This week we wrote en editorial titled: Precious Metals- Keep it Simple. Investing success requires diligence but also patience. In our article we conclude:
The plan of action should be fairly simple going forward. If the metals break to new lows, one should begin buying after the breakdown. Specific targets have been discussed with our subscribers. Regarding the shares, one should begin accumulation on a retest of the low. What happens if these markets firm? In that case, wait for support to be confirmed and then accumulate. It is simple but it requires constant patience. In the meantime, if one is too heavily long they could consider hedging their exposure with the inverse ETFs.
We also want to direct your attention to two great editorials:
Yesterday we spoke with Tiho Brkan, author of the Short Side of Long Blog and a fund manager in the Asia-pac region. Tiho discusses Gold, Silver and Agriculture. When Tiho speaks, I feel as though I’m a student and he’s the teacher.
Yesterday we published an update which was sort of an intro report on the development sector within the precious metals sector. (The sector could be divided into large producers, growth producers, development companies, and exploration companies). We post part of our conclusion for you:
Generally, I’m not a fan of development companies as their projects tend tobe years from production and its difficult to appropriately value thesecompanies. Why own a big development company if its upside is not muchmore than a double or triple? I’d rather own an (withheld) or (withheld) andbe more confident of the result. All this being said, there are two reasonswhy its time to seriously look at the development companies. First, they arepresently at the bottom of that “life cycle of a junior miner” chart. 85% ofthe risk has been priced out of these stocks with that figure potentially reaching 100% in July or August. Secondly, these stocks are big enoughand leveraged enough that they can produce fantastic rebounds inpercentage terms.
I don’t know for sure but I’d guess development companies are the mostleveraged to the respective commodity. Exploration companies live and dieon discoveries. High metals prices don’t do much to increase the odds forsuccess. Development companies have a defined asset/resource and they are in theprocess of moving it towards production. A rise in metals prices enhancesthe economic viability of the project. Many of these projects are 3-4 yearsfrom production so a significant rise in the Gold price in the next few yearswould obviously enhance the value of the projects and at a time when theyare much closer to production. Also, these are the companies the majors arelooking for and majors have the cash to pay up for. In this update we provide a list of 13 companies as well as a proprietarydevelopment index. We have reports on two as well as some notes on threeothers. More on the development companies in the near future. We willhave a new updated watch list next week.
Consider a subscription to our premium newsletter. We soon will intensify coverage on our favorite exploration, producer and development companies. The cyclical bear market is nearing an end and we believe we have identified the companies poised for big rebounds (when the sector bottoms) and poised for significant gains in 2013-2014.
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Jordan Roy-Byrne CMT, MFTA, is a Chartered Market Technician and Master of Financial Technical Analysis who is a member of the Market Technicians Association. He is the publisher and editor of TheDailyGold Premium, a publication which emphasizes market timing and stock selection, as well as TheDailyGold Global, an add-on service for subscribers which covers global capital markets. Jordan’s work has been featured in CNBC, Barrons, Financial Times Alphaville, Kitco and Yahoo Finance. He has been quoted in Barron's and has been a speaker at PDAC, Cambridge House and the Metals Investor Forum. TheDailyGold.com was recently named one of the top 50 Investment Blogs by DailyReckoning.