Bullseye Drops Tomorrow ⏳ |
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Hope you were able to join me today for a special Jason Bond Picks training. |
I plan to continue my weekend warrior sessions so look out for my invitation emails or make sure you're on our SMS list: text "RAGE" to 1-(888) 404-5747. |
And below I've included some more information about why the gold surge is one of the most important trends in the market right now … compliments of our friends at Katusa Research. |
Happy reading… and Eat. Sleep. Trade! |
See ya tomorrow, |
Jay |
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Beware the Precious Metals "Boiling Water" Advisory |
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At 211 °F, water is merely hot. |
Steaming as it simmers quietly, on the cusp of transformation. |
Yet, at 212 °F, a mere one-degree difference ushers in an intense transformation: |
Water begins to boil, releasing powerful steam capable of powering a freight train. |
It's that one single degree that makes all the difference, a tiny shift that marks a powerful change. |
There are many reasons we are at that one degree uptick transition moment in the gold market… we could be at the cusp of a historic and monumental rally. |
Ignore this at your peril because right now… |
Gold isn't just climbing—it's boiling over. |
And it's those who act, not those who hesitate, who reap the rewards. |
Now if you're ready to take the heat, read on. |
There's no Going Back, Gold is Hitting the Boiling Point |
Gold just hit $2,400 per ounce, marking yet another record high for the metal this year. It is up nearly 15% year to date, and since January 2023, it is up 30%. |
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Yet contrary to gold, companies with leveraged exposure to gold have not fared nearly as well. |
You'd think gold producers, developers, and explorers should all be up at least as much as gold. |
But as you'll see in the chart below, neither the NYSE Gold Bugs Index nor the Van Eck Gold Miners ETF have come close to gold bullion's returns. |
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Companies operating in the gold development space have fared even tougher sledding. |
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It's Time to Get Selective and "Picky" |
It really is a bewildering time for gold investors. |
You would think record highs in gold would lead to immediate records for share prices but that has not been the case so far. |
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Compounding the issue for the sector, over the past few years, capital raising activities by gold companies have steadily declined. |
Below is a chart that shows the equity raised through financings by gold companies since 2014. |
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Weak share prices and reduced access to capital creates an opportunity for the bold investor… or company. |
Beneath the headlines of share price underperformance and capital raising, the market fundamentals are functioning well. |
One way to look at this is through mergers and acquisitions activity in the sector. |
In dark times, there's no cash flow generated or ability to raise capital to do deals, we saw this in 2016 and 2017. |
Today is much different. |
Gold M&A is Heating Up… |
Even though financings and share prices are down, players in the sector continue to gobble each other up. |
Over the past few years, the gold market has seen big growth in the transaction value of mergers and acquisitions. |
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But even with the recent frenzy of M&A activity, valuations for companies are still low, especially for those in the development stage. |
For now. |
Especially if you don't own any gold stocks backed by people who know M&A or how to make lucrative win-win deals… |
And how to acquire valuable assets that nobody's heard about (or with the know-how and access). |
Lucrative "Takeover Engineering" |
Gold developers are the companies with assets that have completed engineering studies on projects not yet in production. |
I've always liked this sector because it provides valuable upside through development or acquisition… |
But less downside than pure play exploration carriers where you are at the whims of a geologist and his maps. |
The chart below shows the Enterprise Value per Ounce ratio for the gold developer space utilizing the data from 90 North American listed gold developers since 2014. |
Enterprise Value is calculated as the Market Capitalization of the company plus debt minus cash, it reflects the true "take out" value of the company. |
Dividing Enterprise Value by gold reserves and resources provides an apples-to-apples valuation comparison. |
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Today the development stage group is still below its 10-year average, which is surprising given the recent record highs in the gold price. |
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And supercharge the returns of ones that were already economic in the past cycle. |
If gold hangs in above $2,100 per ounce, it could be a major inflection point for the sector and for valuations going forward. |
Pin This to Your Fridge: My 4/64 Rule |
You've probably heard of the 80/20 rule. For example, in mining, 20% of the management teams generate 80% of the shareholder wealth. |
Let's take that formula (Pareto's Law) one step further: the 4/64 rule. |
And when it comes to wealth creation: |
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In today's high stakes world of record gold prices, tensions in the Middle East and Ukraine, and inflationary measures, there is no room for error when it comes to investing. |
It's why in times like this, I go to the best of the best. |
Focus on the BEST management teams with a track record of being in the selective best 4% of management teams who deliver 64% of the wealth to shareholders. |
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This is a sign that there may be value here. |
But most importantly, led by a management team in place who are large shareholders of the company themselves, that have a historical track record of generating strong shareholder returns in previous ventures. |
What happens when a gold stock is one degree away from the boiling point… |
When the market that previously sat on the fence starts jumping in… |
Things can escalate from hot to boiling pretty quick. |
On Monday June 3rd, you're going to get the name of this stock. |
You can access it HERE before the market opens. |
Make sure to refresh that link right at 9AM EST. |
Regards, |
Marin Katusa and the KR Special Situations Team |
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