I haven’t posted on stocks in a while, so I thought I might answer a few questions on my allocation. I don’t get many emails off this blog, but strangely the few (OK, two) that have come in have almost all dealt with questions on penny stocks and allocation. How much money they’ve made me, how much do I risk, etc. I realize that looking at some of these five-, ten- ad sometimes twenty-fold returns that are advertised can seem a little intoxicating. For me, I’ve yet to realize these incredible returns, although I must say that I have done 300 and 400 percent on some positions. The thing about my strategy though, is that through great diversification the chances to knock one out of the ballpark and retire to Tahiti are not going to be there.
And by the way, I feel I must once again caution readers that there needs to be a fair bit of homework, reading and research in this. I’ve reached a point almost by osmosis where I’m comfortable enough investing/speculating in the mining sector. I’ve been working for the last 20 years in some way or another in the the oil and gas and mining industries, and I’m acquainted with their quirks, economics, and project challenges. Doesn’t mean that I’ve gained a deep or proper understanding of company valuations or geology or the technical side of things, but that I’m learning more and more every day. It’s one of things that I’m interested in. The fact that I happen to generate a little ROI doesn’t hurt much either.
On to the allocations. I downloaded the portfolios in the Scottrade account and the 401K into a couple of spreadsheets, and the results might surprise some people. I’m not that much of a gambler. In the 401K, the allocation is are as follows:
- Company directed: 38%
- Self Directed Brokerage: 62%
The company directed side, meaning the portion of the 401K in which I’m allowed only a limited number of funds, is mostly invested into a a money market account, and the rest, about 10%, into a generic bond fund. In the self directed brokerage account, where I get to call the shots, as it were, allocations are as follows:
- Speculative: Mining and Energy Stocks, 11.72%
- Dividend-paying Stocks (Pipelines, MLPs, Utilities, REITs): 23.85%
- Gold, Inverse and Mutual Funds and ETFs: 13.08%
- Cash (Money Market & Hard Currency Funds): 51.35%
This is our retirement account, so I’m not nearly as adventurous as in our after-tax Scottrade Account, where I tear it up with a risk-taking allocation of:
- Speculative: penny mining stocks: 63.18%
- Gold ETF: 8.24%
- Cash: Money Market: 19.38%
- Cash: allocated for pending orders: 9.18%
Combining the before-tax 401 and the after tax brokerage yields the following:
- Speculative: Mining and Energy Stocks, 14.33%
- Dividend-paying Stocks (Pipelines, MLPs, Utilities, REITs): 13.02%
- Gold, Inverse and Mutual Funds and ETFs: 8.18%
- U.S. Bond fund: 5.74%
- Cash (Money Market & Hard Currency Funds): 58.74%
The penny mining stocks I’m currently invested in for the Scottrade account are the following:
| AAU | ALMADEN MINERALS LTD |
| ABMBF | ABCOURT MINES INC CL B |
| AMYZF | AMERICAN MANGANESE INCORP (CDN) |
| AUAYF | ADANAC MOLYBDENUM (CDN) |
| AXSMF | ALEXIS MINRL CP |
| CBLRF | CAMPBELL RES INC NEW (CDN) |
| CDY | CARDERO RESOURCE CORP (CDN) |
| CGR | CLAUDE RESOURCES INC |
| CRCUF | CANARC RESOURCES CORP (F) |
| CZICF | CANADIAN ZINC CP (CDN) |
| DNN | DENISON MINES CORP (CDN) |
| FGOCQ | FIRSTGOLD CORP |
| GSX | GASCO ENERGY INC |
| GXMLF | GEODEX MINERALS LTD |
| HWTHF | HAWTHORNE GOLD CORP CDA (CDN) |
| MLGAF | MALAGA INC COM |
| NATUF | NORTH AMERN TUNGSTEN LTD (CDN) |
| NFRGF | NORTHERN FREEGOLD RES LT (CDN) |
| NJMC | NEW JERSEY MINING CO |
| OTSHF | OTISH ENERGY INC (CDN) |
| PLLVF | PALLADON VENTURES LTD (CDN) |
| PLM | POLYMET MINING CORPORATION |
| SHSH | SHOSHONE SILVER MINING |
| TYHJF | TYHEE DEV CORP (CDN) |
