How do you find the Top 5%?

The gold market is hot.

A lot of companies are going to ask for your hard earned dollars. And trust me - they will all be “world class opportunities.”

Don’t get sucked in - keep your eyes on the prize.

There will be no shortage of deals. But it will be difficult to separate the top 5% from the rest.

You need to be extra careful not to be promoted into the next “can’t miss deal”. The FOMO of missing that great opportunity is real - nobody wants to be left on the sidelines watching other people make money.

But there is a far worse scenario - tying up your cash in “B Grade” companies, and having to take a pass when the “AAA” hits your desk because you are out of dry powder.

Missing a winner means you still have the cash in your pocket. Picking a looser means the opposite. Always remember - a new bus leaves every 15 minutes.

Will gold hit $2000? Probably. Will there be a terrifying correction first? Highly likely. If that occurs, I don't want to be loosing sleep because I made questionable decisions.

More importantly, if that correction comes, I want to have cash on hand to take advantage.

I have spent too much time listening to guys like Doug Casey tell me that “a gold market should add a zero to your net worth.” He says that, because he's done it, but he didn’t do it by catching the first bus.

So as the hype builds, and the opportunities hit your inbox - how are you going to separate the great from the good? I work too many weekends to throw my cash at a promoter on a hunch.

To curb my enthusiasm, I have a few systems that decrease my risk and by default put me into better opportunities.

I start with compartmentalization. I use this tool in every corner of my life.

As an example:

When I have 30 items on my to-do list, it can be overwhelming. It becomes an ocean of tasks - hard to see where to start. So I begin by throwing everything into “buckets”. I’ll create a bucket for tasks related to content creation, a bucket for issues related to sales strategy, a bucket for HR issues, for administration etc - and put each task into the relevant bucket.

Soon the ocean of 30 tasks is organized into 5 or 6 manageable buckets. Much more palatable. Within each bucket I assign priority to the tasks, and get started knowing I am using my time wisely. It creates clarity during chaos.

The market is not any different. Hundreds of companies want your money, and with gold holding over $1800 USD, many of them look good. It can be hard to know where to start.

The AAA opportunities are out there, but they are hidden behind an ocean of B’s and C’s.

Before you start entertaining opportunities, define what you are looking for.

I organize my investment criteria the same way I organize my to-do list. Below are a few of the "buckets" that help me.


People Bucket

Every successful investor will tell you to own the best people, but here is how I put this into practice:

I start by making a list of names - the very best people I know of in the sector, whether I know them personally or not. I don’t worry about what role they play - money manager, company builder, advisor - the best people will be sought out by the best projects, so I just look at the track record. Right now I have 18 names on my whiteboard. I don’t look at any companies that haven’t attracted the involvement of one or more of my names.

To quote Rick Rule, “I would have made far more money, and worked far less, if I had just stuck with 4 or 5 names.”


Commodities / Industries Bucket

Every industry has its time. The question I ask is this - is this the time to buy gold, copper, telemedicine, health science, etc?

I only make buckets for industries that have timing on their side.

Yesterday morning I shared notes with Institutional Investing All-Star, David Rosenberg. David uses a very similar approach with his own labels. Here are his top performers at the moment:

Stay at Home Companies

Vaccine Hope Companies

Gold Companies

Notably, this bucket is less relevant if I am looking at an innovation sector like food production. But right now, I am bullish on commodities, so it is very relevant.

I like taking risks. I always have. But at the moment, we are at peak global uncertainty. Nobody can make geopolitical predictions with conviction. Any countries with a history of corruption are being crossed off my list. There is enough upside in stable countries to fill my portfolio.

Does this mean I will miss some outsized returns in riskier jurisdictions? Of course. But I play by my rules.


There is more to consider - like valuation and share structure, but the criteria above get me started. Once I know my criteria, I can begin shortlisting companies.


Example:

Nolan Watson, CEO of Sandstorm Gold Royalties is on my list of names

Gold exploration is on my list of ideas

Nevada is on my list of jurisdictions.

That led me to a gold explorer near Reno, of which Nolan is an advisor - Eclipse Gold Mining. Chairman Marcel De Groot (who is also on my list) reinforced my conviction. I didn’t obsess about the geology. I didn’t ignore it, but that's not where my strength is. Brent Cook’s business is rocks. My business is people.

Read why I value people over projects here.

Great people won't chase a poor project, but poor leadership can destroy a great project.

I built a position on the open market and topped it up in their recent financing.

On my whiteboard there is a jurisdiction that I have highlighted in bright yellow. It has a a rich history of mineral discoveries, but until recently has been troubled with permitting issues.

In the last 2 months, I have received a flood of inquiries from my Pangea Club members asking for opportunities here. Capital has been rushing in from titans like Eric Sprott, and every recent financing has been oversubscribed. People are calling it the “new Nevada”.

Whether it is or it isn’t, the amount of capital it is attracting will get to that answer quickly. I am watching. There are a handful of targets to choose from, but I haven’t picked my horse yet.

We’ll cover it next week.

Jay