The Easiest Money You Will Ever Make in Your Life Is During the First 12 Months of a Junior Bull – Why We Are Not Yet Ready for a Pull Back and Why Pull Backs Don’t Matter
The easiest money you will ever make in your life is during the first 12 months of a junior bull market. Fortunately for those with the fortitude and conviction to participate, there are plenty of naysayers on the sidelines, trying to convince themselves and everyone else that the move is not real.
Bull markets manifest in such a way as to perpetually sow doubt in the minds of investors. Violent upswings, equally violent pull backs, periods of prolonged lulls – these can all act to shake investor confidence. Only those with the firmest resolve reap the full rewards.
Junior mining bull markets belong in a stratum of their own – an unparalleled set of stocks, which provide such incredible gains at such breakneck speeds that even seasoned market participants can’t believe such a thing could exist, let alone persist!
As in cycles of the past, industry pundits have rushed to blogs, newsletters, and interview channels to opine on the recent move. “Fundraising among junior gold explorers is unsustainable,” “stick to quality names,” and “FOMO” – these are just some of the sentiments currently being expressed.
As avid readers know, my team and I are laser focused on the junior resource sector. We are constantly observing what is moving and what is not, getting a sense for valuations and capital flows, and keeping a pulse on what terms issuers are willing to provide.
It is my firm belief that this move is very real and more importantly, just getting going.
Yes, to the pundits’ credit, pullbacks will occur along the way. But it is equally important to not get caught up in trying to time the pullback. Profiting off of market movements or day-trading has proven to a be a futile task, irrespective of sector. Moreover, investors in the junior space have the realities of four month hold periods, liquidity constraints, and a bigger picture to worry about. Simply put, pullbacks are not actionable events for the junior resource investor.
Using the TSX Venture exchange as our measure, we are four months into a move. Specific juniors are up hundreds of percent; capital is being raised at furious pace.
But, there still exists a rank of companies bouncing along the bottom, waiting their turn in line to be offered financing dollars. A company’s first financing in a bull market is like kryptonite, attracting new sets of eyes, and critically, new mouths to talk up a deal. Like an accelerant, this propels valuations upwards. Companies which have tried to wait out the first few months of the move are quickly realizing that instead, accepting dilution early is the key a higher share price.
This initial maturation phase that characterizes the first part of a junior bull move still has a bit of time left. And until that cycle comes full circle, this initial move will not just remain intact, but quite possibly hasten its pace.
Investors who have remained on the sidelines will begin to cave and come seeking their ten-bagger. To do that, they will continue to move down the food chain, in search of value – not value in the traditional sense, but rather cheap market cap, and sub $0.10 share prices.
This exact situation played out in 2016. By June, six months into the move, I was receiving calls from investors with one simple question – do you know of any junior stocks that are still trading below $0.05? No regard for management, geographical location, or commodity. While the move in 2016 did not demonstrate longevity, it did provide a playbook for investors looking to study the psychology of the early innings of a junior resource move.
As I stated at the onset, the easiest gains you will ever make in your life are during the first 12 months of a junior bull. They are predictable, and can be captured without fear of an approaching cliff ahead.
Those who remain on the sidelines will begin to enter the field. And many will ultimately seek their gains later on in the bull market, capturing a parabolic rise that marks the very top, while simultaneously convincing themselves and everyone around them that the move is real and the bull is just getting started. But like timing pullbacks, trying to capture huge gains at the top of any bull market is a trivial task.
Palisades Goldcorp has emerged as one of the most active check writers in the space this year. Our team has remained disciplined, while managing to stay ahead of the curve.
Until next week,
Founder & Executive Chairman
Palisades Goldcorp Ltd.