Dear Readers,
It has been a volatile year filled with uncertainty and political drama.
Everything that investment experts told you were good, just plain sucked.
Earlier in the year, the advice from many so-called experts was to stay away from stocks but invest in the safer, dividend-yielding utility stocks. Luckily, I told my readers the opposite.
In the last 52 weeks, the Dow Jones Utility Index is down nearly 4.5%, while the S&P 500 is still up over 11%, despite this week’s correction.
Back in early November I said, “The VIX will probably have its day soon enough.” The VIX on the S&P 500 is now up 18.3% since then.
Even in this Helicopter Ben environment, gold and silver stocks have suffered. While I am a big believer in gold and silver, long time readers have heard me say time and time again this year to stay away from most gold and silver stocks – with the exception of a few within the sector.
The Market Vectors Gold Miners ETF (GDX) is down over 12% YTD, while the Market Vectors Junior Gold Miners ETF (GDXJ) is down over 19%.
Everyone is looking for answers.
Do I buy? Do I sell? Should I take the tax loss? Should I lock in those gains?
Unlike the rest of the market, our readers have seen tremendous success with the Equedia Select Portfolio this year. But it doesn’t mean we can always predict the future; nor can I tell you when to buy or sell.
However, when you read between the lines, you often get a strong sense of where the market is headed. With some luck, strong industry contacts, and unconventional research, we have been fortunate enough to accurately call many important market events.
Predicting and timing the market is one thing, but you have to turn it into something tangible; you have to turn it into profits. Not many have been able to this year.
So far this year, hedge funds and bond managers have struggled to show their investors gains. According to Goldman Sachs, the average hedge fund has returned only 4.6 percent this year so far, underperforming the benchmark S&P 500 index by more than 7 percent. What’s worse – only 11 percent of managers were able to outperform the S&P 500.
According to the Economist, the S&P 500 has now outperformed its hedge-fund rival for ten straight years, with the exception of 2008 when both fell sharply.
It seems that many investment advisory services and investment focused newsletters are also struggling to keep up; many showing their subscribers overall losses.
Any newsletter or investment service can show investors gains in a bull market. But when the going gets tough, those who can show investors returns that beat the S&P benchmark truly stand out.
I feel extremely privileged to be amongst that crowd.
We have been fortunate to bat 100% with all new introductions to the Equedia Select Portfolio this year. Every company introduced into the Equedia Select Portfolio this year has shown our readers incredible returns. Given that many investment services and hedge funds have lost this year, I’d say that’s pretty good.
As a result of our success, accurate market predictions, and ability to adapt, the Equedia Weekly Letter is now the fastest growing investment newsletter in Canada. Thank you to all of our loyal readers for spreading the word and making the Equedia Weekly Letter one of the most read Canadian investment newsletters this year.
The last 12 months have been extremely difficult for the resource and commodities sector. The sector as a whole has been received with extremely negative sentiment. Aside from a handful of companies, such as those in the Equedia Select Portfolio, the overall sector is down. Those in the industry know exactly what I am talking about.
I am seeing desperation everywhere. Brokers can’t fund deals because clients have pulled money out of their accounts. Juniors everywhere are desperately seeking to finance at all-time lows; not to move projects forward, but to stay alive. Financings by big firms are being smashed back into the open market, just so bankers can collect some upfront fees and commissions. It’s ugly out there.
Next year is already proving itself to be a difficult year for many in the industry. But I believe that within the negativity, there are going to be some strong standout stocks that will buck the trend; just as the companies in our Equedia Select Portfolio have done this year.
As a result of the difficulties in the market, you have to be extremely diligent on where to place your money. Making bets on early-stage exploration companies just doesn’t make sense in this environment because exploration is a negative cash flow business. Those companies have to raise money to move forward, but where are they going to find it? We’re going to see a lot of fire sales next year…
But amongst the negativity, there are some strong positives. As I mentioned, this shift in money will weed out the weak and bring forth the strong.
The Strong Survive…and Prosper
Companies with strong advanced assets or a growing production profile will truly stand out in the crowd. As a matter of fact, bankers are throwing money at these companies. Even still, not every company with a strong asset will prosper.
