Erik Wetterling – Precious Metals Beta Stocks Are Looking More Attractive From A Risk Reward Perspective

Shad Marquitz
September 28, 2023

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.




Click here to visit Erik’s site.

    Sep 28, 2023 28:41 PM

    The Merit of Alpha vs Beta at Extremes

    Erik Wetterling – The Hedgeless Horseman – September 28, 2023

    “So for about three years we have seen Beta go down >70% on average and at the same time many of us have dabbled in Alpha plays where the game has been increasingly rigged against us. Yet the only wins, if any, have been in the rare occasion that a junior has potentially made a very significant discovery. Thus we have kind of been taught to only focus on Alpha plays despite the unfavorable odds on average. And I would say we have been increasingly taught this as the bear market is now over 3 years old.”

    “The thing is that the longer we only see Alpha ‘work’ (the longer and deeper the bear goes), the more we will be convinced that Alpha is the only place to be, while the merit of Beta relative to Alpha is actually going up.”

    “Remember, the ‘easy’ money is to ride this sector from a bear low, to a bull high, when the ounces in the ground get revalued by perhaps as much as 5X from bottom to top. A true nightmare scenario would be to only be in the highest risk, early stage exploration juniors and see them all fail (odds are always against a significant discovery) just in time for the bull to start. In this scenario one might be unlucky and end up with pretty much zero ounces and not only paper losses, but perhaps permanent losses, just in time for when ounces in the ground are about to pay off bigly.”

    “The point of this article is to suggest that even though Alpha plays by definition can work in any market conditions the opportunity cost or relative Risk/Reward versus Beta is getting more unfavorable as sector prices/sentiment declines. If one were to pick 20 juniors with decent projects, ounces in the ground and that had the staying power to stick around for the bull, then I would expect the majority of those picks to be multi baggers at the next sentiment high. On the flip side one would need to take exploration risk for Alpha plays to multi bag and the earlier the story the higher the risks. It is unlikely that even a junior that has a drilled a few good holes will do very well during a bull if the story turns south…”

    Sep 28, 2023 28:45 PM

    Not some but many of these exploration stocks are so beaten up that you might be better off to buy 20 that are priced at less than 5 cents and wait for The Bull.

    If 4 make it you could be a big winner in a gold bull market but only if you understand when to sell. DT

      Sep 28, 2023 28:17 PM

      DT. You might be right, but we don’t know because of intervention. Most of those that I know that are below 5 cents could have a resource but are either waiting for drill results or funding to drill. They very well could be in the fault zone that has already been proven to be fruitful but it hasn’t been proven up in their ground. Since they haven’t published anything the algos will beat them into the ground hoping to never have to cover or risk buying at their programmed price. Change the chart and make the deal. Others have identified significant resources and either caught the managed brain trust was wrong footed on good news or ran fast when they were short. Wall Street does not pay retail prices so when something is particularly attractive, they will pay less than you unless you buy at lows along with them. If nothing has changed except intervention, why wouldn’t you be buying with them. You either have to believe the company and their PR or try to determine to what extent managed money is intervening for personal gain.
      Seems like at one time value mattered. It still does, but that doesn’t mean it will be distorted. Fiduciary duty went out the window with regulation.

    Sep 29, 2023 29:01 AM

    Bear Creek Mining (BCM) got hammered today on a financing, I picked some up at the LOW! DT

    Sep 29, 2023 29:43 AM

    Interesting action this morning. Looked like short covering erupted in silver before bears and price managers stepped in to prevent the “wrong” closing price for the quarter. Even SLV:GLD turned down where expected…

    Sep 29, 2023 29:09 AM

    UUP:GLD has now retraced half of its fall since topping in September of last year…

    Sep 29, 2023 29:11 AM
      Sep 29, 2023 29:17 PM

      Noticed that Brixton pop. Up a penny at .15 from the deeply oversold annual low of .14.
      Seriously Matthew.

        Sep 29, 2023 29:07 PM

        What’s your point? My comment contained nothing that should trigger you. Seriously jony.

          Sep 29, 2023 29:29 PM

          Added some Brixton. QH of Crescat gave it a pump today just before close. Copper potential gaining speed.

            Sep 29, 2023 29:31 PM

            Yes and don’t forget the high grade gold potential and Ivanhoe Electric’s deal to earn a majority stake in Hog Heaven. Brixton really has more prime property than ten Brixtons could handle.

      Sep 29, 2023 29:45 PM

      IPT holding up very well last few weeks.

    Sep 29, 2023 29:26 PM

    Hello to all folks including Dt who keeps this caving ship alive! Same posters literally for the last 4/5 months 5/6 if that’s not bearish I don’t know what is. Even doc makes an appearance every 6 months with his going lower everyone. I would have to think that a broken record can’t be right all the time lol. Just playing doc!

    Seriously for some of you old timers this handle is going to out last your ages 🤷‍♂️.

    Handle is getting larger than the friggin cup lol.

    Good buy on bear creek dt!

    I reckon and will bet anyone on here one more weak the most maybe two and the mother of all turn arounds! Jon or joy or whoever want to bet?
    Hui low $196/$197 final low in that region $ bucks give or take any one want to challenge Glen? For fun of course.

    Load the mother ship never seen it this bearish in my life!