“Hold on”. That’s the message that investors are hearing now from many experts – just keep holding on because the market seems to be turning a corner and there is hope and new opportunities on the horizon.
One of those experts is Greg McCoach, a respected newsletter writer and industry expert who spoke at the Cambridge House International Vancouver Resource Investment Conference in January, 2014.
We spoke with Mr. McCoach after his presentation to give our readers a summary of what he spoke about and to share some of his market insights with us.
Mr. McCoach told us that one of his biggest areas of focus right now is helping his subscribers make something good out of the markets. “After we’ve been through these tough several years, I’m just trying to help my subscriber investors regroup and try to figure out how we get back to profitability… None of us saw how deep or how bad this correction could be and it’s far worse than I anticipated. We survived and we’re looking to work our way out of this. The smart people who invest at these levels are going to do very well.”
Junior resource companies are hurting. The markets are hurting. And investors are scared. Mr. McCoach sees those challenges and cautions investors that there could be additional hurdles to come: “The challenges in the industry are increasing worldwide. Political situations are becoming more difficult. Countries want to charge more for mining companies; they want to tax us more heavily to do business in their countries. I’m trying to regroup back to North America and look at opportunities there where it’s a bit safer and not such a slippery slope, so to speak. I’m looking for very specific opportunities.”
Mr. McCoach continued with his market analysis: “It seems to me that we’ve hit a bottom. I don’t think we’re going to recover quickly any time soon. It’s encouraging to be at this show and to see value investors walking through the aisle. That’s a sign that we’re at the bottom. We could still trade sideways before we get to a real recovery. In the long-term, I’m very bullish but in the short-term, we could still see low [precious metal resource] prices and that could really hold our junior mining stocks and keep them in low gear for a while. If we could just hold our own and start a base for moving forward, that would be a positive sign. 2014 could be a transitional year with a slight bias toward improving.”
Although his assessment isn’t as “rosey” as investors might want to hear, Mr. McCoach is still positive: “My take is we’ve hit the worse. The better companies have had a nice uptick since the tax loss selling and that’s an encouraging sign. Not everybody is participating in that. Who are those companies that have almost doubled since just 2 weeks ago? Those are the strongest companies that are going to survive for the long term and are going to get the most interest from investors and they could deliver a 2, 3, 4x over a period of time. As the markets start to solidify, you’ll see those good companies start to creep higher as the market recovers. It would be good to find a bottom in gold and silver prices. It’s still too hard to say whether we’ve hit that or not. Some people think the bottom is in, I’m not so positive about that yet. I still think we could see another 10% correction.”
That’s the first step that investors should watch for – good companies moving higher plus a potential gold and silver correction. “Once that clears out, I think it’s clear sailing. Higher metals prices will solidify
our markets in the junior resource space. I just think we need to be a lot more selective than we have in the past. You don’t need lots of companies, you just need to focus on a really solid group of companies to get you back to profitability.”
So, what is Mr. McCoach looking for? “We have to be very selective about who we’re willing to put our money with at this point. I still feel like there are opportunities. If you focus on real value you can find opportunities that can get us back into the black as the market recovers.”
Mr. McCoach also encourages investors to break free from some of the traditional ways of thinking and look for new opportunities in areas that most people aren’t dreaming about: “I’ve also talked about thinking outside of the box. For example: Watching this situation in Iraq, as crazy as it sounds; there’s a lot of oil and gas and there’s gold and uranium. Could this be an opportunity – if the political situation opens up? It’s worth looking into. A lot of big banks from Europe are investing heavily into Iraq, hoping it changes there. I’ve always gone by the premise: You only invest somewhere if you can safely travel there. Would I feel safe about traveling in Iraq right now? No. But it looks like it’s going to change. I do think there’s some changes going on there right now that will be interesting to watch. If it does develop, some of the politicians have said that they think Iraq could be one of the big economic boom locations on the earth in the next decade. It’s been a war-torn, difficult area for millennia but it’s worth watching.”
And for immediate investment in this recovering market? Mr. McCoach said: “I like companies that have money in the bank, that have been smart, that have traded at or below cash value.” One of the companies he likes is Colorado Resources (TSX-V: CXO). “They were trading at 16 cents, well below its cash value. As soon as tax loss selling was over, the stock went up to 30 cents. It almost doubled in a three week period. Nothing has happened significantly at the company. It’s a real asset. They have money. Their burn rate is very manageable. They have a good management company. I’ve been a shareholder since the inception of the company. It’s been as high as $1.70 but that just shows you how volatile the market is. I think we’ll start creeping our way back up.”
Investors should also be watching for junior resource companies with good assets but who aren’t doing a lot of active drilling at this exact moment: “If I was a junior with money in the bank, I’d be holding onto it right now until we can see our way through this where spending money and getting drill results will get value for your stock. A lot of these juniors are just spinning their wheels right now if they’re spending money for drill programs – it doesn’t matter what you find, the market hasn’t been rewarding [drill results] for the most part.”
And another way that investors should consider investing is with physical metals: “This is a great opportunity to buy physical metals. It should be the bedrock of your portfolio. Take delivery of physical purchases that you’ve paid for. Have them delivered. You store them safely yourself. Don’t let banks do it for you. Don’t put it in safety deposit boxes. Do it yourself. History has shown that in this kind of environment, when governments are in trouble… they can’t be trusted. You have to think for yourself and it’s in your best interest to purchase gold and silver. As an investor, if you can buy within 20% of the bottom and sell it at 20% of the top, you’ll be in the top 5% of investors. Most investors will wait when they could have bought now.”
For investors who want to hear more about what Mr. McCoach has to say, they can email him directly at gm@4shorty.com to express their interest in his insights and he’ll send them more information about subscribing to his newsletter.
“The past few years were a bloodbath,” Mr. McCoach summarized. But then he delivered good news: “I think we’re going to start making our way back to profitability now.” That’s something investors want to hear, even though it means doing extra due diligence for companies that have money in the bank and will survive the next few months.
REFERENCES
Greg McCoach: Email him at gm@4shorty.com and check out http://www.amerigold.com/ for more information on physical metals.
Cambridge House International Vancouver Resource Investment Conference: http://cambridgehouse.com/event/vancouver-resource-investment-conference-2014