Editor's Note: Earlier this week, I had an excellent conversation with Porter Stansberry on his Black Label Podcast. Porter and I have been longtime colleagues and friends, we discuss everything from the enormous move in gold to the greatest business in the history of capitalism — and how to invest in gold right now.
You can check out my full interview with Porter for free, when it goes live at 4 p.m. today, October 8th:
Click here to see my chat with Porter Stansberry.
What Makes These Gold Stocks Unique…
I specialize in junior mining and royalty stocks. If you look at my portfolios, the stocks may seem unusual at first… like something isn’t right.
For one, most of them have five letters in their ticker symbols. A five letter ticker means these companies are not trading on the New York Stock Exchange (NYSE) or the Nasdaq, yet.
That “yet” is important. I don’t talk about it much because it’s usually a later-stage benefit of investing in these smaller companies, but if they don’t get acquired by another firm, successful junior mining and royalty firms will get uplisted to a big exchange, usually the NYSE. When they do, they’ll ditch one or more of their letters - and typically experience another bump in price thanks to various knock-on benefits of being on a big exchange.
For instance, once you get onto the Wilshire 5000, every institution that owns a Wilshire index, ETF, mutual fund, etc. has to go out into the market and buy shares to add your company to their Wilshire holdings…
For a small cap company, that can sometimes (but not always) mean a pretty nice boost.
Another benefit to uplisting is the cache of a bigger, more reputable market like the NYSE. There’s a degree of perceived safety among companies that are in the NYSE due to more stringent reporting and listing requirements.
Until they’re uplisted, these five-ticker companies trade over the counter or OTC. Sometimes known as the “pink sheets.” They usually also trade on the Vancouver or more typically, the Toronto exchange.
The reason these small companies are listed on both Canadian and OTC exchanges is simple: Canada is actually the mining capital of the world. Over half of all mining companies are listed in Canada. Part of the reason is Canada has a long history of mining, and they more or less invented the best practices and procedures for publicly traded mining stocks. Those best practices were paved and honed over the decades as the investment public, regulators and gold companies pushed and pulled, finding the weaknesses and tendencies of various reporting rules and standards.
The OTC listing has more to do with just getting listed anywhere. Anyone can buy an OTC company through a normal brokerage account, usually without any kind of hiccup. For a small company just getting started that has zero cash flow and very little financials to report (at least at first) the OTC exchange makes it relatively easy to hang a shingle and start attracting investor capital.
Of course, this ease of listing also means the OTC market is filled with go-nowhere companies, scams and fly-by-night boiler room firms.
To the average main street investor, they may all look the same. Some of the worst companies to own tend to have some of the slickest investor relations marketing, sending out teasers and exciting stories that will get your heart pumping. They all have websites and phone numbers and corporate offices.
You really can’t tell what’s inside most of these companies by reading the name on the tin.
That’s part of the work that I do besides reading and analyzing reports… I also regularly talk to CEOs, institutional investors, industry experts, geologists, bankers, lawyers, etc.
Once you go around the horn for a couple of decades like I have, you get a finely tuned sense of who the real players are and who is running a scheme. In a business like mining, you absolutely live or die by your integrity and your ability to get things done on time and under budget.
Mining is such a capital intensive operation that there is no room for futzing around. Especially for juniors, if the market senses that your company is being even slightly poorly or having any kind of difficulty, you’ll get eaten alive.
Keeping my ear to the ground and talking regularly with industry professionals is almost as important as crunching the numbers and finding deep value. I wouldn’t ever buy or recommend a gold stock if I didn’t also have a keen understanding of company leadership.
Speaking of professionals, I highly recommend taking a listen to my talk with Porter Stansberry. He’s one of the sharpest minds in the business and we had a great, candid chat about the gold market.
Click here to listen now.
Best,
Garrett Goggin, CFA, CMT
Chief Analyst & Founder, Golden Portfolio
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