Misconceptions in the Resource Market
There’s a general misconception that the Net Asset Value (NAV) of a Company should always be reflected in the share price. Often, investors do their research, find a company that’s trading at a discounted valuation to the market, and invest based only on the NAV.
But that’s a dead wrong approach.
There are a lot of other factors you must consider. As I mentioned in past letters, my focus this year was on companies that fit into one of the following three categories:
- Producers that are increasing production and decreasing costs, while lagging in price when compared to peers (Timmins Gold)
- High grade explorers next to producing, or near production, mines that are takeover targets (MAG Silver and Balmoral Resources)
- Near term producers with strong Preliminary Economic Studies and blue sky, take-over target potential (Corvus Gold)
Within each of these categories, you also have to consider: how much cash each companies have and how easily they are able to raise more; the jurisdiction their flagship asset resides; and of course, management’s ability to execute and market their story.
If you’re going to invest in more resource stocks next year, please be extremely diligent and look for more advanced stage companies; especially considering that both the GDX and GDXJ are down significantly this year.
While there are early stage companies that could fly, and I’ll be looking for them, the key is wealth preservation. Don’t make stupid bets. If you plan on speculating on long-shots, you are better off hitting the roulette table.
Despite the GDX and the GDXJ both down significantly this year, there are always opportunities in a down market and the companies in the Equedia Select Portfolio proved it this year.
Equedia Select Portfolio Performance
*(all figures in CDN dollars and share prices are those on the Canadian Exchanges)
We added only four new companies to our Equedia Select Portfolio this year.
They include:
1) MAG Silver Up 36.65% YTD
2) Balmoral Resources 17.86% YTD
3) Timmins Gold 46.57% YTD
4) Corvus Gold 165.08 YTD
All of these companies fit into my three categories and all meet my investment criteria in terms of cash holdings, jurisdiction, and management.
The performances of these four companies have shown our readers tremendous gains this year; especially when comparing it to all major benchmark indexes. Together, they are up an average of 66.54% YTD. Of course, what really matters is how much they are up since our initial reports.
The mean average gain of all Equedia Select companies initially announced this year is 38.59% on the Canadian exchanges. If you calculate the percentage from the highs of each company since our initial reports, the overall percentage gain would be 60.55%.
That means the current Equedia Select portfolio is beating every major index and hedge fund average this year:
- S&P 500 up 9.83%
- S&P TSX up 4%
- Dow Jones Industrial Average up 4.36%
- NASDAQ Composite Index up 11.76%
- Dow Jones Utility Index down nearly (4.5%)
- Market Vectors Junior Gold Miners ETF (GDXJ) down (26.15%)
- Market Vectors Gold Miners ETF (GDX) down (16.49%)
- S&P/TSX Venture Composite Index down (19.05%)
- SPDR Gold Trust ETF (GLD) up 2.96%
- iShares Silver Trust (SLV) down (0.94%)
Let’s take a closer look…
MAG Silver (TSX: MAG) (NYSE MKT: MVG)
MAG Silver has impressed us all year, beating out almost every major silver stock in terms of performance.
It’s currently up 22.59% from our initial report, but hit a high of $13.32 just a few months ago for a potential gain of 65.26%.
MAG Silver has a 49% interest in what I call the best undeveloped silver project on the planet at Juanicipio.
However, this year, MAG Silver made an incredible discovery that will rock the silver world. I think they have found the biggest CRD deposit in the world at their 100% owned asset, Cinco de Mayo.
These CRD’s represent approximately 40% of Mexico’s 10-billion ounce historic silver production and have been mined for more than 400 years. If MAG can prove that Cinco is what I think it is, their 100% owned interest would be worth a lot more than their 49% interest in Juanicipio.
While there are some current issues at Cinco de Mayo waiting to be resolved with the local Mexican tribes, I expect them to be dealt with sometime next year. It’s not uncommon for local Mexican bands to make demands; especially when they know that MAG potentially has one of the biggest CRD deposits ever found. But these things often get resolved. When it does, MAG will be THE silver story to watch.
