Bad markets (sentiment) periods that produces bargains is when you sow.
Good markets (sentiment) that produces over-valued PRICE vs VALUE propositions is when you harvest.
… It always go back and fourth between the two and that is a fact.
Just knowing that sentiment will one day in the future be extremely frothy and valuation multiples will be, well multiples of what they are today, should be enough for any value investor to hold firm at a time like this.
Easy steps to set yourself up to beat the market during deep corrections (when almost everything is no brainer cheap):
- Pick out 30 cashed up, high quality companies you like and create a watchlist
- If you have dry powder go in and buy whatever say three stocks are down the most on any given day (assuming no news)
- Log off and continue with your day
- Rinse and repeat
… This process takes a few minutes of your day and will probably beat the market handedly over the coming years. High ROI in other words. One day the developers will be trading at $100/oz instead of $15/oz. That you can set your watch to.
If I think that my average purchase at these levels will produce an average 300% return, within 3 years, then how stressed to you think I am to see buyers come in and good sentiment to return? At mania level highs the expected return on any dry powder deployed will be negative not positive.
Most people complain about times like this because their shares aren’t going up. What I think is more important is that these are the easiest and most care free times to invest because the odds of anyone making a mistake by overpaying is so low. It doesn’t require a lot of knowledge or brain power to realize that if the mining sector is near the cheapest levels it has ever been then one probably can sleep pretty good at night… Knowing that when the sentiment is good again one will look back and realize what a no brainer time to buy this was. The pendulum always swings. Always. Always. Always.
The people who sell the bottom when projects are given away for free will be the same people who buy them off you when they are ridiculously overvalued during the mania phase.
Oh and remember that you are buying a piece of a business. A business that have employees who show up to work and try to create value every day regardless if you are zipping Margaritas on a beach, or worse, are glued to the computer screen for 6 hours per day trying to “will” the stocks higher. Yesterday I talked to a friend about miners and I said that the gold price is at $1,900. Today I realized we’re at $1,800… That’s how little I care about the current price of gold and it’s barely a factor to consider given that especially the juniors trade like gold is at $1,300.
The forever trading sardine Bear Creek Mining as an example:
The Hedgeless Horseman