Late last year, a certain asset went vertical, bagging huge profits for investors in just a few months.
I’m not referring to Bitcoin.
I’m talking about shares in Australian gold hunter Novo Resources (NVO.V). As you can see in the chart below, Novo shares shot up tenfold in just a few months.
Why? The company made a gold discovery with huge potential. That’s come in to question now (just as the value of Bitcoin has), but the vertical leap delivered for investors.
But here’s the thing: while Bitcoin’s 20-fold rise in 2017 was almost certainly a once-in-a-lifetime event, junior mining stocks like Novo do this sort of thing often.
This is key.
I’m looking to diversify beyond metals and mining. I’m researching several investments in the tech space. One obvious specific tech sector to consider speculating in is the cryptocurrency market. But which one has the best potential to appreciate, going forward? Is Bitcoin done? Or still the best bet? Some crypto gurus say Ethereum is better. Others swear by Ripple or Litecoin.
I actually do own a bit of Ethereum I bought last year with play money (and is therefore not in the Independent Speculator portfolio). But I couldn’t honestly give you a logical argument based on facts I know as to why that’s a better choice than any other. It was a whim that worked out.
The bigger question is whether any of the cryptos will be able to deliver 2000% gains in a year again, as Bitcoin did in 2017. Various gurus argue that their favorite choice will do so, but with new coins reducing the scarcity of cryptos on what seems like a daily basis, I’m skeptical — of all of them.
On the other hand, I know from direct experience that almost every year there are one or more junior resource stocks that go vertical, delivering gains like Bitcoin’s in 2017.
Last year, that was Novo. Off the top of my head, I can think of a couple more in recent years. GoldQuest (GQC.V) made headlines with a high-grade gold discovery in 2012 that delivered 20x gains for shareholders.
Noront Resources (NOT.V) was a 10x winner based on a nickel discovery in 2007.
I can think of more, but I don’t have data to make charts, because they were bought by larger companies. For example, Aurelian Resources popped when it made the world-famous Fruta Del Norte gold discovery in Ecuador in 2006. Aurora Energy did so on a uranium discovery in Canada at about the same time.
There are others that delivered 10x gains or better, but took longer than a year, such as First Majestic Silver (AG, FR.TO), from 2008 to 2011. I can think of many more like this. One of my best past successes was a company called Newmarket Gold, which I recommended at C$1.25 in September of 2015. It delivered in spades, then merged with a high-grade Canadian gold miner and is now called Kirkland Lake (KL, KL.TO), which closed at C$26.88 today. Newmarket shares turned into 0.475 shares in Kirkland Lake, after the merger, but it’s still a big winner.
I want to be very clear: I’m not saying I know I have the next 10x or 20x winner in my portfolio. I am not promising anyone gains like this if they subscribe.
I am saying that while catching something like the Bitcoin craze of 2017 may be a once-in-a-lifetime opportunity, it’s relatively common in the resource sector.
Yes, it’s possible that one of the stocks in my portfolio now could hit it out of the ballpark. But saying that a speculation could be great is just making noise. Of course it could. It could also be terrible.
The plain truth is that no one—not even Doug Casey or Rick Rule—can reliably predict which junior resource stocks are going to soar like this. Being savvy speculators, they don’t even try. They do, however, buy stocks with the potential. As do I. But I don’t kid myself about the odds.
Instead, I buy stocks with good odds for a double, or better. That’s enough for me. And if any do go vertical, great. I’ll take that too.
This is why, as keen as I am to diversify into other markets, I intend to continue speculating in the resource sector. I don’t want to put all my eggs in one basket—but I sure don’t want to abandon the basket that has done so well for me and my readers, either. There really is nothing else on earth quite like resource stocks.
Watch this space.