Initial Report: The World’s Most Important Silver Project
Initial Report Share Price: (TSX: MAG): $8.06
Current Share Price (TSX: MAG): $9.88
Current Potential Gain: 22.48%
Highlight: New 52-week high of CDN $13.32 since initial report; potential gain of 65.25%
Timmins Gold (TSX: TMM) (NYSE MKT: TGD)
Timmins Gold continues to impress and outperform its peers. They continually beat market expectations and are a significant cash flow machine, on track to produce more than 100,000 ounces of gold next year.
As a result of their performance, they have attracted coverage from some of the biggest and most respected firms in the industry; including recent coverage by RBC Capital Markets and Dundee Securities.
RBC just reported that Timmins Gold may have the highest free cash flow yield in their coverage universe; that puts Timmins in an extremely advantageous and favourable position when compared others in the space. With their significant free cash flow and strong share price, they could potentially be an acquirer of some great gold projects next year.
Timmins’ management has done everything they told me they would since I first started discussing their project with them. They continue to deliver on their promises and next year should be no different. If that is any indication of things to come, there is a lot to look forward to.
Initial Report: A Cash Flow Machine: Growing Gold Production with Significant Upside
Initial Report Share Price: (TSX: TMM): $2.21
Current Share Price: (TSX: TMM): $2.99
Current Potential Gain: CDN 35.29%
Highlight: New 52-week high of CDN $3.48 established since initial report
Balmoral Resources (TSX.V: BAR) (OTCQX: BALMF)
Balmoral has had tremendous success this year and many of our subscribers have seen gains of well over 90% since our first report.
For a while, Balmoral was stuck in the $0.94 range, as a result of the 12 million warrants at $0.94 that expired on November 9. As a result, every time we saw a move up higher, those with warrants were likely knocking it back down for some quick gains.
However, that’s old news and Balmoral was able to capture a lot of those warrants; putting tons of cash in the bank. By my calculations, Balmoral should have more than $19 million now. That’s plenty for next year.
Balmoral’s management team continues to hit high grades and their drilling success just doesn’t seem to have an end. The warrant overhang is now gone and Balmoral seems to be slowly trending up higher. Given that they continue to astound us with phenomenal grades right next door to what will become Canada’s Largest Gold Mine next year, the Detour Lake Mine, I expect more special things to come from Balmoral next year.
Initial Report: A Recipe for Success: One of the Biggest and Best Mining Packages
Initial Report Share Price: (TSX.V: BAR): $0.57
Current Share Price: (TSX.V: BAR): $0.99
Potential Gain: CDN 73.68%
Highlight: High of CDN$1.10 since initial report for a potential increase of 93%.
Corvus Gold (TSX: KOR) (OTCQX: CORVF)
Corvus Gold has a lot of what you want in a near term gold production story; it has incredible management, good economic numbers, is in the best gold jurisdiction in the world, and it has great blue sky potential.
Every dollar management has raised has returned nearly 5 times the market cap back.
I have been to Corvus’ North Bullfrog Project and it wouldn’t take much to put the thing into production. Not only that, they may be chasing a large high grade discovery that could dramatically change the economics of the project. Much of the follow up drilling on the high grade targets will be done next year, so I am extremely excited. It could be a massive game changer for Corvus.
Initial Report: The Complete Package: A Massive Game Changer
Initial Report Share Price: (TSX: KOR): $1.36
Current Share Price (TSX: KOR): $1.67
Potential Gain: CDN 22.79%
Highlight: New all-time high of CDN $1.72 for a potential gain of 26.47% since initial report.
How to Win When Others Fail
The companies selected into the Equedia Select Portfolio this year went through an extremely rigorous evaluation process before being added. There’s a reason why these companies have succeeded this year, while the majority of others have failed miserably.
If you haven’t already, take the time to go through all of the past reports and you will see why these companies were selected, and why they have succeeded in such a terrible resource market.
Unlucky Number 2013?
No one knows where the market is headed next year.
From a fundamental standpoint, stocks are still trading at an average price of 13-times forward earnings, which is well below the historical average.
Earnings yield on the S&P500 is 6.8%, while the yield on the ten year Treasury Bill (T-Bill) is 1.8%.
Conventional wisdom says if the earnings yield on stocks is greater than the yield on the 10-year T-Bill, stocks are undervalued. When you consider that the current yield on stocks is more than 3.5 times the yield on the 10-year, it would seem that stocks are still very much undervalued.
