December 3, 2017
December 3, 2017


CGA Mining would u touch this kuppy?
by the way have u heard of RED:AX? Red 5

Never Heard of Red 5. Sorry

At one point, my fund owned a pile of CGA. I bought a lot more of it when it dropped under a dollar in late 2008. Masbate seems like a good asset. That said, the company repeatedly bragged that they were fully funded to production only to spring another dilutive equity financing. Either they’re liars or incompetent at budgeting–or a bit of both. Meanwhile, they were drilling like mad in Nigeria. I don’t get it. Why spend cash that you don’t have to drill out a project that won’t produce for a decade? Why issue equity at like 2x expected cash flow to fund a greenfield Nigerian drill plan? My dog has a better understanding of capital allocation than these guys. I finally just gave up and sold my stock at like $2.20 or so. The stock is up nicely since then–but I have no regrets. I made money, but should have made a whole lot more as Masbate seems to be producing just as expected–unfortunately there’s like 100m more shares outstanding than there should be. It’s typical junior mining stupidity. They had a sure thing, got greedy trying to thread the needle and gave away the farm. I sold six months ago and haven’t looked back. Wish I could help more. Remember, it’s cheap for a reason.

First, thank you for the website and your commentary. You have made me think differently about how to approach analyzing an investment.

My question has to do with time management. As part of a family that operates five small businesses (not in the financial industry), I find it challenging to search for small cap equities on my own let alone performing the due diligence. I prefer to manage our family’s investments as much as possible. Do you employ a stock screening strategy for example using software with certain parameters which helps you narrow down the number of opportunities? We have developed an investment strategy so now in the process of implementing it. I realize allocating a specific amount of time per day is one of the critical pieces to this process so looking for a few suggestions on how best to approach this given my time constraints.

I appreciate your time and any suggestions. I believe there are probably a number of small companies in our position (busy taking care of the business and not wanting to hand over investment assets to a traditional broker).
PS: I also enjoy your travel commentary.

Glad you enjoy the site.

You likely have the same dilema that other part time investors have. There just are too many companies and too few hours in the day. The problem is that to do anything well, you need to put a lot of hours into it. If you try to do it part time, you likely will miss out on stuff. I do this full time and I don’t have enough hours to investigate all the great ideas that people send me.

Stock screeners may be useful for large cap stocks, but the reason that small cap stocks offer the opportunities that they do is because you cannot screen for them. Trust me, I’ve tried. Of all the screeners, the only one of any value is insider buying. I’ve found it is much more useful to think of what secular trend you want to capture, then use that to narrow the list down to a dozen companies that you can dig into. Outside of that, it helps to have a network of dozens of smart friends who are all looking to share ideas.

I would never suggest turning your money over to a traditional broker unless you really trusted the guy (and there are quite a few really excellent ones out there). This may be heresy, but if you have the assets to warrant it, I’d recommend giving your money to a few very talented small cap hedge fund managers that you trust to do the right thing. Make sure that their funds are small, they have all their own money invested in their strategies and that their current stock picks sound reasonable. The benefit of this is that they work full time to find companies, yet you can review their selections over time to see if you like their ideas. Most good small cap investors only have a dozen or so large positions and they keep them for years. This makes it easier for you as you to track them and you really are just interviewing a few good investors to see how they think–rather than constantly having to find the next great investment yourself.

Outside of that, unfortunately it will take a lot of time to do this well.