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Getting four digit returns from mining stocks

The BarkerLetter
'The meek shall inherit the earth - but not it's mineral rights...'


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A colleague of mine is preparing a list of junior golds with cash exceeding their market caps. Not a bad investment strategy! A bit general, but you have to start somewhere.
It's certainly a good idea to determine well in advance what kinds of companies you don't want to invest in ... such as those without cash reserves, or at least those without sufficient cash to get themselves through another liquidity crunch (.. remember the winter of '08?).

Be that as it may, I need something else before I park my money in a deal. Call it 'the X factor'. But before I launch into that I want to talk about the broader market....

The most successful people in the stock market invest too early and sell too soon. Yes, that's right. They get in too early, which means they wait the longest, and they get out too soon, often leaving money on the table. So why are they deemed successful? Because they lose less!

This has to do with the old 'buy low, sell high' credo of the stock market. I think it's relatively easy to get in at the absolute bottom ... you just have to be the first in. Picking the top is a little harder. But so what if you miss the top? If you made money, good for you ... you won ... so shut up already. Selling high merely means getting out at a profit. You don't need to reach the absolute peak of the market and those who try, will get it wrong most of the time. It's absolute guesswork. Gambling. If you can get out within 15% or 20% (...or within the same distance of the bottom...), you've won as far as I´m concerned.
So how do we translate that? Let me put it this way: the majority of investors lose money, something like 80 percent. Why? Because they interpret the following headline as bullish: 
S&P says worst is over for U.S. Metals & Mining Sector...
(Read the rest of the story here.)
That means the top is not just near, but arrived. Do you want to invest at the top? No. That´s when you want to sell. When everything is hunky dory, beautiful, when we're looking at a seemingly endless summer, we can expect the clouds to start gathering on the horizon. This is not a cynical or negative point of view, merely the rational acknowlegement that the economy or any given sector of it is a living, breathing organism with periods of health and illness, ups and downs, and that the downs generally follow the ups.
Hence, a recession is the best possible thing that can happen to an investor on the buyside. However, it doesn't really matter whether the economy is tanking or peaking, as long as it's excessive, drawn out, and/or overdone. Excess is what drives profits in the stock market.
The glimmer of hope for me in that article is the admission by S&P credit analysts that '..demand and prices have not consistently improved across the sector, or even within subsectors...' Ah, so - not a top in fact. Well that is good news. Even better is the note that '...we expect recovery to be choppy.' ... in other words, short, abrupt rallies and sell offs. Volatility is good. Excessive moves are good.
As for the X factor of individual stocks, yes I look for something more than fundamentals and technicals. Speculating in the stock market, what I do, investing within a three to six month horizon, is like buying real estate, yes? You're thinking 'resale' from the get go ... so when you buy real estate you're looking for something that makes it compelling. Sexy even. A peekaboo view, proximity to a mall or light rapid transit. Don't pick something out of the herd, pick something that has the market all to itself.
 
It's really worth looking a little longer and harder to find something that will generate giga dollars over the short term.
 
Kb