Another Lesson In Money Management!

I was feeling a lot smarter back in June-July-August, that’s for sure!

Since then I’ve been feeling like less of a market genius.

Reflecting back on it, my emotional barometer was flashing a “sell” sign, being that I felt so smart, but I didn’t listen.  I should’ve lightened up on GoGold (GGD, TSX), for instance, but I was too busy feeling good about how much it was going up every week.

As John’s TA indicated, GGD lost some steam between 70 and 80 cents, after powering higher by more than 300% from where it started the year.  Such an advance suggests GGD is one of the winning stocks in this “market within a market”.  We’ll ultimately see it passing $1, but those in-between cooling off periods can be tough to bare.  September and October haven’t been as kind with GGD closing at 58 cents today.

Nearly 30% off the high is enough to make anyone regret not selling some closer to 80.

“You can always buy it back, Dan!,” I’ve been telling myself that a lot lately.

Right now GGD is building the foundation for its next leg higher.  This looks like a great entry point for anyone who doesn’t own it already (and if I sold some I’d gladly be dumping some of that money back into GGD near 60 cents).

To think GGD wouldn’t pause at some point is pretty silly, right?   It was up more than 300% year-to-date.

I knew it would pause and I consciously told myself I should be selling some, but when something is moving up so fast greed creeps in.  Ultimately, I justified not selling (probably a crime considering my cost basis is around 25 cents) because I didn’t want to forego further upside and I figured the inevitable pullback would be shallow and short-lived.

So far the pullback has been shallow and short-lived, and I may look back when GGD is $1.50 and be happy with my decision.  However, I believe the proper move would have been to sell at least 25% of my total position.  Taking enough profit off the table to get half or the whole of my original investment back would have been the smart business decision.  This was just another learning lesson for me with respect to “money management”.  I did the homework which led to the correct answer – buy GGD – but to maximize returns and generate alpha, “buying right” isn’t always enough.  We also need to be disciplined managers and lock in some profits along the way.  

I think the greed factor robs us from taking profits all too frequently.  Out of being afraid to miss a 10-bagger we end up not fully capitalizing on lots of doubles and triples (which fizzle out before ever becoming 10-baggers).

As a rule of thumb my plan is to start selling at least 25% of the position following a double.  By doing so I get 50% of my original investment back and still have 75% of the position to play with.  Reducing our cost basis toward $0 is what we should always be striving for.  And taking profits is the first step toward reducing our cost basis on a stock to zero.  Such a strategy, when implemented, lays the foundation for a money management business that will be successful over all time periods.

Gut Check On The Markets!

Like I said, I haven’t be feeling so smart lately.  My general feeling has been more closely aligned with “frustration” than anything, and that’s a great sign that we’re very near a turning point!

September and October provided some time for consolidation, plus some profit taking, following a big run in both senior and junior Gold mining stocks.  The blast past key resistance points of $1,350 and $1,400 being the catalyst for a 50% gain in GDXJ.

Taking a quick look at the 3-year we have the bigger picture in mind.

The break past 36 coincided with a breakout in Gold.  Then, naturally, GDXJ ran up to a multi-year resistance point.  Call that resistance point 42, where some some market players began to unwind their position.  Given the general direction of Gold and Silver, bull trends that are very well intact, GDXJ should find its footing near 36 (the lowest point would be 34 unless Gold retests $1,450).

26 is the number to watch for the senior miners index (GDX) – 26 is support and the price point at which GDX broke to a 3-year high in July.  Some big volume, +10 million shares, was exchanged last Wednesday at $26.25, but it couldn’t break the market lower and GDX ended up closing the week at $27.12.

If I had to pick just 1 stock to hang my hat on, just 1 stock to be “the” indicator that Gold and Silver stocks bottom in October, it would be First Majestic (FR, TSX; AG, NSYE).  Shares of FR seem to sniff out turning points, ahead of time, better than almost every other mining stock.  So if you subscribe to that theory you’ve got to be encouraged by how FR ended the week.  It was down today but the stock does seem to be gearing up for a breakout above a bull flag as John’s chart showed in today’s Morning Alert.  That would be good news for both Silver and Gold!

Fiore Gold (F, TSX): I Added To My Position Last Week

Q4 came in a little weaker than the prior quarter, but that was expected.  A weaker Q4 was always part of the mine plan, according to CEO Tim Warman, as Fiore worked through the installation of a new crushing facility and higher strip ratio.

