Due Diligence Correlates To Making Money
Want a shortcut on performing due diligence when speculating on resource stocks? (Gold Mining, Silver Mining, Uranium Exploration… the list goes on these days) – Keep reading!
The venerable resource stock investor Rick Rule, who you are probably watching regularly on YouTube, says that you should be willing to spend 1 hour per month, per stock, in your speculative resource stock portfolio.
Do you have that kind of time?
Do you have the skills and the INTEREST to spend that kind of time?
If you are like so many investors & speculators these days, the answer would be a resounding ‘NO’. With these types of investments there are key concepts that really don’t exist in so many other genres of stock market investing.
Unique Concepts of Due Diligence for Us
The first somewhat unique concept you may not be familiar with is Net Present Value. (NPV)
When it comes to Gold mining stocks, for instance, NPV has a lot to do with the present value of the resource in the ground. Now, your first problem is determining what counts as “the resource” (Gold, etc.)
How much can they really retrieve, economically! You’ll end up looking at core results, grams per ton, etc. It can really drag you down into the weeds.
Understand also the definition of a Gold mine: “A hole in the ground with a liar standing next to it”. Just sayin’ – word to the wise.
Another unique concept would be that NPV is typically only counted for the next 10 years…
But what if, you might ask, the Gold or other resource lasts longer than 10 years?
That is what might be referred to as a “tail” – not to be confused with “tailings” another concept you might come across in mining. The tail, in this instance, refers to potential value for shareholders outside of the NPV or Net Present Value computation.
There are many, many mines – some famous in the industry – that have been producing their respective resource for many decades, even 50, 75 or 100 years in some cases.
So Why Does NPV or Other D.D. Work Even Matter?
The whole point of all of this due diligence work is to determine not just IF you want to own a particular resource company’s stock, but AT WHAT PRICE?
Again to invoke the name of Rick Rule, if you can buy an asset for significantly less than the sum of its parts or NPV, that could get interesting (and therefore profitable).
The problem, however, is that there is so much more than just NPV when it comes to deciding if you should speculate with your own hard earned money and give it over to the market for stock in what is by definition a speculative enterprise.
The reason we are even willing to take this risk is, of course, the hope for an outsized gain. Ten, twenty, even fifty baggers are bandied about in the industry. We want our share of those, right?
Here’s the Shortcut
Due Diligence is like so many other aspects of life, there are professionals one can hire to do the work for you.
When it comes to household plumbing, for instance, there are many tasks I can handle myself with very little risk of mucking it up. Other tasks, however, require more expertise, special tools or perhaps just more experience using those specialized tools.
When it comes to due diligence of speculative resource stocks there is only one name that jumps out above the rest: Lobo Tiggre. (Lobo’s Website)
Lobo worked for another venerable resource stock investor long ago, Doug Casey; at Casey Research.
Well, Lobo struck out on his own many years ago and has been building a team at The Independent Speculator for the sole purpose of providing the highest quality work in the profession.
They provide more than specific company recommendations when you subscribe today, you’ll know WHY you’re being shown a particular stock instead of its peers in the market.
And that’s only the first half of the equation, because you also need to know when to SELL! That is provided as well.
Yet it doesn’t stop there…
This isn’t Lobo’s first rodeo so he’s also going to tell you when you might want to exercise his “upside maximizer” and take your initial chips off the table, and let just the house money ride.
That’s a key concept in speculation – getting your initial capital back.
So In Summary
Due Diligence is CRUCIAL in resource stock “speculation”.
Get it done yourself, or, hire an expert.
The expert I recommend is Lobo Tiggre and his team at The Independent Speculator. Check it out right now by CLICKING HERE
Here’s a photo of Lobo & I in Puerto Rico a few years back…
