Investing in the Resources Sector — Luck or Skill?

mining commodities_lge

I can tell you, being a resources analyst in this market is a tough gig.

If you don’t know by now, I’m bearish on commodities this year. Crazy isn’t it…a resources analyst actually telling you the truth for once; resources suck.

That said, I’m still finding opportunities in the resources sector — although you have to dig deep. And this means that you’ll have to dive into the speculative end of the resources market if you want to make a profit; for now anyway….

One of the speculative stocks which I’ve recommended to Diggers and Drillers readers has jumped more than 100% in recent weeks.

Admittedly, as I expected, the share price did pull back a little bit. This generally happens after a big move — some punters like to take profit off the table.

This week, I provided a geotechnical analysis to Diggers and Drillers readers about this company’s results, and why they sent its share price flying. The stock jumped another 40% in the following two days.

The share price is now higher than before…and it looks like it’s just getting started.

What I’m looking at now is a standout speculative mining stock. In fact, I believe that this stock has the potential to become the next Sirius Resources [ASX:SIR]. If you can recall, Sirius saw its share price jump from five cents to $5 dollars in around 12 months back in 2011/12.

With all this hype, I must add a disclaimer…

I spent weeks carefully analysing and writing about the recent results. I’ve warned readers that the company still has a lot more work to do before it can stand against an industry titan like Sirius.

But because it’s still early days, you have an opportunity to be a maiden investor before the success story truly takes off.

Drilling results are due out extremely soon. If the results are ‘economic’, good luck buying this little company at its current market capitalisation of $30 million. In fact, good luck buying it at $60 million.

This company is definitely worth a small punt of even $500…its geotechnical results, to date, appear to be superior to Sirius’ early days. If you want to check out this company, scroll to the bottom of this link.

Luck and emotional investing — how to succeed?

Now I want to talk to you about something serious — how to use skill to become a lucky investor in the resources space.

There’s no doubt that an element of luck contributes to successful investing in resources.

When I look back at my personal investing career, I’m shocked how lucky I was with some of my investments. I was extremely lucky to profit over 100% in two weeks when I bought Centro Property during the Global Financial Crisis. At the time, I recall thinking…‘well it’s fallen from $10 to 10 cents (i.e. 99%) so it’s bound to bounce soon’.

If I saw it at 40 cents, I may have thought the same thing — a great opportunity. This would have turned into a ‘bargain’ that went wrong. If I followed through with this investment strategy, waiting for a bounce or to recoup my profits, I would have lost my capital — albeit, it wasn’t much. The company went bankrupt soon after I took my 100% profit off the table.

In this instance, luck came to me. I was trying to profit by catching a falling knife. This is why I believe that you should use the skills and information available to create your own luck.

My experience investing and trading during volatile times of the financial meltdown, and having a funds management background, has taught me how to create my own luck…or at least put myself in a position to get lucky.

I’ll explain…

When I took over the publication from the former editor of Diggers and Drillers, I immediately cut a fair chunk of the previously recommended stocks. The stocks that I cut were poor businesses that weren’t going anywhere anytime soon. Since then, I’ve even cut a number of my own investment recommendations that didn’t meet my expectations.

In fact, the majority of stocks cut are now trading significantly below the price which I recommended selling.

The fact is that you should never become emotional with stocks — especially when you’re investing in the resources space. You’ll miss the next opportunity. And the one’s following, if you want to wait years to recoup your losses.

Creating own luck in the coming resources bull market

The fact is that everyone needs a little bit of luck on their side. So why not create your own luck?

Although the geotechnical results are exceptional in the above mentioned stock, a degree of luck is still needed. Everything hinges on the drilling results.

Indeed, the coming drilling results may not pan out. I’ve seen it before. Exceptional initial tests, but no luck on the drilling results.

But after hundreds of hours of analysis, the opportunity is presented. Readers are aware of what the company needs to do to succeed. This means that they know when to buy, sell and hold. This is what I call, creating your own luck…

Unfortunately, many investors put in the work but then rely on hope. They hold stocks for years and perhaps decades waiting for it to repay them what they invested, let alone make a profit.

This is because these investors do not want to even think that their investment strategy didn’t work out. They have no plan B. And they don’t understand when plan A goes wrong. A good investor alwaysassumes he could be wrong. Then you constantly check your position.

The message: everyone needs a little bit of luck on their side. Don’t just let luck come to you. Implement thorough analysis, become open minded, and use a common sense approach to create your own luck. If you invest smart, you’ll see that luck will come to you more often than ever before.

Cutting your dud stocks and taking advantage of new opportunities is where successful investing is born in the resources sector.

If you want to outperform in the resources space, you’ll need to strategically select the right sectors. This is where my analysis on how the sovereign debt defaults in 2016/17, geopolitical risk and the US dollar bull market can help you.

Indeed, absolutely everything is linked to commodity prices. If you don’t connect the macroeconomic dots, profiting in the future means that luck comes to you. If you have the information available, why pass it up?

If you’re interested in receiving this exclusive in-depth analysis on a regular basis, you can check it out here.


Jason Stevenson,
Resources Analyst, Diggers and Drillers

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