In the 401K, the speculative mining companies are fewer, and you’ll notice some of them common to the Scottrade account:
| AXSMF | ALEXIS MINERALS CORPCOM |
| BPMSF | BRALORNE GOLD MINES LTD |
| CVVUF | CANALASKA URANIUM LTD COM |
| CDY | CARDERO RESOURCE CORP COM |
| TYHJF | TYHEE DEV CORP COM |
| CLHRF | CORAL GOLD RES LTD COM NEW |
| GEN | GENON ENERGY INC COM |
| GTCDF | GETTY COPPER INC COM |
| GVGDF | GRANDVIEW GOLD INC COM |
| HWTHF | HAWTHORNE GOLD CORP |
| NGLPF | NEVADA GEOTHERMAL |
One might think that I’m over-weighted in cash. Partly due to being a little nervous/bearish about the next market leg down, and also because I’d like to be well positioned to take advantage of some of the screaming buys that are sure to be available. Being volatile by nature, mining stocks respond like any other to steep market downturns. The beauty of it, is that they’re that much quicker to rebound. I have many on my shopping list and others that I’ve owned before, that if such a downturn were to happen, I’ll be snapping up right quick.
On the select penny stock portfolio that I’ve posted on this blog, there’s not much of an update, except that with the market edging up, the resource-based portfolio has been doing better, up some 19% since Dec 2nd, the latest data marker I can get Google Finance to measure to. I haven’t purchased or sold any penny mining stocks since the last update, although I have put several limit buy orders which haven’t been filled yet.
My open buy orders :
- Virginia Energy, buy at 1,000 $0.35
- Canadian Arrow, buy 10,000 at $0.07
- Abitex Resources, buy 4,000 at $0.13
- JNR Resources, buy 2,000 @ $0.35
Virginia Energy, Abitex and JNR are all uranium junior exploration companies. Canadian Arrow is a nickel/copper base metal junior miner. Please forgive me if I don’t go into a great deal of detail on each company, but as you can see I’m well diversified with over 30 mining companies, and doing a write up on each one would be a bit onerous (not to mention boring). As soon as one of the open buy orders hit, I’ll post the rationale behind the buy. I did take profits on Strathmore Minerals and most of my Denison Mines position, taking advantage of this recent interest in uranium. If there’s a dip in the markets, I’m going to jump in again with both feet on these two favorites. Since they didn’t form part of the original Centavos online portfolio (according to the guidelines which I posted here), I didn’t write about the trades. Speaking of the online portfolio, this is what it currently looks like:
( by the way, none of the preceding is meant to be solid investment advice. Presented solely for reader’s amusement and entertainment )
Hmmm, I like the term penny mining
I usually don’t play in that area, but it sounds like fun, especially if one of the penny stocks hits big! I do call speculating purchases “buying lottery tickets”, especially when the market was down in 2008 and 2009.
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MR, it’s a gas when the market goes down, and your portfolio goes up any way by 1, 2 or 3 percentage points, on the strength of one or two stocks. Of course, the next day they might swing 20 percent back down the other way. It is a gamble of sorts, that’s why the after-tax brokerage is money we can afford to lose. Almaden Minerals (AAU) was one of my “lottery tickets”, bought it in 2009 at $0.79, sold most of it at around $2, and retained a small position as a place marker. Today it’s at $4.26 (drat!). A bunch of mining claims, small float, but still at an exploration stage (no production). Dollars to doughnuts that in a serious market correction it’ll go back down below $1.00.
WOW, 63% in penny stock. That is huge. How does that 63% translate when looking at the entire portfolio?
It sounds like you are investing in what you know though so that gives you a huge advantage.
