World Of Wallstreet

Portfolio Performance: Top Picks Since The Correction

The graph that follows captures the ten day performance of my top portfolio holdings (while showing the S&P 500 and the spot price of silver and gold for comparison). The ten day performance pretty closely captures the effect of the gold and silver price correction (to date).

Here's some observations:

(1) Obviously, precious metal stocks pretty much follow the metal prices.

(2) Obviously, this is quite volatile and you probably don't want to invest like I invest. That silver price drop (which took place in four days) was really breath-taking.

(3) Besides metal prices, Jr mining stocks seem to be largely driven. News, anticipation of news or the absence of expected news largely accounts for the relative performance of the individual stocks. Here's what is happening with news, by stock:

• Gold Resource Corp (GORO.OB) - released more drill results. As you can see, news (for Jr mining stocks) trumps metal prices.
• Minefinders (MFN) - presented at a couple of conferences where they reiterated that April start of production guidance. Minefinders is relatively strong as anticipation of the start of production news release builds.
• Metanor (MTO.V) - is languishing as the long-awaited start-of-production news release fails to appear. There were a couple of webcasts covering Metanor at the beginning of the ten day period where it was announced that the mill was processing ore, but the price of Metanor seems to have lost momentum as the official press release fails to appear.
• New Guinea Gold (NGG.V) - is languishing from a lack of news. The news about the ramp up to full production of their first mine is now overdue and is hurting the stock price.
• Golden Star Resources (GSS) - there is no news from GSS which is a high-cost producer. As such, it is highly leveraged to the price of gold and that leverage has shown up in the form of a leveraged stock price fall.
• Aurcana (AUN.V) - is languishing from lack of news. Aurcana's fourth quarter ended 31-Dec-2007. Regulations require the release of audited financial results by the end of April. Aurcana's first mine was still ramping up to full production when the previous quarter's were released. Metal prices (particularly silver and copper) have risen significantly since Aurcana's previous guidance. I've been seriously increasing the size of my position in anticipation of both improved fourth quarter financials (when they are released) and production for the first quarter (ending this week). In addition, there is anticipation of further drill results and resource increases. So there is a lot of hopefully good news building up. I haven't been disappointed by anything about Aurcana fundamentally, but my experience with Aurcana, to date, has been characterized by news coming out much later than expected. I'm expecting good things from this stock soon.
• First Majestic (FR.TO) - had suffered from a dilution-induced price drop that occurred right before the silver price correction. I think First Majestic has held up since the silver correction started primarily part due to the fact that "weak hands" had already exited after the dilution. Furthermore, the dilution (having taken place right before the private placement at the very best possible price) now seems like quite a little coup increasing the stature of First Majestic's already respected management. Going forward, I'll be looking for dilution by competent management as a signal of a metal price top.

CONCLUSION: I'm learning is that correctly anticipating news releases is key to the short-term trading of Jr mining stocks. At this point, I've been adding to my Minefinders, Aurcana, New Guinea Gold and Metanor positions in anticipation of positive news releases. I will probably "sell the news", reducing my positions, in each case after the anticipated news hits.There is good reason to believe that Quadra mining's next quarter results will be unusually good (due to accounting peculiarities) and I plan on riding the build up to the earnings release along with the pop that follows.

Jr Miners Take Another Spanking - Why You Don't Want To Invest Like Me

Well my highly concentrated junior precious metal portfolio took quite a hit today after silver took a 5.8% hit and gold took a 3.6% hit. My portfolio was down 6.82%. Quite a spanking.

Since I've gone to highly concentrated junior mining porfolios (first base metals, lately precious metals), I've had quite a few days where my portfolio tanked more than 5%. This was hardly the worst of those days. Here's a graph of this carnage.

I've got hope for a better day tomorrow. The graph that follows gives the next day results for days where my jr mining portfolio took a 5% or larger hit.

Overall, the next day results average +2.5% and since I switched to precious metals the average, from only four data points, is +2%.

I took quite a hit today, but my portfolio, overall is up 9% year-to-date. That compares favorably to the:

• DJIA at -6%
• S&P 500 at -9%

But does not compare that favorably to:

• Gold at +18%
• Silver at +31%

Crazy Good / Crazy Bad

Today was quite a spanking. On days like this I'd like some perspective on what I'm doing with my investing. I guess I'd say I've been taking some big chances and have been making some good gains. Its pretty clear, that with this kind of volatility you have to "be right, sit tight". Sitting tight is not enough. Being right (and yet trying to get out on days like today) is also not enough.

As I said, today was quite a spanking. I'm down 9% for the day, 16% for the week and 22% in the last four weeks (as you can see below). And who knows if we're at the bottom. This is why you probably don't want to invest like I'm investing. Here's my volatility over the course of the year. As you can see, there are times when its crazy good (almost 50% in one month) and times when its crazy bad (like now) or worse (down 40%+ in one month).

But to keep things in perspective, let's add in my performance year to date (below). As you can see, I've never been more than 2% below my starting point all year, have been up since early January and, even with the recent correction, am up 88% YTD. Of course, if you had joined me in late July when I was gushingly bullish you'd be in a world of hurt right now. Of course, I'm very aware that there's always the question about whether being up 88% YTD is luck or skill (or some combination). Time will tell, perhaps.