build it up of the over time based on the company success and your own conviction up to 200,000 shares.

      Is there a shareprice threshold you use then? I’d imagine that works better with the earlier-stage penny stocks versus the producers or royalty companies that may be in double-digit dollars in price per share.

      My approach personally is more on the percentage basis, like Erik mentioned. My higher conviction anchor positions are generally producers or royalty companies that may be in the 2%-4% range (and sometimes temporarily thrust to higher percentages, but I’ll generally sell some if they jump up over 3-4% or higher), then other producers and developers may be in the 1%-2% range, and then other less intersting developers or explorers will be in the 1% or smaller partial percentage category.

      There are times where an explorer will jump from a half of a percent to 2-4% in time, but then after a big move or more project derisking by that company, it is generally more fairly valued (or over-vaIued), so I generally chop it back between 1%-2%, or trim back most of the profits and keep a 1/2% or 1/3% tracking position, looking for volatility to exploit by growing it back higher in size again.

        Jun 10, 2022 10:15 AM

        Dollarwise, I try to buy under $1. For example: Group Ten .20-.30, Empress Royalty .22, Osisko Metals .35, Libero .35, Honey Badger .05, Copper Lake .06, Millennial .60, Impact .27, Southern Silver .18. are some examples of current timeframe purchases. However I had 3 recent buys of Lion One in the $1.20 area, Emerita from .28 to 2.70 and sold my profits where my current average is in the red, Great Bear I think was between .40 and about $3.50, So it looks like I don’t like going over $3.00 and if I do go over $2.00, I probably won’t go beyond 10,000 shares unless it is a large grade/ounce like GB or Emo. My oil stocks have been $1. -$2 range like Petrus and NG so shares held down compared to a Copper Lake which I will have 50,000 shares or more and move in and out of. Recently it has been held around .06, so waiting. I have 30,000 shs of Nevada Sunrise sitting with a +40% gain and waiting for a sector move to see if it really is going to do anything. It is day to day until something happens. I have gone through a bunch of good ones that I wish I had held and many several times. I held GB many years and have had Emo over a year. But not without using some profits to buy something like Lion One for the 3rd or 4th time.

          Jun 10, 2022 10:52 AM

          Here is the problem. CPI +8.6% and probably understated with extraction. You would think that was gold positive. But if you look at the 15 min chart of Gold on, there was several large red candles before the CPI announcement. Upon announcement, there was a big green candle taking Gold back to even followed by a series if red candles taking Gold to -18 before I began typing. Miners open with 95% down. Free trading or algo response to paper market intervention? I will leave it at that.

            Jun 10, 2022 10:11 AM

            I apologize to Erik for spelling his name with a “c”. I knew better. Here is another thought. I have bought both Honey Badger and Empress before. Wednesday, I printed out the Forum Program for the upcoming MIF and they have two pages of presenters and some of each presenter’s favorite stocks or ideas. I went through the list and Chen Lin had Honey Badger on his list and Brien Lundin had Empress. Honey Badger is relatively new and has done some sampling that had some impressive #s…but most samplings do and don’t mean drilling will produce the same. Empress is relatively new in the royalty business but their potential seems to be growing with a few producers in their stable. It is hard to say how either of them will do in an up market, but since I owned them before and they are on the MIF list, I thought I would do some preemptive buying just in case they have something to add to their value at MIF. If not … then they may roll to something else that sounds good at MIF. I wouldn’t recommend anyone follow what I do, but rather listen to Cory and Shad and other investors on this site. I just find it interesting to read or hear what Errik, Shad and Cory and others are invested in and how they approach the markets. They are out there everyday in contact with some of the best in the business. I am often mowing the lawn or at the store.

            Jun 10, 2022 10:09 PM

            Good thoughts on how you handle position sizing Lakedweller2. Also thanks for sharing some of the companies that have your attention in the PMs and Oil/Nat Gas sectors. Yes, as some of these stocks run and become multi-baggers, I may press the bets at a few points during pullbacks, but overall I personally let part of the position run, pulling some profits along the way, until they become to large a position weighting, and then I’ll pare it back down as the market cap continues to swell.

            Thanks for the kind words towards Erik, Cory, and myself, but I assure you we all have our fair share of stinkers that have sold off hard in this environment, to go along side the winning stories that have done well. Yes, we get hit with so many stories every week, that it is easy to feel either overwhelmed or fall in love over and over again when getting pitched. One technique I use is refraining from buying the first few times I hear about a company or interview them or if other guests promote them as interesting opportunities, but do add them to a watchlist to closely monitor what is going on with those companies. I try to keep a vigilant eye on key press releases most days, but it is like trying to drink out of a firehose with so much news being published each morning that it is impossible to keep up with all of it.

