Have we seen the bottom in commodities?https://dailyreckoning.com/have-we-seen-a-bottom-in-commodities/
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At the conference, there was also plenty of grist for the speculators.
There was a long list of CEOs of junior miners. These stocks often trade for less than a dollar. They have no or minimal cash flow. And they usually face heavy development costs. Playing the junior space is like throwing dice.
My favorite among the ones I saw was Robert Friedland’s Ivanhoe Mines. The best summary I heard was this: “Ivanhoe’s worst asset is the best zinc deposit in the world.”
Robert Friedland is a legend in the natural resource space. He is a great salesman and financier. And he’s assembled a world-class collection of assets in Ivanhoe, a company with a market cap of $436 million. The stock is 56 cents this morning, up 5% as it enjoys the afterglow of Friedland’s riveting talk. The man could talk you into having a lifeguard at a carwash.
But there is no denying the quality of Ivanhoe’s assets. It has three world-class deposits that could be worth $4 billion altogether. The problem is they require billions to develop. With Friedland at the helm, though, I wouldn’t bet against him.
Later, on a panel of six, four of us named Ivanhoe as our favorite speculation in the sector. Rick Rule, a legend himself in the resource sector and the moderator of the panel, said that you can lose a lot of money on Ivanhoe, but you could also make a “stupid amount of money” if it works.
Ivanhoe’s stock, as mentioned, is 56 cents per share. What’s eye-rubbing about that is the stock was $1 in January. The 52-week high is $1.41. As recently as 2013, it was over $5 per share.
I heard Steve Sjuggerud, the editor of True Wealth, make a simple observation that seemed to stick with people, as I heard it repeated a couple of times. If a stock falls 95% and then doubles, how far are you down from your initial entry price?
The answer is you’re down 90%.
That’s just math. But it does hint, possibly, at the upside in some of these pounded names.
Ivanhoe, for example, could triple and would still be down two-thirds from where it was in 2013.