Process Not Results
Bill Bellicheck, one of the winningist football coaches of all time, liked to focus on process over outcome. I think that's a healthy attitude to hold in both bull and bear markets.
Year to date gold peaked a few days ago at +60% and today is still +56% on the year. If you take the average of the big 4 royalty companies it is +67% year to date, mostly in-line with the underlying metal.
However the $GDXJ was +160% (now +122%) and the $GDX was +148% (now +114%). That's double the gains of the underlying metal.
Today as I write this the $GDXJ is currently -10.70% on the day. Who knows where it will close.
I'm not a dummy the first 10 months because I got outperformed by the $GDXJ, nor am I a genius because I am not holding the $GDXJ today.
I follow my process where I think I have good risk adjusted chance at making good returns and I follow my process. The chips fall where they fall.
Current Gold Exposure
So, what am I doing in gold today? For one I'm not panicking. I have lightened my overall exposure by exiting some positions prior to today. I am around 18-19% of my portfolio in gold related names, which is way down. I have too much cash and am increasing my exposure in other areas. More iron ore, lithium, met coal, tin, & copper in commodities. I'm adding more non-commodity stocks as well.
I'm still letting my pre-production sweet spot companies play out to first pour or declaration of commerical production. Rio2 $RIO.V, Montage $MAU.TO, & Robex $RBX.V.
I'm still holding project generators, currently only Kenorland $KLD.V which I have added to my position. Actively looking at others.
I have a half position in Franco $FNV as my only current precious royalty. If I'm going to overpay I'm going to overpay for quality, plus Cobre Panama seems like it will reopen someday. I'm looking at, but have no current position in, Royal Gold $RGLD who has lagged the other major royalty companies year to date but who now has a very nice development portfolio.
I've shifted most of my gold explorers to copper explorers, but still have a half position in Awale $ARIC.V.
There are some explorers, miners, and royalty companies that I have entry price targets on. If this pullback continues I'll be increasing my exposure to gold again. But it takes more than 10% to correct enough to want to back up the truck again.
Signs of a Bubble
Can you name a single gold development project that doesn't work at current commodity prices? I can't. Instead of I've seen projects that I think shouldn't become mines get funded.
I'm a gold bull for a lot of reasons, but if gold is +100% in 2 years and +60% year to date even I am wondering if it's gotten ahead of the fundamentals driving the increase.
Non-Commodity
Growth to Value (R1k Growth / R1k Value) are at all time highs. Large to small are near all time highs (S&P500 / Russell 2000). Tech is at all time highs (S&P500 tech sector / S&P500).
It's a time where stock pickers have extrordinary opportunity. Is Lululemon a fad that has pased or an enduring brand that hit a bump in the road? Is Delta an unprofitable airline or the owner of a valuable credit card loyalty program? Is Bumble going to be replaced by AI or benefit from it? Are Paypal and Remitly valuable payment networks or antiquated tech that is getting replaced by cryptocurrency? If you have an informed view on financial services companies or healthcare companies you can make a killing right now.
There's a lot of change happening and a lot of companies are being mispriced in both directions. It's a great time to be an active investor.