            I then play the game of “Would I rather hold stock A or stock B and why?” This helps me narrow down the watchlist to the companies I have on deck to buy, should things change either fundamentally or technically with the stocks I already hold. As a result, when I sell a stock or just trim back a position, I often have plenty of vetted companies to choose from on my watchlist to rotate those funds over to.

            Another thing that helps me in my portfolio is that with the royalty stocks and producers and even the larger developers, they are more established and solid companies with intrinsic value and some of the “margin of safety” that Erik was talking about. As a result, I don’t really have to watch the news like a hawk, like one has to with earlier stage drill plays. The larger companies can just be traded based on technical moves, and I don’t have to know every single update (unless something major is going on that is changing their story like a key acquisition or takeover etc…)

            People say “how can you follow all those companies?” This likely stems from them only being in very early-stage news-driven companies where things change every week or month. In contrast, if I’m in Hecla or Equinox or Sandstorm or Maverix, is there really that much that changes most days? No. Of course they can all have those days where key news drops that is significant, but that will show up in the price and volume of trading to signal me to go have a look at what is happening, and rarely could it have been anticipated in advance anyway, even if people studied it all day long. So while I try and keep tabs on all my positions, I generally just sort them each day for the larger performers (to the upside and downside) and then see if there is key news driving the move and then adjust accordingly. For the middle of the pack names, I just hold them and don’t need to obsess over each one every day.

            There are also situations where I’m patiently waiting for a company to get taken over, or for the next drill program, or for a resource, or PEA/PFS/FS, or for their thesis to play out and those things take time. Case in point, Lion One recently. I’ve had a position in Lion One for a while, at one point it was much larger but I trimmed some back a while ago and just kept a core position in it, waiting for them to keep testing depth in the feeder zone at Tuvatu, and also waiting for them to eventually get into small-scale production. When that news dropped earlier this week, I was already in position and benefited by just having a core position in place, and now am debating on adding more on any future weakness since the results were so impressive. I didn’t need to look at it and pet the stock every day saying “come on and grow little buddy.” I held it waiting for the thesis to pan out like it seemed it could, and now it has. There are plenty of stocks just like that where there is a reason and thesis behind why I picked up shares, and often a wait (sometimes a long wait) to see if the company will execute on their plan. Some days I wake up an notice a big move or sometimes when busy it’s at the end of the day, and I’ll then go do some research on why it was moving, but since I was in position, it ultimately didn’t matter why, but rather, just that I had a position in place to capture outsized gains. That’s my point with the mantra “you gotta be in it to win it.” Similar things happened for me in many base metals and battery metals stocks as well, where I got into position, waited and then when the big pops came I did another deep dive as to what may be happening, is it fleeting or can it be sustained, what comes next, how does the valuation look, etc…

            Anyway – good chat here on portfolio management and good trading to you sir!

            Jun 10, 2022 10:33 PM

            Thanks for your great thoughts.

    Jun 10, 2022 10:43 AM

    Claude Beget: Game Over For Stock Market With Mining Decoupling on Horizon

    Stansberry Research – June 8, 2022

    “People will have to realize that we are now in a bear market, the world is different,” says Claude Beget, keynote speaker at this year’s Swiss Mining Institute conference in Zurich. “It’s game over for stocks,” he tells our Daniela Cambone, with decoupling to come between the stock market and mining stocks. “You should never believe anybody when they tell you to leverage,” Beget argues when asked about the cryptocurrency space. “[Bitcoin] is a risk asset for me,” he continues. Beget also shares his insights on the general mining sector as well as his favorite mining stocks.”

      Jun 10, 2022 10:03 PM

      Yes, a simple tout of Alexco, maybe the biggest move since mid 2020

        Jun 10, 2022 10:19 PM

        Agreed. A nice pop in good ole’ beaten down AXU Alexco, but that was par for the course today with nice shareprice gains in most of the more advanced gold and silver projects on the day. Nice to see some green on the screen to end the week. Cheers!

    Jun 10, 2022 10:09 AM


      Jun 10, 2022 10:16 AM
        Jun 10, 2022 10:24 AM

        🙂 HAVE A GREAT WEEKEND……………..
        at least the COMMITTEE ……. on Lefty Brains Jan 6 Committee will be at home resting….
        Turn off the News and have a beer…………

    Jun 10, 2022 10:38 AM

    Hey Ex…….. did you see larry’s post…….. he gave you quite a compliment…….. on your “how to think”

      Jun 10, 2022 10:48 AM

      Thanks for the heads up OOTB, and thanks for the kind words Larry.