Right now Fiore’s market cap is $38 million (CDN) and they’ve got approximately $10 million cash (no debt aside from equipment leases).  That’s a very reasonable price in my view, based on several valuation metrics.  Plus, Fiore has considerable growth potential.  Therefore, if the stock drops further on “weak earnings” I’d recommend taking what you can away from weak handed shareholders.

Most people who know about Fiore might just see it as a producer that’s too small, but that would be missing the Big Picture.  Fiore owns 100% of one of the largest land packages, 200 sq km, prospective for Carlin-style Gold deposits in all of Nevada.

Aside from the majors and Gold Standard Ventures (GSV, TSX), which also owns about 200 sq km, Fiore holds the largest land package.  Yet, because it’s a producer Mr. Market has decided to place little or no value on Fiore’s claims. Therein lies the opportunity with F.

Kinross (K, TSX) was keen to take an equity stake in Fiore because their Bald Mountain Property, containing millions of ounces, looks very similar to Gold Rock. “Oxides at surface” provide the smoke that Fiore could have some high-grade Carlin fire down below, too, and they’ve only started scratching the surface of this 200 sq. km land package.

Don’t discount the fact that Gold Rock is already federally permitted. The time savings there is measured in years!  Having those federal permits in-hand is an intangible asset for Fiore (and any would-be acquirer), no doubt about it.

This 48-Metre Intersection Containing Abundant Sulphide

And Visible Gold Was Rushed To The Assay Lab!

The next press release from Wallbridge (WM, TSX) could be a real whopper.

They’ve intersected some beautiful rocks in hole FA-19–086 and the core looks similar to other high-grade hits, such as hole FA-17–07 which assayed 149 g/t Au over 7 m.

“We are very excited about the two recent intersections of the Tabasco zone in holes FA-19–086 and FA-19–090 where visual results consistent with previously-reported assays confirm our modeling and understanding of this zone and reinforcing its importance as one of Fenelon’s best-endowed Gold zones,” stated Marz Kord, President & CEO of Wallbridge.  “Drilling to date has also outlined at least three continuous zones in the Andromeda corridor of Area 51, which are also becoming more enriched and wider with depth. We have accelerated the sampling and assaying of some of these significant intervals and will be reporting these assay results as soon as available.”

Not just 1 but all of the zones discovered by Wallbridge to date are becoming more enriched and wider with depth, to reiterate an important point made by Kord in his prepared statement.  Also important, speaking to the potential size and scale of this deposit, we now know Wallbridge has intersected visible Gold 800 m away from the next closest drill hole.  This could double the strike length from 900 m to 1.7 km!  That doesn’t account for Area 52 either, where Balmoral (BAR, TSX) has intersected similar mineralization, also containing visible Gold, about 600 m to the east.  And all of these zones are still wide open, I might add.

Mr. Market isn’t quite buying the significance of this yet, WM actually sold off a few pennies following the news.

Eric Sprott, on the other hand, well…he’s had a hard time containing his excitement.  Below are a few points Sprott made recently about Wallbridge during the weekly news wrap-up.

• New sets of shears – these newer zones (Orion and Andromeda) appear to be running northeast to southwest, whereas Tabasco and Cayenne run in a more east-west direction;
• 800 m is a gigantic step out!  That doubles the size of the endowment if they hit something, and they DID hit something!
• The existing structures widen with depth. “I can’t begin to tell you:  If something goes from 5 m to 48 m that’s basically 10-times bigger, 10-times bigger.”  Sprott reiterated, “And this is in the Abitibi where mines already go down 4 km.”
• We don’t have the results yet but that 48 m intersection is well endowed.  It could be quite stunning. Those assays have been rushed to the lab.

So, interesting developments for Wallbridge, to say the least.  I continue to think what’s good for Wallbridge should be good for Balmoral and Area 52, at least around the margins.

As a reminder, Balmoral has 100% owned claims on a chunk of ground surrounding Wallbridge’s Fenelon Project.

Shifting to Nickel, Balmoral is one of those odd ducks that offers Gold and Nickel exposure, the company will be active with the drill bit “on at least 3 fronts” this winter.  According John Foulkes, VP Corporate Development, Balmoral will be working between the 400 and 800 m level – wedge drilling – to extend the high-grade core of their Grasset deposit.  Also within the Grasset Complex they’ll be pursuing Type 1 komatiite-style Nickel, following up on the 3.5% to 4.1% massive sulphides found back in January.

Aside from Grasset, Balmoral has 2 grassroots stage Nickel projects on the go this winter.  First pass drilling at the Bluenose anomaly – RUM Project – and then reconnaissance work will begin for the first time at their Gargoyle Project.