Erik Wetterling – Precious Metals Beta Stocks Are Looking More Attractive From A Risk Reward Perspective
Erik Wetterling, Founder and Editor of The Hedgeless Horseman website, joins us to review the current depressed valuations in the gold and silver stocks, where once again the Beta mining stocks, with defined ounces in the ground, offer an increasingly attractive risk reward profile and optionality to the eventual shift in sector sentiment.
He outlines that for the last 3 years, as the sector has been in a cyclical bear market, where investors have been trained to believe that only the Alpha mining stocks with “probable growth” are the only way to win and make money in the precious metals sector. However, those Alpha drill-plays and earlier stage explorers still have a lot of execution risk and unanswered questions in front of them, without having defined enough evidence that they even have a substantial amount of economic metal in the ground. Even many earlier-stage exploration companies that have shown some good drill results were still sold off hard with the rest of the sector. The point being, the Alpha plays simply don’t have the ounces in the ground yet that will have the optionality to improving metals prices and sector sentiment.
As a value investor in junior gold and silver mining stocks, Erik concedes that he has been comfortable the last 3 years patiently holding and adding to the Alpha companies with competent management teams and a defined strategy to grow value in their project, while waiting for their thesis to play out. However, when investing in the Beta companies, Erik points out that it is more about market timing and getting them during bottoming periods and sentiment lows, and then getting back out of them at sentiment swings to the upside.