RE: Retail investors tired of holding?https://www.resourceinvestor.com/pebble.asp?relid=30354
Patience a Requisite Virtue for Resource Sector Longs
By Michael J. Deslauriers
28 Mar 2007 at 11:56 PM GMT-04:00
TORONTO (ResourceInvesor.com) -- Myself and fellow correspondent David DesLauriers have profiled numerous companies for RI that went on to become multi-bagger situations. Recently for Q1 2007, a number of new names have been put forward that are expected to perform similarly over the next 18 months.
What we have had until roughly the end of February is a very hot market with robust volumes that has allowed all manner of successful and unsuccessful resource companies ranging from explorer to producer to find favour and flourish. This seems to have created an emergent environment (and culture) of instant gratification in which investors and speculators alike expect to be rewarded with instant doubles, triples and multi-baggers.
In our opinion, and given the volume of mail we have been receiving spewing lament at the lack of instant capital gain, this calls for a reality check. Despite appearances in frothy bull markets, quality resource companies are businesses. These businesses need daily attention as they strive to achieve milestones to increase shareholder value. All of this takes time to accomplish.
We tend to focus specifically on near-production situations. These are companies building mines. Once these mines are built, they need to produce according to specification, which is no easy task. Regardless, investors who come in to the story at the right time and have the patience to wait through the process tend to be very well-rewarded.
We can point to various stories that we have highlighted in Q1 of this year which have yet to yield major returns. That does not mean that they will not yield major returns or that we feel any differently about the fundamentals now than we did when we first put pen to paper, or in this case, wireless keyboard to 19-inch monitor.
It is too easy in a bull market to take triple digit gains for granted – one must recall the fact that if one were to double $10,000 compounded, seven years running, one would be a millionaire in short order. This bull market has been running for about six years already and by all accounts could have a similar life expectancy before it, which in all probability will be yet more profitable, as valuations expand geometrically to account for increased demand for what is a very small amount of product in a global context.
At the end of the day, the message here is that readers and investors in general need to park their hard earned money in resource plays that have quality fundamentals underpinning them - be right and sit tight. Self doubt and its ugly brethren, fear and worry, are unattractive qualities that are especially hideous when directed in an accusatory manner towards those who dispense quality information.
Given a basic assumption that metal prices range within a 10%-20% plus/minus band, and barring nationalizations or acts of God, we believe that past performance can be repeated, but shareholders must let business plans unfold and take their course to fulfillment.