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RB40, I posted an update, showing the combined value of the 401K and the Scottrade account. The total allocated to penny mining stocks is not that high, 14.33%. Some of the stocks are not “penny” any more, Almaden, Cardero, Claude, Denison and Polymet are listed on the Amex and are trading at from well over $1 to over $4 for Almaden.
Yeah, I’m surprised by the high % in penny stocks in your self-directed account. You seem to be quite comfortable with the risks the pennies present though, which you know more than I do, is very important is you’re going to dabble in this space.
Good on you to use limit orders on purchases.
I’m curious about the rest of your portfolio. Do you own any bonds? What ETFs do you own? Any equity index products you’re a fan of?
Cheers,
Mark
My Own Advisor recently posted..December 2010 Dividend Income Update
Hi Mark, it depends on how risk is measured, or rather, perceived. If I buy a few thousand shares of a $0.20 mining stock with the full knowledge that it *might* go down to zero, then I don’t much mind if it does. Although, that hasn’t happened yet with a mining company. I have had an oil & gas exploration company go bankrupt, and lost about $500, and more than anything it was the seemingly endless reams of shareholder notices that I got in the mail that really bugged me. Another holding I still have, First Gold Corp, has faced permitting issues and is down to *fractions* of a penny. Could it come back? Sure. If it doesn’t though, that’s OK too.
The only bonds I’m holding is a generic U.S bond fund, in the company portion of the 401k. As for ETFs, I have a fair bit in CEF, Central Fund of Canada, for physical gold and silver. The other ETFs are an Inverse Long bond from Rydex (RYJUX) and a general market shorting fund, Proshares Ultra Short (QID). I don’t have a large position in either one though. As for equity index funds, I don’t have any. I did hold the Rogers Commodity Index ETF for a while, but I sold it recently to move a larger share into cash.
I would normally suggest that “ordinary” investors steer clear of penny stocks, but you’re in the “other” group. Clearly, you know the mining industry extremely well and are comfortable/knowledgeable with making penny stock selections. Seeing how you’re someone who does know what he’s doing here, it’s neat to observe from the outstide.
Interesting stuff. A post that’s a primer on penny stocks in general would be interesting to read as well – going over the very basics.
Agreed. It’s best to do much reading and research before risking any hard-earned cash, and my advice would be/has been exactly the same.
Thanks for your kind words, but I don’t know that I know the industry extremely well. I do try to follow it and learn as much as I can.
I was working on some thoughts for a penny mining stock primer, I’ll probably post that before long.
You probably know penny stocks better than the vast majority of personal finance bloggers. Most folks don’t actively trade them. If you do put together a primer – starting at the basic level – it can be educational for folks and might get a good deal of interest. I’ll be interested, if nothing else:)
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I don’t make the time to invest in this area confidently, nor do I really have a strong enough interest. However, like @Squirrelers said, you fall into the “other” category. It will be fun to watch how your portfolio progresses.
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Slow and steady for me, Shawn, it’s a game of centavos. I did a small trade yesterday, sold off half of my Palladon Ventures holdings, and netted about $420 after tax. In at $0.045, out at $0.10.
Penny mining seem to be your specialty! I am surprised at your high cash allocation, are you expecting another correction soon? is this market timing on your end?
BeatingTheIndex recently posted..Why Oil is the Name of the Game in 2011
Mich, I’m not much of a market timer. I was more heavily invested into some other REITs, when I saw that they were approaching price levels right before the 08/09 downturn. So I took the opportunity for some profits, and wound up with a the present large cash position. I also sold off some of the gold fund I was in. I’m OK with the yield on the remaining dividend stocks. In the meantime, I’ve been getting a little more nervous about a general correction, so I’m going to sit partially on the sidelines, and wait for some bargains to pop up.
With your experience, I predict you will strike it rich with your portfolio. (Pun intended.)
Maybe your farmland is also on a uranium mine of some sort? Oil field?
I like these updates, please keep sharing. It offers a view into investing that I have been hesitant to try so far. Maybe when I have more money that I can afford to lose…
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I sure hope there’s no uranium on Terra Farms! Maybe a little gas well on the corner would’ve been nice, but sadly, no, there’s none.
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