Erik Wetterling – Investing In Resource Stocks with Key Strategic Shareholders Or That Are Backfilling Value To Price
Erik Wetterling, Founder and Editor of The Hedgeless Horseman website, joins us to unpack how he approaches value investing in junior gold, silver, and base metals mining stocks. He is interested in companies that have already received 3rd party validation from larger companies or institutions, as well as alpha growth plays that are narrowing the gap between value and price.
Erik discusses a handful of stocks in this interview to illustrate some of these points, outlining what he he is animated by in Headwater Gold (HWG) (HWAUF), New Found Gold (NFG) (NFGC), Nevada King Gold (NKG) (NKGFF), Snowline Gold (SGD) (SNWGF), and Western Alaska (WAM) (WAMFF).*
*In full disclosure, the companies mentioned by Erik in this interview, are positions held in his personal portfolio, and are also may be site sponsors of The Hedgeless Horseman website at the time of this recording.
I bought SILJ today because the odds of a low now or very soon look good. This is the first backtest of a rising 200 day MA in 2 years.
I will probably be a buyer next week as well.
Double bottom for CDE?
Tried to sell some ATM puts on these Friday afternoon, but no takers.
Interesting. I’d try again if it gaps down on Monday.
This seems like a good time for a big-picture look at gold.
As an aside, it’s plain to see that gold’s first big bull move since the 2011 top began in 2019 with the breakout of a 6 year base.
8 straight quarters higher resulting in a 75% move is definitely a bull market performance…
The comparison to the equivalent MA price in 2005 is interesting. Give perspective. Thanks Matthew!
Erik, you seem to be the only here that sees the true value of the moving averages. The fact is, price relative to the MAs is almost always more important than looking at price alone. Done properly, one can usually see trend changes ahead of the price-only crowd especially long term (most important) trend changes.
By the way, I’ve mentioned before that gold’s dip below 1200 in 2018 marked a more significant low than its dip below 1100 in 2015 and there were many reasons for that, one being price as it relates to the 600 week MA shown above and in this chart:
It would be fantastic if stockcharts would offer a tool that makes an MA flat and shows price action as a percentage of it instead of a dollar value. That way we could see actionable support/resistance structures develop that would be impossible to detect using the MA envelopes that I use.
Stockcharts do offer such a tool. It is available as an add on to ACP. I don’t know whether it is free on the basic sub. that I have.
Thank you Christopher! 🙏🏻
Matthew, Adam Hamilton is very big on buying way below the 200 day MA and selling when it is way above. Gary Savage had been very bullish on gold and silver recently, but yesterday he changed to sell and wait a month to buy back. Bonzo ain’t selling!
Bonzo, the current bullish setup has not failed yet so you’re right and Gary’s wrong in my opinion. However, IF it does fail in a particular way (which I won’t go into), there’s potential for extreme downside and another year or two of lost time which is why I would sell my non-Venture exchange positions and consider going short. Explorers can add value in any market since projects can go from little or no value to substantial value based on drilling.
As you know, silver beats gold in bull moves so the silver-gold ratio is very much worth looking at.
In the following chart we have SLV:GLD at 2 fork supports and, for the first time since the March low 2 months ago, the 15,5 MA envelope. The setup rates a strong buy (for the sector) in my book so I bought SILJ on Friday and will keep buying in the days ahead if the setup doesn’t fall apart. The March-April move up was powerful in a way that the September to December move lacked and now that bullish sentiment has been trashed we could be in for another very powerful move up. I think we will know very soon which way the sector will go.
For those who might be wondering, I will not be selling my TSX-V stocks if things turn ugly. Instead I will sell the larger companies and consider selling them short and/or buying puts and selling calls. Not advice!
Matthew, I hope you will let us know if you turn bearish like Gary Savage did on Thursday on silver.
He is not bearish yet on gold and GDX but thinks they will likely break down like silver. But then Michael Oliver is very bullish on silver and thinks it’s going to 200, and last week Trader Vic said silver will go to 1000.
That’s interesting about Gary because silver has fallen hard versus gold and now looks better as a result.
SLV:GLD is down 9% in 2 weeks and is in a zone of support.
Long term I agree with Michael Oliver. $200 isn’t a radical target at all.
SILJ:GDX is weekly oversold and just put in its lowest weekly close in 3 years (156 weeks) while it filled a big old gap so I’m more interested in silver stocks than gold stocks.
Copper:SPX became daily oversold as it tested 2 Schiff fork supports last week:
Silver:SPX also found support at 2 forks last week:
Silver has pulled back to the middle of significant support:
SILJ bottomed to the penny at its 40 week MA last week as that MA crossed above the 50 week MA for the first time in years.
SIL, GDX, GDXJ, XAU and HUI also just had their 40 week MAs cross above their 50 week MAs.
The Mining Sector Is Hard Because YOU Make It Hard
Erik Wetterling – The Hedgeless Horseman – May 12, 2023
“Daily paper metal swings does almost nothing to affect the actual long term value of an exploration project. Yet daily paper metal swings can affect price in a material way. People think paper metal prices matter a lot because they see it affecting a lot of people… A lot. But that is the short term loser game. You are supposed to TAKE ADVANTAGE of how everyone else reacts and thinks. Not join in on the stupidity…”
“But as you are probably well aware of most people watch the FED, rates, paper metals, macro events and almost always tries to “guess the short term paper metal price direction” and of course needing four computer screens just to be able to “keep up” with all that “important” information that is flooding the internet every single day. Basically everyone is taking something that CAN be as absurdly simple as “buy low and sell high” and instead use a hundred different “indicators” that are not only chaotic but pretty much also completely redundant.”
> Just think about what is easiest:
“Follow and be able to conclude the net impact of >20 macro things and the short term metal/miners direction”
“Try to identify a company that is undervalued and should revalue higher eventually”