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Mailbox: How Long Should I Hold A Stock?

This is a question that will take a bit of answering… I think the easiest way to answer is to break it down by stage, as you suggest.

Explorers: it’s all about the investment thesis and the results. Those divide into three broad categories:

  • Success: drills hit and return something exciting. The share price responds. I almost always sell some into a discovery price spike. Excitement runs a price like nothing else. Reality (waiting for the next result, what the next result is) almost always brings it back down, at least to some extent. This pattern happens time and again. If the stock has doubled or better, I sell enough to take my cost base to zero. Play with the house’s money!
  • Neither up nor down: drill return some of what was sought but not enough. The market is nonplussed and the stock doesn’t do much. Here the decision rests with the details of the results - how does it grow or change the geologic theory and therefore outlook? - and what’s in the hopper - more results still pending? different area/approach or same? pause because of funding or seasonality? All of these things feed into a decision about whether to stick with or sell and move on
  • Results disappoint: stock drops. Decision here again rests with the details of the results (did the result invalidate the whole thesis or just part of it? did the drilling work -reach intended target and good core recovery?) and with what else is pending (more holes testing another idea/approach? or that’s it?). I think you have to go through that assessment and come out pretty optimistic about the potential to hold if a stock has tanked on drilling news simply because the market is hesitant to give projects a second chance, so the bar for success ironically gets higher with each failure…

Resource growth/developers: it’s about two things: catalysts and the market

  • are there clear catalysts on the horizon? testing new zones, a maiden resource, a PEA? If so, holding to and through these events can work well (unless, of course, the news disappoints). speculation ahead of the news can also generate lift, so sometimes it makes sense to sell into that wave.
  • In a rising market, defined ounces/pounds that are taking clear steps forward and demonstrating tangible value along the way provide great leverage. A strong management team that drums up and maintains excitement over the stock’s potential as a takeout really helps (drives retail investors in). Marathon Gold is a great example of a great project advancing steadily and successfully that has takeout target written all over it - it has outperformed peers by a mile.

Mine builders: this is the golden runway. In general, it makes sense to hold builders until first pour. PGM is a great example. Once the mine starts up the stock could keep rising but the risks of failure increase for sure (metallurgical issues, processing problems, rock competency challenges, debt walls, etc).

I haven’t given you ANY actual timelines, but that’s because there is simply nothing to say that applies across the spectrum of stocks in our sector. It’s all about what the investment premise is, how new data feeds into it, and how the stock has performed.

It’s SO easy to hold onto underperformers thinking a recovery is around the corner. It’s also so easy to hold onto outperforms, thinking there’s more coming. In both of these situations, it comes down to relative appreciation potential.

If your investment thesis pans out, what might the stock be worth? What is the risk it doesn’t work out? What other forces will impact the share price in the meantime (need to finance, free trade date from a financing a few months ago, seasonal restrictions on when they can work, etc)? And have you already gained or are you already down??

Consider those concepts and then think about whether you’d rather have your money in that stock or in another stock, perhaps one you just learned about that you really like. that’s what I mean by relative appreciation potential - would your capital have better odds of generating the kind of gains you seek in this stock or in another?

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In her letter, Resource Maven explains what she is buying and selling, and why. Maven has bought into several of the markets best - performing stocks well ahead of the curve. She regularly identifies exciting new exploration opportunities and manages the inherent risk by selling some into speculative gains. And the mine builder and operator stocks that form the basis of the portfolio give strong, ongoing leverage to the rising prices of gold and silver. She has your precious metal bases covered.

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Hi there, just a quick note to say how impressed I am with all the work you and your team do.
I started a few months back, and I'm sure in it for the long haul.
All the best

-G (Netherlands) (Jan 2018)

Hi Gwen,

Thank you so much for this excellent Maven letter. Your market analysis and logic is again exceptional. Your insights, knowledge and feel have given me a wonderful couple of hours. I am now planning my activity. I look forward to seeing you tonight on the Virtual Metals forum, I am pleased that you start first as I am a morning not a night person.

I hope you and your family stay well.

Best Regards,

CLB

-CLB (May 14, 2020)