Erik Wetterling: Creating Generational Wealth in Junior Gold Stocks
Tom welcomes Erik Wetterling of the Hedgeless Horseman to the show. Erik shows how real assets have never been more undervalued as they are now at 97-year lows. This fact, coupled with poor sentiment towards mining and gold, is a clear sign that this market is massively undervalued. It’s absurd to be talking about being bearish when it comes to miners or the price of gold. He says, “Investing really shouldn’t be this easy.”
Erik discusses the need for conviction regarding your positions because finding bottoms is difficult. Since the potential risk to reward ratio on many of his investments is great, his approach is often to buy more if the stock moves down.
His approach to the miners is to have an extensive watch list and then wait for the opportunities to come to him. For example, the March 2020 Corona crash created enormous value and thus opportunity. Please focus on the valuations and invest where it makes sense. If you really like a company, but it’s a bit expensive, just put it on your watchlist and wait for an opportunity.
Most retail investors have a time horizon of a couple of months, and every investor has a plan. If he can make a case for a company on a two-year time horizon, that won’t be a crowded investment. Most people aren’t willing to wait, and if you know when the catalysts are coming, it’s the best way to make outsized returns while minimizing risk.
On a longer time horizon, your not as concerned with minor pullbacks. It should make you like the stock more as long as the risk factors haven’t changed. Volatility in gold can have an outsized effect on junior miners, and you should take advantage of it to gain outsized returns.
Don’t even try to guess where gold and silver are going but look for cheap companies at today’s metal prices. The only thing you as an investor can do is to control your own decisions.
He explains his favorite factors when investing in miners. Marginal safety is essential, and his preference is to stick with companies that can generate value on their own. You want to be set on the downside and have good potential upside with the possibility of great returns.
Focus on making rational decisions, use common sense and learn from your mistakes. You don’t need to be an expert; try to avoid emotion in your decisions.
Time Stamp References:
0:00 – Introduction
0:33 – Gold Macro Factors
5:08 – Sentiment & Timing
8:35 – Keeping It Simple
12:48 – Time Horizons
16:07 – Risk & Volatility
19:38 – Focus & Control
21:51 – Junior Preferences
26:20 – Building an Empire
30:33 – Management & Jurisdiction
35:14 – Concluding Thoughts
37:49 – Wrap Up
Talking Points From This Episode
- Real Assets Vs. Financial Assets
- Taking advantage of volatility.
- Investing with Longer-Time Horizons
- Favorite factors in picking miners.
Erik Wetterling is the Founder and Owner of the Hedgeless Horseman and FH Invest AB. He writes primarily about gold, silver, investing, and mining stocks under the name “The Hedgeless Horseman.” His current mission is to make the most of the upcoming precious metal and mining bull and bring as many people along for the ride as he can.