Way Too Early to Sell
Don Durrett told Investing News the gold and silver stocks are still undervalued, and he is not taking profits. The question he had just answered on his own forum was the one every holder asks after a run. Should you sell some along the way? His answer was no.
“I believe this is my personal approach, that we are speculators here. We’re trying to maximize our returns. We’re not investors.”
He sells for two reasons. The story changes, or the stock gets pricey. Neither one is here. The cycle is early. The upside he is underwriting has not been paid.
“We’re early in the cycle. These stocks have lots of upside left. It’s way too early to be taking profits.”
The gauge he wants people to watch is free cash flow, not the quote on the screen. Multiples on the producers are around 10. He does not call that frothy. Frothy is the 20s. Until the elite names get there, the second rule has not kicked in, and the first rule has not kicked in either.
“Until they get into the 20s, there’s no reason to take profits unless my two rules kick in. My two rules don’t kick in, then just ride these things.”
The ride is the whole point. If gold gets to $7,000 or $8,000, he is counting on the portfolio to do what a trader who clips gains cannot do. He said he has three stocks he expects to be 100 baggers, about five he expects to be 50 baggers, and about 40 he expects to be 10 baggers. That only happens if he lets them run.
“The only way that happens is if I let them ride. So I have to let them ride. I’m not, I have no interest in taking profits until they basically run.”
He used the same rule on the way in. Avino, when it was under 50 cents, was a buy to the bottom, not a trade to flip. Beaver Creek last week did not change the math. He came home owning the names that stood out, Heliostar, Honey Badger Silver, Osisko Gold among them, and wrote that quality risk reward stocks on that list have 10 bagger upside at about $7,000 gold and $200 silver over three to four years, with most of them carrying 20 bagger potential if the metals get there.
The near term is the part he is willing to be wrong on. He has said he expects gold and silver lower into the election window, and that the job is to buy the dip, not to declare the top because a newsletter reader is nervous. Targets move with the volatility.
The exit does not. Story breaks, or free cash flow multiples get into the 20s. Until one of those prints, Durrett is still long, and he is still not selling.
