There’s an air of FOMO in global stock markets right now.
Indices are breaking into new all-time highs. House prices keep going higher. Everything’s melting up!
So, what should you do if you hold some cash and are looking to put that to work?
Chase this rampaging bull market higher?
Or wait patiently for better prices to arrive?
Well, diving into this market exposes you to dramatic trend reversals. Remember what happened in the sharp April sell-off?
A distant memory now.
On the other hand, there is an opportunity cost to doing nothing.
Especially if inflation rears up and erodes the value of your cash savings.
So, perhaps the best answer I can offer you is to focus on value investments.
My colleague Greg Canavan does an excellent job of finding companies with real earnings that the market is not currently pricing effectively.
True value in the Aussie market still exists.
However, given the melt-up across global markets, value is getting harder to find.
That’s why you need experience and someone with a strong fundamental approach to guide you towards the value opportunities that can still be found.
And this market is primed for investors to switch their focus to value.
Value stocks keep you invested but also less exposed if the market suddenly reverses and sells off.
The assumption is that if these stocks haven’t participated in the recent melt-up, they’re unlikely to suffer as much if stocks pull back.
In my opinion, they offer the best risk-reward payoff in a market that’s looking rather lofty.
I suggest learning more about the virtues of value-oriented investing by checking out Greg’s latest work here.
But there’s another place that value-focused investors don’t tend to look.
A sector I’m more attuned to, given my experience as a geologist!
And right now, it’s a sector swarming in value given investors’ prolonged lack of interest.
So, what am I talking about?
Exploration Stocks!
Over the last decade or so, this sector hasn’t gained much love from investors.
Companies trying to find the next generation of deposits are about as disliked as they’ve ever been.
Yet, their role in the global economy is critical.
They find the stuff we need to fuel our daily existence! Copper, iron ore, zinc, natural gas.
Everything you can feel or see was likely the product of an explorer finding it!
Another key aspect is that junior mining stocks do something real with investor capital.
And that could get much more critical in the years to come.
We live in an era when billions of dollars of investor capital are being poured into fantasy investment themes like meme coins or the metaverse.
Sure, it makes money for speculative investors. But at what cost?
What happens when fantasy investment ideas hit brutal truths?
My guess is that when market threats re-emerge, things without any level of scarcity attached to them will start to feel somewhat unreal.
Speculation with tangible value
Junior mining stocks are speculative but offer something far more real for investors.
Consider the net result:
If a junior explorer finds a new natural gas basin or potash deposit, this has very real implications for the global economy.
Potash is used as a fertiliser, which grows crops and feeds the world!
Natural gas means hot water for your morning shower, the ability to charge your laptop, and heat your coffee, tea, dinner, and eggs!
There’s nothing fictional about the junior mining sector.
This is speculative investment but with REAL outcomes.
Junior miners aren’t creating a fictional real estate market in someone’s imagination, like the metaverse.
Or making ‘another’ fantasy meme coin like ‘Dogecoin’ or ‘Official Trump.’
Junior miners are looking to uncover raw materials: the foundation of human existence.
And you can’t get more real than that!
In Australia, our economy depends on these tiny explorers finding the next generation of deposits—ore bodies that will fuel our national wealth for decades.
Explorers play a critical but hugely underappreciated role in the global economy.
Stay tuned for my next edition as I explore this idea further!
Until then.
Regards,
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James Cooper,
Editor, Mining: Phase One and Diggers and Drillers
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