Miners, especially gold miners (GDX) (GDXJ), don’t have a great reputation in the investing world. Unfortunately for them, that is rightfully so. It is often the case that the management is more focused on the stock market, than on business performance. A quote from the 19th century explains it very well!
In such an environment, one must be very careful. The key is to understand the risk and not do stupid things like investing on hope or going after a good story.
An investment in a miner has to be founded on a real business analysis of its fundamentals and a careful assessment of the risks and rewards. On top of that, one should know the miner’s sensitivity to the respective metal’s cycle.
Investing while excluding the above, cannot even be called speculation, it is pure betting and you know what are the odds when it comes to betting.
In this video I share 7 things to analyze when investing in miners, or at least to take into consideration when analyzing the risk and reward of a specific investment. The things to watch are the following:
(0:39) – ETF ownership and business value
(1:47) – A general valuation of miners
(3:40) – Book values are often misleading
(6:05) – Advertising your own stock with Google ads
(7:09) – Example of operational risks in the mining industry
(7:53) – Dividends and cash flows
(9:00) – The value within junior miners and the Van Eck Junior miners ETF
Enjoy the video.