Over the past several weeks, I have spent a lot of time sifting through junior gold mining stocks, looking to identify those that offer truly exceptional value.
Most of this time has been spent evaluating and comparing companies against one another in order to identify the true gems within our sector. I spent my time looking for area plays around the Abitibi Greenstone Belt of Ontario and for the Boise Basin gold of Idaho.
As I was going through the process recently, a famous quote came to mind:
"Be fearful when others are greedy, and be greedy when others are fearful."
- Warren Buffet
There is certainly plenty of fear out there at the moment... and for good reason, given what we have seen the past several months.
J. Paul Getty also embraced this same philosophy whenever he made an investment and considered this the secret to his investing success. Getty knew the difficulty of training oneself "to buy when everyone else was selling, and sell when everyone was buying." But he maintained that this was in fact the simplest and sanest way to make big money in any market you fancy.
Personally, I am not afraid to buy good value when things seem most desperate, but it would be nice to buy within 20% of the bottom.
Are Junior Gold Mining Stocks Nearing the Bottom?
Calling tops and bottoms consistently is impossible for any investor or analyst, as the statistics clearly show. But we can take another lesson from J. Paul Getty in this regard: Getty really didn't give too much heed to market timing other than buying when things were "really bad" for a sector. He knew the key was to buy low when nobody was interested and have the patience and financial staying power to wait things out. Over time, as the market for that sector improved and people came piling in, he would sell and look like a genius. He did this time and time again during his life.
Using the Buffet and Getty lessons, I would say that things are definitely desperate enough to warrant a look-see at buying value in junior gold mining stocks, currently.
But, could things go lower than where we are now?
Absolutely. But buying stocks at the exact moment of bottoming out is not statistically likely.
I sense we would be better off following the models of two of the most successful investors of all time and looking for value when things are really bad and fear reigns. Wouldn't you say things are currently "really bad" per J. Paul Getty's definition of when to buy, or using Warren Buffet's fear gauge? I would.
Do any of us have the courage to realign our portfolios and buy the best values of the moment? I think those who do and those who take the longer-term perspective will turn out to make the biggest returns from our sector yet.
These are critical times we are living in.
The choices we make right now regarding our finances may be some of the most important ones we make in our lifetime.
I repeat my mantra that owning physical precious metals along with the right set of junior mining stocks is still the best way to protect oneself from the financial hell-storm that is underway and getting worse by the week.
With all that is happening, particularly the level of desperation under which the Federal Reserve and U.S. Government are operating, precious metal prices are going to detach from the general market activity at some point and absolutely soar.
As the precious metals make their move, and they will in a big way, a select group of junior gold mining stocks are going to perform phenomenally well!
Nibbling at the best values in our current market is probably a smart thing to do over the next few months.
Getting rid of the deadwood is also important as we re-align our portfolios to match the changes the market has dictated. And if after making those changes we have the staying power and patience to weather the storm, then I believe things will work out in our favor in the end.
Editor, Gold World
Investment Director, Mining Speculator
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