Explorers - are they really right for long term holdings?

[DionM]

I have a few explorers in my portfolio.

I am not a day trader, I am holding for long term (5yrs+ as a minimum). I only buy smallish parcels of stocks I like the sound of; explorers I think that have good lease areas or future prospects.

However, will many of these explorers actually go anywhere? Will they all have the ability to reach production? It seems like there are a million explorers out there in WA alone.

So I guess I wonder, are they the right type of share for me?

Originally I bought into them thinking they when they do reach production, they will climb up the ranks like the other 'famous' producers (eg ZFX, PDN too I guess, and so on), the SP will rise and they will start paying dividends, and I will be happy I got onboard when the SP was sub $1 (for example). But now, I don't know? I look at TAM for example, which is producing but the SP is still low. Had I put that same investment into say BHP, I'd probably have had better growth thus far taking into account dividends.

I am not concerned with the risk, they are only a small part of my overall portfolio. I am buying them for long term rewards. But while their share prices go in spurts (both +ve and -ve), I wonder if overall I am not better really sticking with more bluechips and those that pay dividends, or at least companies that are doing something rather than poking holes in the ground

 

[cuttlefish]

I don't think you can just buy, hold and ignore spec stocks. You need to actively manage the investment in them, track what they're doing, and drop them if their exploration or development results aren't absolutely top quality.

You need to be very critical and selective.

(this probably holds true to a fair extent for any stock investment)

 

[disarray]

i agree with cuttlefish. the money that is attracted to spec stocks is very nervous and is very quick to take profits or bail out at the first hint of trouble so you need to keep monitoring what the stock is doing. buying a bunch of specs and holding for 5 years in the hope they may take off is gambling.

maybe they will take off and you will make a fortune, and if you are comfortable putting money on a "maybe" then go for it. maybe that 100-1 shot will win the big race too.

in the stock market the best you'll ever get is a "probably" so if you want to buy and hold, blue chips are the most "probably profitable" stocks going.

 

[shinobi346]

I agree with these sentiments. You have to actively manage your explorers a lot more than other types of stocks. Many things can happen during a short period of time like option payouts, option conversion due to nearing expiry dates, fund raising, buyout offers, entitlement offers etc which require your attention to best take advantage of.

I would not sit back and relax on an explorer.

 

[DionM]

Thanks for the feedback guys.

I'll have to have a bit of a think then as to what I want to get out of them. I may decide to only keep a few star performers and ditch the rest. Hmmm.

 

[ithatheekret]

They are speculative , so the emphasis is on management and risk/reward ratios , if it's a miner , fundamentals are the first and foremost step prior to entry , at least then you will have the abandonment breakdown along with the net asset value . After that it's market mood , cash at hand and allocation allowance .

I don't mind the speccies ... after all FMG was one once

 

[gfresh]

With regards to profits, when you make 300%+, the capital gains tax is painful, so it is tempting to just leave profits there.

I've always wondered that the 12 month CGT rule may save you the 50%, what are the odds of that profit dropping by more than 50% at the end of the 12 months and completely eroding that gain?

It's a tough one to decide, do you take the gain now and pay all that tax, or take it after 12 months, and risk it falls to (practically) nothing.

 

[DionM]

Well I've decided to start rationlising.

I'm only going to keep explorers that have a very high chance of going into production in the near future (YML appears to be like this, based on their location and management), or those that for which production is imminent (e.g. AGM).

Those that have no real timetable for production (or production is a long time off such as MGO) I will probably dump. I'll probably also look at dumping those that are currently producing but still dabbling in exploring - too much of a diversion I think (AAR, for example).

Once they are producing they're probably a bit more of a safer "buy and forget" type investment.

 

[nioka]

Point1; Never worry about paying tax. You only pay it after and if you make a profit.
Point2: There are ways to minimise tax legally.
Point3: Always have an exit strategy.
Point4: If you make a profit on a speccie, or on any other for that matter, Sell enough to cover the outlay and the rest is free carried in the event of a crash.
Point5. Remember points 1,2,3&4

 

[Wysiwyg]

DionM;220634]Well I've decided to start rationlising.

I'm only going to keep explorers that have a very high chance of going into production in the near future (YML appears to be like this, based on their location and management), or those that for which production is imminent (e.g. AGM).

Those that have no real timetable for production (or production is a long time off such as MGO) I will probably dump. I'll probably also look at dumping those that are currently producing but still dabbling in exploring - too much of a diversion I think (AAR, for example).

Once they are producing they're probably a bit more of a safer "buy and forget" type investment.

I wonder how many "explorers" are feeling the pinch.The companies still scratching the ground and contemplating a drill in the next year must have a declining interest.My opinion is there are too many explorers now, the I.T./boardroom guys that jumped on the bandwagon are getting hit.No purpose, no direction, just looking for the directors paypacket, preferably something like Andrew Forrest.

Might be a while before the pseudo explorers get interest, maybe too late.

 

[BeterValue]

Well I've decided to start rationlising.

I'm only going to keep explorers that have a very high chance of going into production in the near future (YML appears to be like this, based on their location and management), or those that for which production is imminent (e.g. AGM).

Those that have no real timetable for production (or production is a long time off such as MGO) I will probably dump. I'll probably also look at dumping those that are currently producing but still dabbling in exploring - too much of a diversion I think (AAR, for example).

Once they are producing they're probably a bit more of a safer "buy and forget" type investment.

Dion, management is going to be the key still as these guys get ready to produce they miss target dates etc. and the market punish the sp. so be ready for it and keep your ear on the ground.