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One value investor who's into gold (other than me)


Mark Jr.
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A value investor I met via a shared interest in new media assets, his name is Aram Fuchs and he runs a fund called Fertilemind Capital. He talks about gold in his latest letter to shareholders which he's given me permission to post on wealth.net here:

 

http://wealth.net/on-wealth/a-value-investor-buys-into-gold-oh-my

 

and the direct link to the PDF "Lucrative Paradox Of 2011“ here (5 pages)

 

http://wealth.net/wp-content/uploads/2011/01/Lucrative-Paradox-Of-2011.pdf

 

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  • 3 years later...

I miss all the posts about gold.  Today, GLD is lower than it was 5 years ago!  I suppose that explains why it's out of favor.

 

Which is really ironic for a value investing board. Some miners trading for less than cash, mines closing, extreme negative sentiment.

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I miss all the posts about gold.  Today, GLD is lower than it was 5 years ago!  I suppose that explains why it's out of favor.

 

Which is really ironic for a value investing board. Some miners trading for less than cash, mines closing, extreme negative sentiment.

 

I'm not interested in miners, that's firmly in my too hard pile, but I have owned gold in the past.  I'm waiting for ~$800/oz to own it again.

 

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I miss all the posts about gold.  Today, GLD is lower than it was 5 years ago!  I suppose that explains why it's out of favor.

 

Which is really ironic for a value investing board. Some miners trading for less than cash, mines closing, extreme negative sentiment.

 

Do you have some names that trade for less than cash?

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  • 2 months later...

I miss all the posts about gold.  Today, GLD is lower than it was 5 years ago!  I suppose that explains why it's out of favor.

 

Which is really ironic for a value investing board. Some miners trading for less than cash, mines closing, extreme negative sentiment.

 

I'm not interested in miners, that's firmly in my too hard pile, but I have owned gold in the past.  I'm waiting for ~$800/oz to own it again.

 

It'll never get to $800/oz as there is clear sovereign buying at around $1200. Mainly China buying as much as possible.

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I miss all the posts about gold.  Today, GLD is lower than it was 5 years ago!  I suppose that explains why it's out of favor.

 

Which is really ironic for a value investing board. Some miners trading for less than cash, mines closing, extreme negative sentiment.

 

Do you have some names that trade for less than cash?

 

kobex, ryan gold

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I miss all the posts about gold.  Today, GLD is lower than it was 5 years ago!  I suppose that explains why it's out of favor.

 

Which is really ironic for a value investing board. Some miners trading for less than cash, mines closing, extreme negative sentiment.

 

Do you have some names that trade for less than cash?

 

kobex, ryan gold

 

Not gold, but Karnalyte resources, about half cash

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There was a thread just a week or 2 ago about gold miners. Since gold miners require some of the tougher valuation work out there, I mostly looked at the qualitative side of things to identify potential stocks to acquire as I knew all the gold miners were cheaply valued as a whole so I just wanted to make sure I got some form of quality back for my buck. Sometimes you just gotta let go of the models and numbers and put your faith in your judgement.

 

Mine led me to Mandalay resources, which if you look from a bird's eye view is a gold miner with a value investor's philosophy: They acquire underperforming projects in the safest jurisdictions for a discount, then bring them up to speed with their operational expertise. The company has showcased outstanding capital allocation skills (god I hate that word, it sounds like kewl kids saying kewl kid things, only for investors) and is as shareholder friendly as you'll get in this industry. Although that's not a huge achievement given how low the bar is LOL.

 

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Personally, I would not fuck around too much trying too hard to figure out individual stocks. Most mines are outside the US so there is a triple whammy here:

 

1. Oil down 50% and oil/energy makes up 30% of a mine's cost structure;

2. Gold is up now in the past 12.5 months even relative to the US dollar and the US dollar is up relative to currencies of countries where gold is produced (therefore the price of gold in those countries' currencies is up by double digits;

3. Miners' stock prices relative to gold are at all time lows.

 

I would just buy GDX or Sprott's Gold miner ETF or call options on GDX at this point.

 

Then, once you have had the time to figure out individual companies, you can sell your initial position and convert it into those. For me, I just bought call options on GDX and SLV (the latter which I intend to convert to physical at some point because if gold continues to rise here, there should be a default on the COMEX at some point and contracts will be cash settled).

 

There is a shortage of physical precious metals in North America.

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I miss all the posts about gold.  Today, GLD is lower than it was 5 years ago!  I suppose that explains why it's out of favor.

 

Which is really ironic for a value investing board. Some miners trading for less than cash, mines closing, extreme negative sentiment.

 

I'm not interested in miners, that's firmly in my too hard pile, but I have owned gold in the past.  I'm waiting for ~$800/oz to own it again.

 

At $800, I'll buy some gold coins and put it in a safety deposit box!

 

Anyone else do that? And wants to admit it?

 

 

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