“There is a huge amount of uncertainty in the financial markets right now,” says Lawrence Roulston, a geologist and the editor of the newsletter Resource Opportunities, at the recent Cambridge show in Toronto. “There is so much negativity with the American and European debt situations… But if all you do is read the headlines, you might think the whole economic system is on the verge of collapse here.”
That’s not the case, Roulston says during his presentation titled “Picking the stocks that ‘rock.'”
The investing world was previously terrified of the dire consequences of the Greek debt situation, followed by the downgrade of American government debt. But, neither triggered a financial collapse, notes Roulston.
“Greece did default on its debt. It’s only a selective default, but they did default on their debt. And the world carried on,” Roulston says, adding there was no “financial Armageddon” as predicted by some if America lost its triple-A rating. “The American debt has been downgraded, and the world carries on.”
Even with the rising fear that America and Western Europe are dipping into another recession, Roulston encourages investors not to go into hiding. “I’m not suggesting things are in good shape,” he says, pointing out there are serious flaws and uncertainty in the American and European system. But those problems won’t totally shatter the financial system.
Though America and Europe may not be doing well, other parts of the world such as China, Indonesia, South Korea and India are growing. As a result, base metal prices are strong and the mining industry is flourishing.
What should investors do?
The real way to play the market is to look at the supply side and not to bet on the prices of commodities, offers Roulston. Gold and silver prices will continue to rise, he says, as investors seek a safe haven, but they will be extremely volatile. The prices of other commodities may also rise, but how much exactly is merely a guess.
If you look at the mining industry it’s constantly building new mines to meet demand and juniors will be the ones to provide those new mines.
“Every decade, 10% of the entire mining industry has to be replaced just to keep production leveled, and on top of that we are seeing growth and demand for all the metals.”
Roulston says in his newsletter he looks for companies that have the capacity to be a takeover target for a major. However, he strongly suggests investors to do their own due diligence, and diversify their portfolio to mitigate risk.
‘Stocks that rock’
The following are Roulston’s picks, which he presented in alphabetical order during the Cambridge show:
Alexco Resource (asr-t, axu-x; $8.45)
Andover Venture (aos-v; 50¢)
Bear Creek Mining (bcm-v; $4.44)
Candente Copper (dnt-t; $1.25)
Fortuna Silver (fvi-t; $6.10)
Golden Valley Mines (gzz-v; 38¢)
Kaminak Gold (kam-v; $4.13)
Lion One Metals (lio-v; $1.55)
Midland Minerals (mex-v; 8.5¢)
Newstrike Capital (nes-v; $2.78)
SilverCorp Metals (svm-t, svm-n; $6.90)
Roulston says the current fraud allegations against SilverCorp are “nonsense,” but still advises investors to be cautious.
(The stock prices listed are the Sept. 15 close in Toronto.)
Lawrence must feel like a complete idiot. His picks are worth nothing now and started their decline after this article.