A lot of people are tempted to sell juniors because they think gold/silver will head lower.
Even though the juniors are cheap relative to especially the current price of gold there is of course a high likelihood that said juniors would get even cheaper if gold dropped a lot.
However, if something is cheap it is cheap…
Scenario 1:
The gold sector is hot and in a fully fledged rally.
Investors are happy because every gold stock has been going up and the precious metal portfolio has been doing great.
Now, grassroot explorer A is trading at a MCAP of $50 M and makes a significant discovery which will end up being worth $400
That’s an 8X return
Scenario 2:
The gold sector is in the toilet after a year long correction.
No one is happy and no one wants to buy.
As a result grassroot explorer A is trading at MCAP of $16 M since everyone and their mother is in “risk off” mode and assume that the miners will go down forever.
Said explorer makes the same discovery as in scenario 1 and will be worth $400 in the future.
Given that the sector had been obliterated the revaluation now starts from $16 M in MCAP instead of $50.
That’s a 25X return instead of 8X.
Discussion
Same company. Same target. Same discovery…
Totally different returns simply due to the stock being a lot cheaper due to valuation differences as a result of materially different sector sentiment levels.
Conclusions
I refuse to believe that buying disgustingly cheap stocks with disgustingly good Risk/Reward will ever be bad regardless of how shitty the sentiment is or how bleak the chart looks for gold.
If something is cheap, like now, you will often get paid more in the future.
The reward for being disciplined and not selling stuff when it becomes CHEAPER is that the REWARD side and the RISK/REWARD equation goes up EXPONENTIALLY.
This is really simple concepts that the VAST MAJORITY (95%) for some reason have a big problem to understand.
I sell shares when I think they are expensive not when I think they are cheap and might get cheaper…
But that’s me.