Let’s
start with the facts about 2014. A year ago, in the December edition of the Casey International
Speculator, I recommended buying 23 different
stocks. To be clear, I did not say investors should buy them all at once, and
most were already in the portfolio. However prices were way down, and that’s
the number I said were buys as of December 2, 2013.
A month
later, I went on record saying that gold had bottomed in December. That
bottom held until it was breached in early November of this year, making me
officially wrong—at least about gold.
Flash
forward to December 2, 2014, and 14
of the 23 stocks I’d recommended buying the year before were in the black,
some substantially so—one spectacularly so. If someone had put $1,000 into
each of my 2013 picks at the recommended price, their $23,000 would have
become $25,869.38 a year later, yielding a 12.5% gain.
This
does not count the fact that I had recommended taking profits on one stock
that had risen 458.1% over its December 2, 2013 price by last July. But it
also doesn’t take into account that we were already long at higher prices on
most of the recommended stocks. I want to be very clear on that; I am not
claiming these numbers as actual position gains. They are just a way of
quantifying what 2014 was like for our portfolio.
Frankly,
while 12.5% beats money in the bank, it’s not a great success in my book.
It’s not what we’re here for; my job is to look for “hockey stick” type
results, like the stock that shot up 458.1%—and then went on to peak at
1,035.5% gains over the December 2, 2013, closing price.
It is,
however, quite notable, given the level of despair and near capitulation that
has gripped the gold sector in the latter half of 2014. It also tells us
that, while I was wrong about gold having bottomed, I was not wrong about my
gold stock portfolio having bottomed.
This
illustrates several important things:
- The “secret” to buying low and selling
high—even in a “bad” year—is to recognize the difference between price
and value. One can do very well buying value when it’s objectively
underpriced, regardless of subsequent market fluctuations.
- It’s possible to come out ahead going long,
even when the market itself falls short—if you make the right picks.
- A “through the roof” stock pick is hard to
predict, but a basket approach increases one’s odds, and a single big
win can more than make up for a lot of picks that don’t work out.
- It’s hard when things look grim, but as Doug
Casey likes to say, it’s better to risk 10% of your portfolio for 100%
gains than to risk 100% of your portfolio for 10% gains. Successful
speculation takes a great deal of contrarian courage.
Looking Forward to 2015
Fine,
but what now and what next?
Good
questions. While I have no crystal ball, I will say that the above results
show that one does not need to be able to see the future; one needs only to
be able to see underpriced value and stick with it until payday.
So,
while it’s true that our market “feels bottomy” to me—just like last
December—what’s more important is that there are great assets on sale now.
That means that even if 2015 disappoints as 2014 did, there are still
opportunities to make money for those with the courage it takes to buy low
and sell high.
I can
live with that as a base-case scenario, but I have to say that I do believe
the precious metals will rally in 2015, even if they dip first. If so, it
should be a spectacular year for us. It wouldn’t be unrealistic to add a zero
to that 12.5% average return reported above; we’ve done it before.
Of
course, I’d like to offer my help via the Casey
International Speculator to anyone interested
in taking advantage of the opportunities before us. The truth, however,
despite my healthy ego, is that I am not indispensable. You can do this on
your own, if you remember the “secret” described above: successful
speculators see when price and value diverge, and place their bets
appropriately.
However
you play it, I wish you a happy and very prosperous 2015.
