Issue link: http://resourceworld.uberflip.com/i/229125
Resource Stock Outlook for 2014 Despite the ongoing bear market in junior mining, there are opportunities out there. by Prentice Lee Being a portfolio manager brings along certain expectations, some realistic, others not so much. One of the follies we have seen good portfolio managers run into is thinking that they know what is going to happen in the future. While we all strive to get insights into how the world will be shaped going forward and from time to time get it right, the fly in the ointment is the timing. Markets do not behave in an orderly fashion; they can confound and disrupt the best laid plans. Recognizing this, we have two fundamental investment-related philosophies at Prentice Lee Wealth Management. The future is unknowable. The world is unstable. This was most recently amply illustrated by the Japanese earthquake, tsunami and subsequent ongoing nuclear disaster at Fukushima. In the 10 months leading up to the Japanese disaster, the TSX Venture Index moved up by 75% and from the lows of the financial crisis at the end 2008 it was up a staggering 263%. The world got a terrible shock when the images of the tsunami started to roll across our screens and there seemed to be a collective, global reaction for investors against the riskier assets in their portfolio, as represented by the Venture Index. No one could have predicted this event. The tsunami continued to swamp the small cap, venture stocks and for more than two years we saw new lows quarter after quarter as investors and portfolio managers (including us) unloaded our small cap stocks in favour of large cap dividend payers. The Venture Index lost 65% of its value and many individual stocks were down by 90% or more. Clearly at the end of February, 2011 investors had a much rosier view of Venture stocks than they do today. The collective view of the market at the top was very optimistic and very wrong. However, as you can see from the accompanying chart, we seem to have finally found a bottom. We believe that there are some tremendous assets for the selective investor that have been swept away by the prevailing tidal wave of negative sentiment and for patient investors, there is money to be made in finding those high-quality assets today. S&P TSX Venture Index 14 www.resourceworld.com RW December 2013.indd 14 DECEMBER/JANUARY 2014 12/11/2013 6:11 PM