This is (still) not investment advice
By May 1, 2022– Published on
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I am writing this on a flight home from Spain. I spent the last week in Barcelona with a group of entrepreneurs as part of an annual strategy session.
Once per year, for the last eight years, this group has met somewhere exotic for a focused four-day deep dive into our biggest challenges and wins in our business lives, family lives and personal lives. They are like my personal board of directors. We hold each other accountable to our most audacious goals, act as a sounding board for our biggest challenges and share experiences and life lessons along the way.
We were aligned by businesses, all of us own companies of similar size in unrelated industries, but the retreat agenda always spends equal time on all facets of life - business, family and personal.
This crew is without question one of the most valuable tools in my tool belt.
Although Barcelona is a city known for its nightlife and leisure, in our frat house-style Airbnb, you found a front hall packed with running shoes, a kitchen full of supplements and a dining room table buzzing with strategy sessions and business presentations.
It is a highly competitive group - nobody wants to be the one who shows up unprepared for their business presentation, nor the one who misses a daily workout.
It’s like a summer camp for entrepreneurs. It’s the best. Every year, at the close of the retreat, I am thinking bigger than when I arrived.
As a consequence, I was not buried in the market last week. So as markets crashed, and my DM’s blew up with market chatter, I didn’t have much to say. The usual “what's going to happen next…?” debates were occurring, with many investors in my chat groups scrambling to figure out their next move.
But because of the way I make my investment decisions, I am not impacted by these developments. The Fed is raising rates and simultaneously selling off the balance sheet. It’s never been done before. It is making the market nervous. We are watching the world sell whatever is liquid and gather US dollars. The DXY is about the only impressive chart over the last 6 months.
I am not a trader, so weekly - and even monthly headlines, don’t impact me so much. I am an investor. I find the right people, build positions and wait. If I am right, then market forces aside, the right people will persevere until they are rewarded. When you invest in people, you buy them when they are cheap, and then you go to Barcelona.
Let me use a real-time example. In mid-march, I mentioned a few companies that I owned and was continuing to build positions in. One was Pure Gold Mining (PGM.V).
A quick reminder, this newsletter is not, and never has been investment advice.
In my March 13th letter, I shared these words on Pure Gold:
“Market legend, Rick Rule, told me years ago that he would have made 10x more money and worked half as hard if he had only invested in the same 3-4 entrepreneurs. I believe that Mark O’Dea is one of those entrepreneurs for my generation of investors. Mark came on my show in 2020 and told my audience that Pure Gold would be pouring gold bars by year's end. He did it. Since then, they’ve realized some operational challenges and the share price plummeted. O’Dea made the hard call and replaced his CEO, but now has to wait for the market to regain trust. I am not waiting. I am adding to my position now. They are a high-grade gold producer in a great jurisdiction (Canada) and are led by one of the most competent and serially successful teams in the mining business.”
Two weeks later, PGM realized the full scale of these “operational challenges” and the share price fell from 0.70 down to a low of 0.14.
I received a flurry of emails from readers asking what my action was with the stock. Here is a simple two-step process...
Step 1: Revisit the reason I bought the stock.
Step 2: Is that reason still valid?
I bought Pure Gold because I trust Mark O’Dea. I trust his judgment and decision-making, I trust him to surround himself with other great people and I trust him to have a Plan C in his back pocket in case Plan A and B fail.
Why do I trust Mark O’Dea? I have had him on the show 4-5 times, I believe he is honest, hard-working and remarkably durable as a company builder. He does what he says he will do.
But let’s take a look at his resume…
He founded True Gold Mining (Acquired by Endeavor Mining for $226 Million)
He founded Aurora Energy (Acquired by Paladin Energy for $260 Million)
He founded Fronteer Gold (Acquired by Newmont Mining for $2.3 Billion)
So I don’t feel I am going out on a limb with this one…
My average cost of PGM was .65. The share price tumbled to a low of .14. So what did I do?
I tripled my position at 0.15.
This is (still) not investment advice.
But - for anyone in my position who needs more clarity from the decision-makers at PGM - Mark has agreed to gather the whole executive team into a board room and is letting me bring my camera crew for an hour of questions.
Here is some advice to anyone reacting to recent market events. Unless you are a trader, don’t react like a trader. It’s easy to have conviction when the trend is moving in your favour. But nobody got rich by doing the easy stuff. Be patient, be thoughtful, put a few chips on the table, and go back to work.
Mark O’Dea and 245 other junior mining CEOs will be at my show on May 17/18th in Vancouver, BC.
I interview macro-finance personalities three to four times per week for my YouTube channel and podcast. The problem with macro is that there always appears to be a gold bull market right around the corner. So although I put weight on these conversations, I put more weight on sentiment and capital allocation. Over the last six months, there has been an undeniable trend of big money - from central banks to institutional funds, increasing their allocations to the precious metals sector. Without question, demand growth is outpacing supply at an increasing rate.
It doesn’t mean the precious metals market will start ripping tomorrow. But regardless, market forces aside, the right people will persevere until they are rewarded. When you invest in people, you buy them when they are cheap, and then you go to Barcelona.
Be patient, trust your process.
See you on May 17 & 18 in Vancouver, BC. Get tickets while they are still available.