Of course, that assumes that earnings will continue to grow and that everything around the world, such as Europe and China are fine; of course, neither of those situations are.
Europe is still a mess with no real resolve and will have to resort to more money printing, just as the U.S. has done. China will need to do the same but they have a lot of hidden skeletons that could be brought to light next year. I won’t go into how bad things could get for China if some of these skeletons come out. Just be prepared to seem some major shocks.
I’ll do my best in 2013 to inform of any market-changing events, as I have done this year. It’s going to be another hard year to invest; but where there’s negativity, there’s also opportunity. You can bet I will be looking for more winners next year.
Thank you to all of my loyal readers for sticking it out with me through thick and thin, and trusting in my ability to present you with great ideas during these difficult times.
You have made the Equedia Weekly Letter one of the most read investments newsletters in Canada this year.
I can’t thank you enough.
Have a safe and wonderful New Years.
Until next week,
Ivan Lo
Equedia Weekly
Disclosure: I am long gold and silver through ETF’s and bullion, as well as long both major and junior gold and silver companies. We’re biased towards Corvus Gold Inc. because they are an advertiser and we own shares through their most recently announced financing dated October 15, 2012 as well as shares purchased in the open market after our initial report, and we own options. We’re biased towards Timmins Gold Corp. because they are an advertiser, we own options, and we own shares. We’re biased towards Balmoral because they are an advertiser and we own shares. We’re biased towards MAG Silver because they are an advertiser and we own shares. You can do the math. Our reputation is built upon the companies we feature. That is why we invest in every company we feature in our Equedia Reports, including Timmins Gold Corp., Balmoral Resources, Corvus Gold, and MAG Silver. It’s your money to invest and we don’t share in your profits or your losses, so please take responsibility for doing your own due diligence. Remember, past performance is not indicative of future performance. Just because many of the companies in our previous Equedia Reports have done well, doesn’t mean they all will.
Furthermore, the management teams at Timmins Gold, Balmoral Resources, MAG Silver, and Corvus Gold have no control over our editorial content and any opinions expressed are those of our own.
We’re not obligated to write a report on any of our advertisers and we’re not obligated to talk about them just because they advertise with us; and we have many advertisers. Disclaimer and Disclosure
Equedia.com & Equedia Network Corporation bears no liability for losses and/or damages arising from the use of this newsletter or any third party content provided herein. Equedia.com is an online financial newsletter owned by Equedia Network Corporation. We are focused on researching small-cap and large-cap public companies. Our past performance does not guarantee future results. Information in this report has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete. This material is not an offer to sell or a solicitation of an offer to buy any securities or commodities.
Furthermore, to keep our reports and newsletters FREE, from time to time we may publish paid advertisements from third parties and sponsored companies. We are also compensated to perform research on specific companies and often act as consultants to many of the companies mentioned in this letter and on our website at equedia.com. We also make direct investments into many of these companies and own shares and/or options in them. Companies do pay us to advertise on our website and we often distribute our reports on featured companies. While we are never paid to write a rosy and positive report on any company, we do market our reports using the advertising fees paid for by our featured companies.
This process allows us to continue publishing high-quality investment ideas at no cost to you whatsoever. Our revenue is generated by sponsor companies and we grow our readership by using the advertising fees we charge to distribute our reports. This helps both Equedia and our client companies gain exposure and allows us to provide you with our research at no cost.
Therefore, information should not be construed as unbiased. Each contract varies in duration, services performed and compensation received.
If you ever have any questions or concerns about our business or publications, we encourage you to contact us at the email or phone number below. Equedia.com is not responsible for any claims made by any of the mentioned companies or third party content providers. You should independently investigate and fully understand all risks before investing. We are not a registered broker-dealer or financial advisor. Before investing in any securities, you should consult with your financial advisor and a registered broker-dealer. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report OR ON Equedia.com will be the full responsibility of the person authorizing such transaction.
