Yet another buying opportunity in gold equities
With the most recent pullback in junior gold miners, we are yet again given the opportunity to buy great companies at multi-year low prices. Note that gold hasn’t moved much and is still above $2300/oz, which is a very respectable price, and a lot of miners can make really good money at these levels. Nonetheless, some of the junior gold stocks are selling at bargain-basement valuations.
I think this is a great time to be looking at these companies and coming up with a strategy to buy them. When some of these companies moved recently to the upside, they garnered 50-100% returns in no time. Buying mispriced assets at a multi-year low, when the fundamentals are good, can be a great, asymmetric way to invest. But you need conviction and cash to do so.
It’s understandably hard to have conviction buying gold stocks when the broad markets are going crazy and everyone is getting rich buying tech stocks. And to be honest, even though I think gold stocks make a lot of sense to buy and have in a portfolio right now, I think most people probably shouldn’t buy them here.
As we outlined in a recent article, most investors are just not wired to catch a falling knife in something as unpopular as gold miners now and potentially continue seeing weak price action. The likely result from doing something like that would be to sell them if they go lower in order to FOMO buy something like Nvidia.
But with that said, if you are willing to catch a falling knife, I think this is a great time to buy, looking for bargains. And if you’re not, and need an uptrend to be confirmed, I think it’s a great time to build a buy list and come up with a strategy for when to buy.
One thing that helps me during a correction like this is to have healthy cash levels to deploy if I see an amazing opportunity. This really changes my mindset from being concerned about a stock going down in price to looking at it as a great opportunity to buy more. I’m perfectly fine with some stocks going down in price when the fundamental story hasn’t changed at all. In my opinion, the risk/reward has just gotten better.
Junior mining stocks are so volatile, and investors just sell them down to all-time lows, without any regard to the value of the company. As a value investor, it’s great to be able to be on the other side of that, with conviction and cash, ready to pounce and pick up great value.
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Disclaimer: This article is for informational purposes only and does not constitute investing advice. Please consult with a qualified financial advisor before making any investment decisions.
