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Illegitimi non Carborundum!

Dear Friends,

Well 2012 arrived with more of a whimper than a bang and already it would seem that our "Dear Leader" wants to make absolutely sure that we don't expect too much in the way of good news on the economic front during the year ahead.

If his New Year Message were a company trading update, shareholders in UK PLC would be living in the hope that Cameron & Co were simply trying to manage our expectations, with the intention of under-promising and over delivering in the end.

But alas, we are dealing with politicians and when have politicians ever been known to beat expectations (other than perhaps their propensity to spend our money!)? Still, there's always the Olympics and the Diamond Jubilee to look forward to!

But the holidays would not have been complete without the New Year edition of our Sunday Newspapers. As we returned home from the newsagents with a raft of titles (though notably one less than last year!) under our arms, we started to review the so called “experts” account of the somnolent markets we endured through the second half of the past year.

All this undertaken in the vain hope of gleaning some wisdom; perhaps even gathering a few suggestions as to what we might expect from 2012 and where, with a fair wind, we may actually be able to make some money!

 

 

If like us, you emerged from this exercise with a marked degree of despondency, you will perhaps share the realisation that, when it comes to prognosticating where the markets are heading, the news writers and professional journalists are by and large as clueless as the rest of us! The one significant difference being that they get paid to stick their necks out whilst, if we make a wrong call, we run the risk of getting ours lobbed off!

And that, regrettably, is also borne out on the professional side to the Financial Services Industry with most fund managers failing to outperform index tracker funds over the medium and longer term.

There is, however, another way to go; the way of the contrarian!

When we pick up the papers, we largely read doom and gloom.  When we liaise with investing friends, we also talk doom and gloom. Its hard to recall a time in recent years when there was more despair in the market, even when you count the aftermath of the Lehman Bros debacle.  Stockbrokers, advisors and the rest are head in hands or hands on wine-glass struggling to make it through each arduous day. This recent Bloomberg article gives a pretty good overview of how the London Broker community is fairing right now. In a word, badly!

Isn’t it just perfect?

Not that we take pleasure from the current state of play. Far from it. In fact right now, even the MiningMaven team are getting rather miserable with the markets! But as contrarians, as painful as they are, these are exactly the signs we need to observe.

Our fundamental objective is to find stocks that, right now or in the foreseeable future, could stand a valuation considerably higher than the current market capitalisation of the business.  But in a market where value is not recognised, there is a certain sense of – well what is the point?

Of course we ought to address this right away.  The logic point is that irrational markets do not persist forever, and when rationality returns, share prices will return to more sensible levels.  Stocks that are particularly undervalued will rise the most.  It’s common sense.

At the moment common sense does not prevail, but whilst it may not prevail, it does still exist!

So dragging our overly tired carcases to the New Year writing table, we decided to review the "Common Sense" regarding some of the companies we know quite well.

The findings are revealing, and without wishing to suggest all is rosy in the garden, we believe that when the market does turn, the opportunities for investors will be most prodigious! In the words of Euripides the 5th Century Playwright “Danger gleams like sunshine in a brave man’s eyes”.

However, we would point out that most of the companies we encounter don’t last that long on the review table (and we do get to meet a lot of companies) as the majority of them simply don’t have the mix of qualities we are looking for.

We will not cover a company on MiningMaven just because they pay us a fee to so do. There are simply too many companies out there for us to do justice to them all and we cant be everything to everyone!

Instead, as Private Investors we find what we consider to be the best opportunities where we would be happy to invest in personally.  If we won’t or can’t back companies we cover with our own money, how on earth can we be trusted to mean what we say?

So when we meet a Company we ask them detailed questions about their:

    1. Board and management effectiveness and correlation with investor interests;
    2. Vision, Strategy and how this translates to action on the ground;
    3. Finance and funding;
    4. Geography and geology;
    5. Commodity exposure;
    6. Corporate Governance in the round
    7. Social development programmes in the field;
    8. Communications commitment and capability;
    9. Shareholder awareness.

 

To be honest most of the new companies we meet don’t like our approach.  And if they don’t, we don’t work with them.  It’s a simple principle, hard at times, especially when companies love to pay money for passive compliant coverage.

But our approach has helped us to hone our focus and has also yielded some stunning opportunities, for instance, in the summer  it brought New World Oil and Gas to our attention.

Over the coming week we will be compiling the top list of MiningMaven “Common Sense” plays for 2012. In short, a synopsis of the companies we are following right now and a summary of precisely why we are following them and where we see significant upside coming from.

The top list will be released exclusively to MiningMaven subscribers giving them a “heads up” preview in advance of publication on our website. If you haven't yet subscribed to MiningMaven, its free to do so, simply go to our website and complete your name, email address and region - thats all we need. We dont bombard you with spam or offers from third parties, and wont give out your details to anyone!

As an added incentive we will also be giving away 10 free copies of the dvd of the film Gladiator starring Russell Crowe along with 10 copies of Felix Dennis’s latest book How to Make Money!  Call them useful tools to survive and thrive in this climate. Winners will be notified by email no later than 22nd January.

In the meantime, we would like to wish all our readers a happy healthy and prosperous year ahead for 2012 - and in the words of US Army general "Vinegar" Joe Stillwell ..... Illegitimi non carborundum”!

 

Best Regards

 

The MiningMaven Team

 

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