Please view our privacy policy and disclaimer to view our full disclosure at http://equedia.com/cms.php/terms. Our views and opinions regarding the companies within Equedia.com are our own views and are based on information that we have received, which we assumed to be reliable. We do not guarantee that any of the companies will perform as we expect, and any comparisons we have made to other companies may not be valid or come into effect. Equedia.com is paid editorial fees for its writing and the dissemination of material and the companies featured do not have to meet any specific financial criteria. The companies represented by Equedia.com are typically development-stage companies that pose a much higher risk to investors. When investing in speculative stocks of this nature, it is possible to lose your entire investment over time. Statements included in this newsletter may contain forward looking statements, including the Company’s intentions, forecasts, plans or other matters that haven’t yet occurred. Such statements involve a number of risks and uncertainties. Further information on potential factors that may affect, delay or prevent such forward looking statements from coming to fruition can be found in their specific Financial reports. Equedia Network Corporation., owner of Equedia.com has been paid $9166 plus HST per month for 12 months which totals $110,000 plus hst of media coverage on Corvus Gold Inc. plus any additional expenses we may incur as a result of additional distribution. Corvus Gold Inc. has paid for this service. We have also been granted 150,000 options at $1.08 which expires on September 27, 2014 with a full vesting period of one year, by Corvus Gold Inc. Equedia.com may purchase shares of Corvus Gold Inc. without notice and intend to sell every share we purchase for our own profit. We may sell shares in Corvus Gold Inc. without notice to our subscribers. We currently own shares of Corvus Gold Inc., and have participated in Corvus Gold Inc.’s most recently announced non-brokered private placement financing dated October 16, 2012, because we believe in the Company’s ability to deliver results. The shares will have a hold period of 4 months from the date of closing. Equedia Network Corporation., owner of Equedia.com has been paid $5833.33 plus HST per month for 6 months which totals $35,000 plus hst of media coverage on MAG Silver Corp. plus any additional expenses we may incur as a result of additional distribution; we have thus far been granted a budget of $85,000 for additional advertisements we make on behalf of MAG Silver. MAG Silver Corp. has paid for this service and has since extended this service for an additional 6 months for $40,000 plus HST. Equedia.com may purchase shares of MAG Silver without notice and intend to sell every share we purchase for our own profit. We may sell shares in MAG Silver Corp without notice to our subscribers. We currently own shares in MAG. Equedia Network Corporation., owner of Equedia.com has been paid $7143 plus HST per month for 7 months which totals $50,000 plus hst of media coverage on Balmoral Resources Ltd. plus any additional expenses we may incur as a result of additional advertisements; we have thus far been given a budget of $75,000 for additional advertisements we make on behalf of Balmoral. Balmoral Resources Ltd. has paid for this service. Balmoral has also since renewed the existing contract for another 6 months for $
50,000 with an additional budget of $60,000. Equedia.com owns shares and may purchase shares of Balmoral Resources Ltd. without notice and intend to sell every share we purchase for our own profit. We may sell shares in Balmoral Resources Ltd. without notice to our subscribers. Equedia Network Corporation., owner of Equedia.com has been paid $9167 plus HST per month for 12 months of advertising on Timmins Gold plus any additional expenses we may incur as a result of additional advertisements. We have also been granted 150,000 options at $2.15 by Timmins Gold. Equedia.com and its owner own shares of Timmins Gold and may purchase shares of Timmins Gold Corp without notice. We intend to sell every share we purchase for our own profit. We may sell shares in Timmins Gold Corp. without notice to our subscribers. Equedia Network Corporation., owner of Equedia.com has been paid $5000 plus HST per month for 12 months of advertising on Kesselrun Resources which totals $60,000 plus HST plus any additional expenses we may incur as a result of additional advertisements. We have also purchased shares in two separate private placements. Equedia.com and its owner own shares of Kesselrun Resources and may purchase shares of Kesselrun Resources without notice. We intend to sell every share we purchase for our own profit. We may sell shares in Kesselrun Resources without notice to our subscribers. Equedia Network Corporation., owner of Equedia.com has been paid $6250 plus HST per month for 12 months of advertising on Great Northern Gold Exploration which totals $75,000 plust HST plus any additional expenses we may incur as a result of additional advertisements. We have also purchased shares in two separate private placements. Equedia.com and its owner own shares of Great Northern Gold Exploration and may purchase shares of Great Northern Gold Exploration without notice. We intend to sell every share we purchase for our own profit. We may sell shares in Great Northern Gold Exploration without notice to our subscribers.
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