I am not going to get up on the pulpit (and this is not a direct answer to your question, but still relevant) on this one, like I did on the "Great Gold Lean (and now Bear Trap)" with Bob a minute ago, except to say I feel the gold stock market is now badly bifurcated. The larger companies and even mid tiers are very overvalued relative to POG, and the juniors are severely undervalued. As I suggested earlier on the WMC deal, I think Goldfields overpaid (unless there is some hidden gem expansion potential not generally known), and I'm no fan of South Africans anyway.
The opportunity with the junior market is that it is a value investor's dream. When you are buying companies with a few million dollar market caps, that control top quartile deposits you have to take notice. The problem is that this microsector is very difficult to research, is poorly followed, is thinly traded, and has in the past (mostly in pre Bre-X mania days) experienced a sleazy reputation, and with individual issues has potential for real blow ups (witness GEO recently). Also there is real junk there as well. The better stories are often Canadian, which makes it hard to buy for Americans. And America is a huge investment market.
So it's a real dilemma right now about what to own as a gold investor. I know what I want to own but I'm fanatically focused, but I can sure see how others might balk. For most, the Claude approach of FGX, BAY, CBD (either/or ELD for me), MFL and one more leveraged bet (I'd say BGI, NGT and there are others) probably makes the most sense. I have real doubts as a value investor about hanging on to American listed larger golds, just because of liquidity and size. But, that's not to say it won't work? |
