By J. David
Mason
I really hate
to admit it, but, this sage has survived 12 market cycles in his business
career. With the stock market there is one thing for certain – if you wager your
bets on timing each cycle, you will soon be out of funds. Nonetheless there are
some historical characteristics that one may see repeating. Some observations
and suggestions for investors are:
·
Maintain
a core of blue chips as they, as a group, if not individually, will always
recover after a significant market correction;
·
Optimal
performance occurs with 14-20 core positions. Beyond that you preserve wealth
at the expense of performance;
·
Few
people beat the index, that’s why ETF’s are now so popular; and
·
The
only way you can hope to beat the index is purchasing emerging companies early
in the cycle.
Does that all
appear quite simple? Trust me, it’s not. The extraordinary returns I have
enjoyed (mainly in the last few of the 12 cycles) have resulted from being
extremely long, very early, and quite inexpensively (per share) in emerging
companies. Don’t borrow and be prepared to hold for the full four years. In
other words, don’t bet on timing alone if you wish to survive.
Here are a few
ideas for this coming boom in the resource explorers. The stage is set with the
extraordinarily long bear market that we have been mired in:
Explorers with
a proven resource will not be as beaten up in the bear phase and will react
first when the juniors ‘emerge’. One I would pick, almost randomly, is Magellan Minerals (TSXV: MNM).
I don’t own it but am thinking about accumulating a position for funds that I
manage. This company has two most interesting gold properties in Brazil. The
most advanced is Coringa, which has measurable gold resources and a Preliminary
Economic Assessment completed. The Coringa deposit is high grade and the
bankable feasibility study is almost complete with the final report expected in
April. Both areas under exploration are huge, including the upside potential
for its stock price.
Another company
to consider is Mega Precious Metals
(TSXV:
MGP) with gold resources under development on its properties in the Red
Lake Ontario mining camp as well as at Monument Bay in Manitoba.
To have your
portfolio perform really well, the emerging sector picks might be as much as 20
per cent of total assets, depending on your risk tolerance. I recommend only
choosing companies with an upside potential of more than 10 times its current market
price. Accordingly, you might look at Sanatana
Resources (TSXV: STA)
as it has many characteristics in common with earlier successes – large
property, close to significant discoveries, and drill hole intersections that
are indicative of potential.
Most of the
smaller companies are having a difficult time “keeping the lights on.” One of
the more intriguing finance ideas that have emerged is CrowdFunding, and Klondike Strike (www.klondikestrike.com) has created a portal along with its
partner Koreconx to fund emerging
companies and causes. This permits a large number of investors to place small
bets and assist companies over the numerous hurdles out there in this
environment. Watch this portal for new ideas.
A final
suggestion is that one never really can predict which speculative stock will
give spectacular returns. Buy as many as you can comfortably afford within the
guidelines presented. Bon Chance!
Disclosure: The author and/or Funds that he manages have
portfolio positions in Mega Precious Metals Inc. He was an Insider with two
companies associated with Sanatana Resources, but does not currently have a
position in Sanatana nor any associated companies.
J. David Mason is a resource finance
specialist and investor. He is a former CEO of several listed resource companies,
and Mining Analyst.
Disclaimer: This
article was posted with the permission of a third-party contributor
and the opinions contained therein do not necessarily reflect
those of SmallCapPower. SmallCapPower does not endorse any investment
advice provided by these third-party contributors.
Please consult your investment advisor
before making any investment decisions. Ubika Corporation and its
divisions SmallCapPower, Ubika Communication and Ubika Research are not
registered with any financial or securities regulatory authority in
Ontario or Canada, and do not provide nor claims to provide investment advice
or recommendations to any visitor of this site or readers of any content
on this site. – See more at: http://www.smallcappower.com/posts/small-cap-power-disclosure
