After early retirement from a career in packaged goods (grocery products) and specialty food products marketing and general management I became a volunteer advisor to CESO in Toronto, Canada and undertook assignments for them in Eastern Europe and Sri Lanka and business linkages assignments at... More
Where should we be investing what is left of our hard earned money these days? As the table below reveals having bought a basket of commodity related warrants with a minimum duration of at least 24 months at the beginning of 2009 would have been the right choice. Such warrants are up 111.9% YTD, up 12.8% in the past month and up 11.7% in just the last week. That is 14.7 times greater than the 7.6% YTD increase in gold, 13.3 times greater than the 8.4% increase in the S&P 500, 5.8 times greater than the 19.4% increase in the HUI and 4.8 times greater than the 23% YTD increase in silver.
Last Week's Performance*
vs. Prev. Week
vs. Prev. Month
YTD**
Warrants (+24mo.)
11.7
12.8
111.9
Stocks with Warrants
4.9
3.1
65.8
CDNX***
6.4
8.6
60.1
HUI****
3.8
2.2
19.4
GDM*****
3.3
1.8
17.8
SPTGD******
1.3
1.2
10.7
TSX
5.1
8.6
32.6
S&P 500
4.1
6.6
8.4
Silver
3.7
-1.3
23.1
Gold
1.5
1.2
7.6
* All calculations are based on U.S. dollar equivalent numbers
** Week ending July 24th, 2009
***CDNX is the symbol for the S&P/TSX Venture Composite Index consisting of 558 micro/nano cap companies of which 44% are engaged in the mining, exploration and/or development of gold and/or silver and other mineral resources and 18% in oil or natural gas pursuits.
****HUI is the symbol of the AMEX Gold BUGS (Basket of Un-hedged Gold Stocks) Index and is a modified equal dollar-weighted index of 15 large/mid cap gold mining companies that do not hedge their gold beyond 1.5 years.
*****GDM is the symbol for the NYSE Arca Gold Miners Index and is a modified market capitalization weighted index of 31 large/mid/small cap gold and silver mining companies.
******SPTGD is the symbol for the S&P/TSX Global Gold Index and is a modified market capitalization index of 19 large/mid cap precious metals mining companies.
Most people think of warrants (i.e. securities that give the holder the right, but not the obligation, to purchase common shares of a company at a specific price within a specific time period) as being associated primarily with micro/nano capjunior gold and silver mining companies but that is not entirely the case. Of the 35 companies offering warrantsof 24 or more months duration (of which there are 48 in total):
6 arelarge-cap commodity based companies (2 gold mining companies; 2 royalty companies; 1 oil and gas company; and 1 molybdenum miner)
5 aresmall/mid-cap mining companies (2 gold, 1 coal, 1 uranium) and 1 oil and gas producer
24 aremicro/nano cap companies of which 19 are in mining; 3 in merchant banking and 2 in oil and gas. They are primarily involved in the development of properties for mining/drilling and/or in the exploration phase of operations.
If you believe, as suggested by the outstanding YTD performance of commodity related stocks with long-term warrants, that:
major inflation is coming in the years ahead (I do),
the USD is going to decline vis-à-vis other currencies in the years to come (I do),
the bull run in gold, silver and other commodities has many more years to go (I do),
the profitability of commodity-related companies are going to increase as a result (I do),
the price of most commodity-related stocks are then going to increase dramatically (I do),
many of the junior miners/explorers will be bought out by the majors in the future (I do),
that the worst of the economic/fiscal/financial crisis is yet to engulf us (I do),
then you should prepare your portfolio to reflect these coming events.
One of the best ways to accomplish that objective would be to include a diversified selection of well-chosen high leverage/time value warrants (approx. 5-10% of your portfolio) along with some other commodity-related stocks and some silver and gold bullion during this period of summer doldrums. You will then be well prepared to ride out whatever financial/economic storm is around the corner.
Please feel free to contact me at the address below with your comments and questions. I guarantee you a reply where requested.
Disclosure: While no specific companies or funds are mentioned in this article I do own commodity-based stocks, warrants, gold and silver.
Most people think of warrants as being associated primarily with micro/nano cap i.e. junior gold and silver mining companies but that is not entirely the case. Of the 35 companies offering warrants of 24 or more months duration (of which there are 47 in total) 6 are large-cap commodity based companies (2 gold mining companies; 2 royalty companies; 1 oil and gas company; and 1 molybdenum miner).
As the table below depicts, commodity related stocks and their associated warrants are wasting little time recouping the major losses they incurred in 2008 and are already up 30% and 74%, respectively, YTD, even though they are currently suffering from the summer doldrums.
Every investor has a wide array of asset classes and investment vehicles to consider – stocks; bonds; commodities; funds; options; LEAPS; etc. and the relatively unknown and misunderstood category called ‘warrants’. This article discusses the reasons behind the performance to date of commodity related company stocks (i.e. gold, silver and other metal miners and oil and gas operators) and their associated warrants vis-à-vis the aforementioned categories.
Week after week throughout 2009 the warrants of natural resource companies in North America have outperformed their associated common stock, the various stock market indices and gold bullion and silver even more. It begs the question: What’s going on here? There are three over-riding reasons as discussed below.
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Why Gold Mining Stocks and Warrants are Up so Dramatically
Every investor has a wide array of asset classes and investment vehicles to consider – stocks; bonds; commodities; funds; options; LEAPS; etc. and the relatively unknown and misunderstood category called ‘warrants’. This article discusses the reasons behind the performance to date of commodity related company stocks (i.e. gold, silver and other metal miners and oil and gas operators) and their associated warrants vis-à-vis the aforementioned categories.
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