Earlier this week I connected with John Davies, director of TNR Gold Corp, and a widely followed investor within the resource space. We talked about how he began his career, his thoughts on the Uranium market, and the importance of hedging when risking your capital.
Hi John, welcome to The Next Bull Market Move. As a new guest can you give us some background on how you began in the resource space and how you started speculating in the markets?
That is a great question and I think my thirty-five year history of fund and risk management stems from a number of factors, mostly a fascination of statistical analysis and the predictive nature within commodities.
Hence my answer to your question of ‘starting speculation’, respectfully I never intend to speculate but rather making a highly tactical decision that strangles out risk and provides a return significantly greater than the cost of capital.
We initially connected on twitter, whereby you post lots of valuable information on a daily basis about a number of markets. I think readers would want to know your take on the rise over the last year in the spot price for uranium. It appears to me that more funds and investors are starting to deploy capital in this space, and betting on a new bull market. What are your thoughts?
I am a contrarian by nature, avidly avoid ‘the herd’ but equally that must include sensible choices based upon fact. With uranium, by the autumn of 2017 and after many months of evaluation I was convinced the nuclear energy had fallen deeply out of favour but would prove to be a critical component in the future energy demands through the world.
At this time I aggressively instituted a position in Saskatchewan based Cameco, which I feel I should note included many layers of options as part of my risk management effort, and a number of juniors, including those with projects in the Athabasca Basin of northern Saskatchewan and Alberta.
If there are funds moving into this sector, and certainly uranium mining and exploration has gained significant attention, it is measured and not rushing into position as the share prices do not yet reflect the price of the commodity. Simply, investors have ample opportunity to enter the sector present and despite the move since I entered in autumn of 2017, ‘the big move’ is still to come.
What other markets are you currently looking at? Do gold, silver, and the junior mining stocks hold any interest?
I am, in addition to being the Director of Capital Markets and Blockchain Technology for TNR Gold (picture above includes John Davies and Kirill Klip who is the executive chairman of TNR Gold Corp), highly active in the commodities sector and bullish on precious metals, as well as many base metals, most notably copper and nickel. Additionally I continue to urge accumulation of vanadium, which I first suggested in the early summer 2017, as well as lithium, select rare earths and uranium.
This is obviously a large topic as it involves ‘long game’ investing that understands the complexities of the ‘EV’ and ‘green energy’ revolution, changing technologies and global infrastructure demands, as well as the prospects of de-dollarisation.
I hope that answers your question but otherwise, I am ‘heavily’ involved in he precious and base metals sector, as well a uranium and rare earths, both senior and exploration companies, the energy sector and furthermore active in blockchain technology.
Let’s talk about how you speculate in the markets. Do to spend 3 - 5 years holding a stock waiting for the story to play out? Do you ever day trade? And how do you deal with positions that may initially go against you? I think the psychology behind speculating isn’t generally talked about much, even though it’s perhaps one of the most important things to understand when speculating in the markets.
I invest strategically and the length of hold varies, certainly reflecting cycles, corporate leadership and growth prospects, but equally I have a number of positions that are decades hold and involve complex option strategies to ensure the asset value is protected, whilst growing in value.
I do ‘day trade’ but that is more of a test for myself, a modest sized account I capitalised in the spring of the year to see if I could match my returns as a young commodity trader in 1983.
What are the important qualities to look out for in a speculation or investment. Is it the management team or the assets, the share structure, the underlying commodity price? Or is it a combination of the above?
Management team, the fundamentals of the company which naturally involves a number of concerns and the availability to manage risk of any position. The latter point is important to note as I ‘hedge always’ and if I cannot strangle out risk, I do not enter.
What has surprised you the most in the markets this year?
My greatest surprises in the present market relate more to the investment community which pays little attention to risk and thus typically fails to consider risk management, often ignores the fundamentals, races into the ‘crowded trade’ and consistently overreacts to market shifts.
And finally, tell us your biggest mistake when investing or speculating and what you have learnt from it?
I suspect the lessons I learned early in investing, early 1980’s, have more to do with confidence in one’s own opinion, which is critical for contrarian investors, understanding the enormous due diligence required, that intel is of utmost importance (much more complicated today due to the ‘white noise’ of the internet) and being patient in developing a position.
I think the biggest mistake any investor can make is failing to hedge. Always hedge. Always. Avoid the herd for they are headed to the slaughterhouse. Finally, be bold, be audacious, attack, attack, attack.
Many thanks John.
For more information on TNR Gold visit https://tnrgoldcorp.com
To follow John on twitter go to https://twitter.com/renegadestyle
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