    Jun 10, 2022 10:43 AM

    USD breaking out, maybe a new high with a lower RSI is what is needed IMHO.

    Jun 10, 2022 10:46 AM

    I have also been dabbling in HND, nat. gas down x2.

    Jun 10, 2022 10:51 AM

    NKOSF – Added @ $.3066

      Jun 10, 2022 10:23 AM

      Good time to buy Lab already. Congrats

    Jun 10, 2022 10:08 AM

    Greg Mannarino…Not for close-in timing…He does fully comprehend the FED Reserve constant continual inflation mechanism…He predicts massive inflation as a result of this FED mechanism…glta

      Jun 10, 2022 10:17 AM

      Ditto larry……….. I listen to him daily……… he has been spot on with a few things……

        Jun 10, 2022 10:40 AM

        Jerry you have a great weekend as well 😃

        Let’s finish strong the month and we decouple with miners soon enough!

          Jun 10, 2022 10:24 AM

          Thanks Glen………… I think we are headed in the right direction…. UP……… 🙂

          And you have a wonderful Weekend………

    Jun 10, 2022 10:42 AM

    Gold/silver swing but dollar up .97 as I write. Very little change in my miners as dollar (composite) will trigger negative algos. An up Dollar is counterintuitive in a high inflation environment. Appears the world we live in.

    Jun 10, 2022 10:19 AM

    One more time (I posted the following several days ago), it’s worth keeping in mind that following the 2000 top in stocks, the XAU bottomed after QQQ fell 39%. The interesting thing is that QQQ was still 2 years away from its final low and would fall another 73% to get there (for a total drop of over 83%).
    The bottom line is the XAU gained 113% while QQQ fell another 63% after its initial 39% drop so those expecting the miners to go lower as long as stocks go lower might be in for a big surprise. In my opinion, another such decoupling is probable and might’ve already begun.

      Jun 10, 2022 10:38 AM

      Matthew………… I think your opinion ………… is always welcome…… JMO…….

    Jun 10, 2022 10:37 AM

    Hey Glen………….. your call yesterday on GOLD…….. looking kind of GOOD……… 🙂

    Jun 10, 2022 10:45 AM

    Today is interesting

    DOW -2.3%
    NASDAQ -3.4%
    … all indices RED
    Gold +1.4%

    Jun 10, 2022 10:02 AM

    GDX did exactly what I expected.
    From yesterday:
    We are very likely to see an important low before next Wednesday.
    Another dollar down looks extremely likely to me…

    Jun 10, 2022 10:15 AM

    Swing Analysis:
    This bottom will be confirmed when
    Newmont breaks higher.
    Lookin’ good!

      Jun 10, 2022 10:39 AM

      A long term PM [miners] bull
      requires healthy markets,
      or down with the rest.

        Jun 10, 2022 10:02 AM

        You didn’t define long term or healthy but the miners put in their best/biggest/longest moves when general stock market prices are under pressure. See chart way above as well as this one:

          Jun 10, 2022 10:23 AM

          Greatest declines with sick markets.
          Best buys then though.
          Not now!

            Jun 10, 2022 10:51 AM

            Yes, great declines do happen when the general market falls but that does not negate the message of the chart(s) I showed you. The HUI and XAU also more than doubled in 2008-09 while SPX fell for several more months. Of course the big gains are the result of so many getting their expectations wrong.

            Jun 10, 2022 10:13 PM

            Matthew, thank you for any assistance you give.

    Jun 10, 2022 10:20 AM

    Thanks Matthew.

    Jun 10, 2022 10:40 AM

    TLT looks like it is getting back in sync with gold, at least temporarily, and that’s a good thing since most get confused when the two diverge.

    Jun 10, 2022 10:10 PM

    The GDX:SPY chart turned decisively bullish today as it closed above its 50 day MA for the first time in 7 weeks…

    Jun 10, 2022 10:22 PM

    Stocks and the miners had been moving essentially together lately but today clearly ended that as they went in opposite directions. Even the silver stocks performed well despite their greater tendency to be held back by a falling stock market.
    It seems it can’t be stated often enough that rising interest rates are GOOD for gold and silver and the true-believers who think otherwise are simply married to a “dumb money” myth.
    Here’s SPY and GDX separately: