Recorded Monday October 27th: Erik Wetterling, Founder and Editor of The Hedgeless Horseman website, joins us for a nuanced discussion on how company valuations can shift more due to investor sentiment than on actual fundamentals and newsflow during precious metals pullbacks. These are opportunities for resource investors to exploit these market disconnects.
We start off looking at how companies releasing positive news are still being sold off indiscriminately, due to the overall shift in sector sentiment, as we’ve seen the gold and silver prices continue retreating from their highs of 2 weeks ago.
We start off noting the deeper pullbacks are occurring in the stock that conversely went up the most on the recent runs to new highs. It makes sense to see the pullbacks in the PM producers due to their tighter correlation with PM prices. Erik points out that metals prices are much less relevant to junior exploration companies or even early-stage developers still many years away from metals prices affecting future production.
This type of environment where banked success is selling down in tandem with companies that may not even have any defined gold or silver ounces in the ground has Erik animated by the 2nd wave of the Lassonde Curve, where developers go on a run as the market rerates their projects and leverage to higher metals prices down the road.
We review whether he is focusing strictly on companies that have already raised capital, if there is any specific running room he wants them to have. Additionally, we ask whether it is best for a company to continue to put out news during a corrective period, or if he’d rather see companies preserve their capital and wait to put out news until more bullish sentiment returns?
Erik highlights how he disregards fluctuations in valuations based on sentiment, focusing on longer-term value investing principles and companies that have catalysts on the horizon.
- He outlines the strategy for making peer comparisons on valuation changes, that may differ on fundamental news drivers, even though there are comparative percentage drops in share price or market caps; making one group of companies more attractive.
- We also discuss how Erik is fully deployed, so he uses a “value shuffling” approach to high-grading his portfolio with the companies that have the most upside potential based on fundamental catalysts.
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Investment disclaimer:
This content is for informational and educational purposes only and does not constitute investment advice, an offer, or a solicitation to buy or sell any security. Investing in equities and commodities involves risk, including the possible loss of principal. Do your own research and consult a licensed financial advisor before making any investment decisions. Guests and hosts may own shares in companies mentioned.
Click here to follow Erik’s analysis over at The Hedgeless Horseman website