In the long run, your profits will depend on the quality of your watch list
When impactful market events occur, most of the time they come unannounced. The more unexpectedly, the bigger the shock. Vale’s dam burst. A Trump tweet. Boeing’s 737 failure. Earthquake floodings, JV agreement, etc. At the other side, you have ‘announced’ market events like a PEA release, assays results, financing closure, met results, etc.
For both kinds, you can and should prepare your strategy.
If Gold opens tomorrow +5%, how do I act? If Cameco’s mine flood, how do I act? If the CEO quits, how do I act? … If this, then that. On repeat.
Your due diligence on your core watchlist stocks should be on the same level as the stock you own.
For a company to make it to your portfolio it will need to have passed your due diligence process (people, people, people, assets, paper, catalysts, potential reward vs risk, finances, warrants, etc.). It deserves a separate post. For your watch list, well, we don’t have a set threshold how far to go in this DD. And that’s a shame. How we generally ‘know’ about a company, a few popular ones:
- Recommend by a friend
- Some online posters have a similar portfolio
- Heard it on my favorite podcast
- close ties with one of my investments
- close-ology in the region (Hello golden triangle)
- Some Twitter dudes are constantly touting it
- heard a good pitch from the CEO at conference X
- My newsletter/broker writer likes it
And there is nothing wrong with that. The important step is when to include any of these on your core watch list. Your core watch list stocks are on the same level as your owned stocks. The right timing/market conditions to add them just hasn’t presented itself yet.
Bringing forward the heavy lifting so to react swiftly when the market presents you with real-time opportunities.
My set of differentiators to create a watch list matrix:
- Commodity
- Country of asset
- Listing location & currency
- Stage: exploration, development, production. You can add a royalty streamer, prospect generator, etc.
- Market Cap
- Catalyst
Depending on your convictions & beliefs you’ll be over-weighted in one way or the other. More importantly, you can spot gaps in your matrix. Personal example: I’ve currently no view on a small silver producer leveraged to a possible commodity and/or M&A upturn.
Now you’ve found your gaps you can routinely dig and search focused on completing your ideal matrix. Bringing forward the heavy lifting so to react swiftly when the market presents you with real-time opportunities.
Throw your portfolio and core watch list stocks in the same mix. They are equally important. Be ready for any event, and in the long run, being able to react fast to impactful news by having pre-screened the right companies can pay its dividends.
Happy hunting (Just not on real animals Mr. Bristow)
Cheers, Pete
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