Smallcappower: SmallCapPower is proud to be a Gold Plus sponsor of the recent PDAC Convention held in Toronto. We thought this would be the perfect opportunity to ask our roster of experts, “Is there still a place for small-cap stocks in investors’ portfolios?”
John Kaiser: Right now the valuations are so low that you can hone in on quality companies which are not getting any premium for their stores. There’s the ounces-and-pounds type of companies. Some of them are trading at less than the money they spent advancing these projects in the past four or five years.
Vikas Ranjan: Small caps should be an integral part of investors’ portfolio, at least some exposure to small caps. Over the long term, if you look at the returns, small caps have pretty much outperformed large caps over long term, so having some exposure definitely helps but obviously investors should look at their own investment objectives and then consult their advisers before taking any decisions.
Jay Taylor: Yeah, I think they have to be very careful, obviously, and I would suggest to most people that depending on their age too, that’s an important factor, as you get close to retirement you want to be very careful. But yeah, I think there’s a place for it, but maybe 10% or something like that. I think people should be putting their money into safe things as much as possible. Where is safety? Honestly, I don’t look at the US Treasury as being the ultimate safety. I think it’s gold and silver, primarily, because I think there is going to be a day of reckoning for the reckless monetary policies that have been enacted especially since 2008, 2009. So I would say people should have a percentage of their portfolio in accessible gold and silver to start with, then quality companies that produce dividends that are going to survive an economic downturn. Yeah, maybe 10 or 15% can go to more speculative junior mining companies.
Brent Cook: That’s all I buy, basically, is small stocks. But that’s what I do for a living and that’s what the newsletter’s all about is small caps. See, I do think so but I think you need to be really, really focused on confident people exploring legitimate projects that have the real potential to be a world class, tier-one deposit. That’s what I really want to find and they’re few and far between. And that company has to be able to recognize that potential, recognize it when it stops working, and it helps to have enough cash to get through a couple of years as well.
John Kaiser: They may be worthless right now at, say, $1200 gold, or maybe $2.50 copper, or maybe $0.80, $0.85, $0.90 zinc. But if you get a, say, 25% move in these metals, you end up suddenly massively into the money with the NPV and the IRR and you can get also 5 to 10 times increases. So now is a good time to look for companies that are not going to disappear because they have some balloon payment coming, and you buy them as options. Leverage options on higher metal prices.
Adrian Day: The key, though, is what type of investor are you, what kind of risk and volatility, two different things, what kind of risk and volatility are you willing to accept? But one thing I would say is even if you’re a conservative investor, don’t confuse size with quality. Without naming any names, some of the biggest companies in the sector are far from the highest quality and yet among the junior sector you can find very, very high quality companies.
Eric Coffin: Well, if you’re someone that follows the sector and the mining business, if you will, and the commodity business, even after all the trials and tribulations, everything we’ve been through in the last decade, it’s still the juniors that are the discoverers. They’re the ones that find new deposits. Exploration spending is being decimated. Most of it these days is being done by majors, but if you look at what they actually spend money on, the majority of it is brownfield stuff, and at the end of the day if the world’s going to have enough copper, have enough uranium, have enough gold, have enough anything, someone’s got to be able to find new stuff, and it’s still the juniors who do that. Is that a low-risk proposition? No, it’s an extremely high-risk gain. But the other side of the coin is that you’re lucky enough to attach yourself to one of these companies that make a truly new discovery that the potential gains are enormous.
