2018, a year that many junior mining investors will want to forget is drawing to a close. After a year like this it’s common to simply want to forget about it and skip ahead to the new year with optimism. However, it’s the tough years, the ones that give us some battle scars that help us to grow and become better investors over the long run.
TSX-V Composite (2018)
2018, a year that Canadian small cap investors will want to forget
2018 began with a great deal of optimism and a nearly vertical ascent during the first few weeks of the year but that soon gave way to the first market correction of the year shortly after President Trump began implementing trade tariffs on China. While the S&P 500 continued to steam higher into early October before rolling over sharply, the junior mining sector began to get hit hard in July and never seemed to recover. Of course, there were a few individual success stories like Great Bear (TSX-V:GBR) and Westhaven (TSX-V:WHN) but they were few and far between in a sector that experienced scores of stocks dropping more than 50% from their highs for the year.
The past is behind us and while there are many lessons to be taken from 2018 for me the biggest lesson is to not stick around in stories that simply aren’t working anymore. I’m not saying to sell all of your shares at the first sign of any trouble (a down day etc.), but when things aren’t playing out according to ones thesis there has to be a point where one says “enough is enough” and it’s time to move on. It’s better to sell sooner, rather than be sorry later.
As we enter 2019 it feels a lot like December 2015 in the junior mining and resource sectors. Oil has been pummeled and equity valuations across the commodities space are arguably at historic lows. Simply stated, there’s not a whole lot of optimism out there as we enter the new year.
While there are plenty of reasons to be cautious, I believe that 2019 just might be the year that precious metals investors have been waiting for since at least 2012. Valuations are cheap, pessimism is high, and many gold & silver producers have gotten leaner during the last several years, putting them in a position to finally deliver returns to their shareholders. Could 2019 be the year in which precious metals producers finally deliver leveraged returns to shareholders in a rising metals price environment? My bet is yes.
I asked some well known names on CEO.ca to chime in on what they learned from 2018 and what they’re looking forward to in 2019...
@RocketRed: “2018 was a turbulent year full of highs and lows from booming Cannabis Stocks to some high flying junior mining stocks that were 10 baggesr, plus it's always exciting when you’re making money. But on the other hand the 2nd half of 2018 has been full of train wrecks and tax loss selling has been brutal but could spell a buying opportunity for 2019 with gold to rumble in the 1st Q of 2019!!!! Pick wisely and you will make some $$$$, just remember to take the profits as it keeps you in the Giant Casino.”
@Stateside: “What I learned in 2018 is that regardless of how hated you think a sector is going into a year (For example the TSX-V) there is always room for more downside. Even though I was well versed in the Keynes saying that "The market can remain irrational longer than you can remain solvent" I thought 2018 was the year we would see a turnaround. My thinking going into 2019 is to not have any expectations as to what the TSX-V will do. The lower my expectations the less disappointed I will be if the bear market continues. “
Bob Moriarty: “The world being awash in debt suggests that at the end of 2019 we will look back at 2008 fondly thinking about the “Good old days.” All debt gets paid, either by the borrower or the lender. I think I hear the piper calling at the door.”
@EvenPrime: “Some of the most disciplined traders who have taught me a wealth about risk management have still been taken out to the woodshed in 2018. I can only imagine what the rest of us have gone through. I would say that even the best traders are correct no more than 70% of the time (& that is being super-generous) so when you think someone is trustworthy because they seem to know a lot, I would pay close attention to how often they admit they were wrong.
Too many of us follow people because they sound smart and we assume they must be in the know. If they can't admit their faults/mistakes, and get defensive whenever a valid argument is presented, I throw them in the crap basket along with all the pumpers/scammers because that is effectively what they are doing.
Overall, I believe the worst is behind us - seek out cheap companies with good management - but if you can't do that yet, you shouldn't be investing , you should be reading/phoning/emailing.”
@mendoza81: “I’ve only been trading for a little more than 18 months, and in that time, all of the well-worn clichés have proven to be true over and over again (buy when there’s blood in the streets, sell when everyone’s greedy; be patient; don’t be emotional; etc.). I’ve learned all these lessons the hard way (in trading, it seems learning things the hard way is the only way to actually learn them), but if I had to pick my highlight of the year, I’d say it’s been discovering CEO.ca, and more importantly, a group of people who are willing to help and mentor me as I learn the ropes. In the last 6 months, I’ve learned more in the Trading Lab than I ever thought possible, especially regarding micro and macro trends in markets, technical analysis, and of course, the junior mining industry. I am by no means an expert, but I’ve realized that I can’t do this alone. Finding a group of like-minded, driven experts who are willing to offer insights and advice in a respectful and collaborative discussion has helped me become a smarter, more confident investor.”
