I know that’s a big title, so let me explain. I often get asked: what is the most important thing you look for in a metals and mining stock? Being asked so often prompted me to write this piece. First off, you have to start from a positive sector outlook. Second, the answer will differ person to person because it really depends on your risk profile. Third, if you want to succeed investing in junior resource stocks, find some allies. Then, once you’ve navigated all of that, you can start assessing individual stocks.

I try to convey the keys to successful resource investing in every letter, so this is not intended to be comprehensive! But I wanted to include it as a reminder to take a step back, know yourself, lean on others, and ask questions.

Metals and mining stocks can provide incredible rewards, and often those rewards are available at times when the rest of the market isn’t offering the same. Right now, for example: we’re late in a broad bull market, but the lagging commodities complex is just setting up to go. Commodities from copper to oil to wheat outperform when global economic growth creates strong demand, when inflation amplifies price gains, when price gains attract investment interest just as the rest of the market is becoming less attractive…

Seeing opportunities in commodities is one thing. Knowing how to profit from that opportunity is another.

I am no expert on oil or wheat, but I know metals and mining. So here is my quick run-down of how to invest in metals and mining stocks.

I have four points. Here goes.

First: start macro. Only enter if you have clear reason to believe that the sector and metal have strong positive fundamentals, like they do right now. Within that framework, know what to watch to know if your thesis still holds.

Second, figure out your risk profile. Exploration stocks offer the biggest potential rewards, but the risk of failure is really high. In a strong mining market that risk is a bit moderated, but it never disappears. Large diversified miners, by contrast, are more about offering exposure – and leverage – to metal prices. The upside is less but the risks are also far less.

So know how much risk you can tolerate and how much time you want to spend keeping up with your portfolio – higher risk stocks require more attention. Figure out the risk-reward region where you want to play and stay there.

Third, don’t try to do this alone. There are far too many economic factors and companies and projects to keep up with everything on your own. If you have a good network, though, you should catch the things that matter.

That’s the big picture setup. If you are a Maven Letter subscriber, you likely lean to buying at least some exploration stories – your risk profile allows for that. And if you’re reading the letter right now, you likely see opportunity in the sector over the medium term.

That brings us to what to ask once you are at the point of assessing a particular stock. With junior explorers, there are detailed requirements.

First, interact with management – these are literally the people who will be managing your money if you invest. Are they focused and organized? Do they follow through? Have they done this before? It’s essential to have the right people for each stage – explorers should never plan mines; engineers should never be left alone with geologic information. And management has to be A Team, not B or C. Assess their experience and trust your gut.

Then: does management have a clear plan to access money and then use it to create new value? It isn’t just about having an interesting project – lots of projects are interesting. It’s about having a clear plan for the month, the half year, the year, and the cycle on how to advance the asset or portfolio specifically to create shareholder value. There are too many geologists using public companies to test theories – you want entrepreneurs using geology as a vehicle to make money in a public company. Entrepreneurs have clear milestones to add value and alternatives if those milestones fail, and they can explain that setup in a few minutes.

If management passes your gut test and they have a plan to create value, move on to the company valuation and structure. Is it undervalued relative to its peers? With success on the plan to create new value, what could the value become? And what is the share structure – will the new value create significant share price lift?

Answering those questions requires knowing a bit about the project. For example, size matters – unless it’s a raging bull market, small deposits just don’t attract much interest. Then there’s the big question: does it work? In terms of location, infrastructure, metallurgy, social license and permitting, strip ratio, and so on. These things matter less for early discovery and exploration, but still no one loves really isolated expensive projects or social issues off the bat.

So the project has to work, in terms of location, scale, metallurgy, the basics. For early stage exploration, the evidence has to be strong and the alternatives if drilling fails have to be ready. The team has to have a plan to advance the asset in ways that the market will reward. Within that, share prices move best if the share structure is tight and you’re starting from a low valuation. The people have to be up to the challenge. And it all has to be happening in a metals market that is moving on up.

It’s a lot. But when metals markets go on a run – it’s worth the effort.