Don’t Get Fooled by The Noise!

NOTHING has happened for Novo, LIO or majority of juniors, in terms of company specific reasons, that would warrant the big red candles today. It’s just sentiment/technicals tied to a declining gold price at work! 

Depending on the liquidity there could be one seller responsible for a given dip or it could be GDXJ that is partly responsible for the dip in your favorite miner. If you see gold down 1% and your favorite miners down 5% that probably means that you are staring in the face of an opportunity, all else equal. You were able to buy something 5% cheaper that CERTAINLY NOT saw it’s long term intrinsic NPV depreciate 5% just because there was a cough in gold on January 8, 2020.

The market is NOT rational on a day to day basis.

If you are a value investor, days like this is when you buy, assuming that the company was already undervalued yesterday. Again, this is not strictly related to Novo, but every miner in your portfolio. Sumitomo came on board as recently as December 20, and Novo is currently quite a bit cheaper already. Again, nothing to do with fundamentals. It’s technicals and a sector wide sell off at work. The daily notions of the market means nothing. It doesn’t mean a damn thing and is just noise. If you loved your picks yesterday you should love them even more today because you were able to buy something worth X even cheaper today. If you are a trader, this day-to-day noise will of course affect you in a completely different way.

Your favorite stock(s) might continue to go down tomorrow, and the next day, and the day after that for similar NON-COMPANY-SPECIFIC reasons. Sure, it might sting for a bit but every additional share that you pick up at cheaper levels have more potential upside, all else equal. I have had many really deep corrections in my portfolio and I constantly catch “falling knives”. The thing is that when the tide turns, the up swings surpass the previous ones because I simply have more shares, but that also means you better be right about the LT fundamentals!

As it relates to Novo: The share price did simply not have enough strength to break through the line in the sand which is the $4 level. Novo seems to have a habit of breaking down before it heads higher. In other words there seems to be a lot of “false breaks” that can lead to some people panicking, before it turns around and heads higher. The slaughter across the mining sector did of course amplify this break down. Since nothing has changed except the price of the company becoming cheaper, I have started to shed some peripheral positions for more Novo shares and am fully planning on catching this knife as usual (Not investment advice since I’m crazy!). I can come up with a number of potential catalysts in the coming weeks and months that I think could make today’s levels look like real bargains in hind sight. I will reiterate again that the important thing to keep in mind is that, when almost every miner is down, NOTHING BAD HAPPENED to your favorite miners. The fall in share price does not signal anything in terms of a change in fundamentals for any specific company. It simply went down because people decided to sell that day for whatever reason (Except e if a company did actually release bad news the same day of course).

Always try to be more rational than the market. Be more disciplined. Be more patient. Think longer term.. Take ADVANTAGE of the daily swings instead letting them take advantage of YOU!

… Hammer home these points until you start looking positively at days like this, assuming you have capital (tools), to be able to take advantage of it.

… Pray for panics if you are a value investor! Pray for NON-COMPANY-SPECIFIC blood baths, because that’s how you can outperform the market.

(NOTE: All this is primarily related to alpha plays and not beta plays where you are at the mercy of the gold price and sentiment only.)

(Note: This is not a buy or sell recommendation. This is not investment advice or trading advice. I am not a geologist. Always do your own due diligence.  Novo Resources is my largest equity position which I have bought in the open market and am thus biased.  Novo is a passive banner sponsor on my site.)

Best regards,

The Hedgeless Horseman

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