@Thecowsaysmoo: “I learned that it's better to sell and take a small loss than end up carrying a big bag. Especially in a down market, odds are the bag will get much bigger. I fooled myself, believing my thesis to be right but my timing was off. I could of put the money to better use elsewhere and possibly revisited the thesis later.
@SASKEXPRESS: “What I learned in 2018: First, I experienced what a big down year in the Venture looks like for the first time since I started investing in the junior space. That experience is annoying yet invaluable and made me up my game. I’ve started looking much more closely at charts, been more patient as a result and waited for obvious opportunities to come along and piled into them, rather than buying starter positions in everything I liked (though I still did some of that!). I also started messaging, meeting and calling more and more of the people I respect the most on this site and elsewhere. File that under building relationships. For 2019, I’m hopeful we’ll avoid an inverted yield curve and subsequent recession and that Trump will make up with China. I think the markets could sort themselves out if we can get that high level stuff resolved.”
@MiningBookGuy: “In 2018, I learned about 'patience'...more than I wanted to learn! Whether it's just waiting for the right entry point for a junior, or simply not chasing hype or exciting drill results, I did best when I was patient. It's been especially tough, as 2017 could have been described in a similar way, meaning we've gone through 2+ years of this.
In 2019, there will continue to be exciting drill results, and likely more M&A. In all cases, I will just try really, really hard to be even more patient for those truly excellent risk/reward opportunities.”
@mikeymike426: “2018 taught me to never let your guard down. Doing your own due diligence is the best way to protect your investments. Investor forums are useful as long as you’re fact checking along the way due to the incessant bashing that happens these days. I have seen more forms of manipulation in the markets comparatively to years prior and It’s important to recognize it.”
@economicalpha: “2019 is looking very similar to 2016 in terms of the potential violent move we could see to the upside in gold and the associated miners. The market forces are strikingly similar: crashing oil prices in conjunction with a fed pause. My biggest regret in 2018 is harvesting big winners too soon and trading too much. Also, falling for a few value traps. Otherwise, very happy with 2018 in light of an overall poor market for miners and gold.”
@MadeofRubber: “The trend is your friend... unless it's a junior or downtrend, for which, position size is your best friend.”
Ross Beaty: “2018 was just an awful year for gold equities as investors chased other dreams in tech, cannabis and US markets generally. But it was actually a decent year for gold, which held its own despite a strong US dollar, record US equity markets and a mostly risk-off sentiment during the year. So it was a great buying opportunity for value investors like me, and I was happy to be a corporate buyer both in Pan American Silver with our takeover of Tahoe Resources, and Equinox Gold (TSX-V:EQX) with our acquisition of the Mesquite Mine. In 2019 I expect gold prices will move higher, maybe much higher, with some good gains in gold equities but still great opportunities for building my companies into bigger, stronger industry leaders. I’m pleased to be so exposed to precious metals markets in the current economic environment.”
I learned a lot from these CEO.ca user soundbites and I agree with @SASKEXPRESS that the challenging conditions in 2018 helped me to up my game as well. I am an eternal student of markets and I don't think there is any other way to be successful over the long term in this game. A big thanks to everyone who commented in this post, may we enjoy the final days of 2018 and create tremendous success in 2019!
DISCLAIMER: The work included in this article is based on current events, technical charts, and the author’s opinions. It may contain errors, and you shouldn’t make any investment decision based solely on what you read here. This publication contains forward-looking statements, including but not limited to comments regarding predictions and projections. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. The views expressed in this publication and on the EnergyandGold website do not necessarily reflect the views of Energy and Gold Publishing LTD, publisher of EnergyandGold.com. This publication is provided for informational and entertainment purposes only and is not a recommendation to buy or sell any security. Always thoroughly do your own due diligence and talk to a licensed investment adviser prior to making any investment decisions. Junior resource companies can easily lose 100% of their value so read company profiles on www.SEDAR.com for important risk disclosures. It’s your money and your responsibility.