I promised several weeks ago to write brief posts on each of my ten current stock holdings. This is the first post and it’s about one of my favorite speculative stocks that I own.

So, why Minera Alamos?

Well, for one thing, quite a few people who I’ve followed on fintwit for years, and who I’ve come to respect, are invested in the company. Already, this is a controversial part of my investment thesis. Lot’s of people will tell you that you can’t rely on anyone else and that you have to do the due-diligence yourself. This is true of course. But a large part of the due-diligence is finding people who have been doing it longer than yourself and seeking out their advice. The reality is that in any area of publicly traded companies, there is a massive amount of research you’ll need to do to really understand an industry and specific companies.

Knowing people that are smarter than you, and who have more experience in an area, is tremendously beneficial. The kind of people who I follow in the mining industry have vastly more experience than I do. These are people who are geologists, metallurgical experts, former mining executives, etc., etc. Many of these guys are actually out in the field and have been to the mines themselves. It would take a lifetime in the industry to be able to acquire their knowledge. That’s simply not realistic for myself. What is realistic is finding these people, following them long enough to find out how knowledgeable they really are, and then listening to what they have to say and comparing it to my own due-diligence. I’ve found fintwit to be an incredible asset here, and I’m taking advantage of that.

Most of my reasons for owning the stock are detailed fairly well in the article below. But here are the bullet points:

• They seem to have a competent and ethical management team.
• Doug Ramshaw, the company President, is putting his money where his mouth is. He’s been continuously buying shares in the open market for years. This is unusual in this industry.
• They have a business philosophy that resonates with me. They believe that it’s not about how many ounces you mine, but rather, it’s about how much can you make per ounce. In other words, it’s about getting to profitability as soon as possible and than using that profit to fund future expansion.
• Their team has a proven track record of creating profitable mines in Mexico.
• They have a solid balance sheet.
• They haven’t diluted their shareholders.
• They’ve had a consistent story from day one and they’ve stuck to it through the past several years despite some setbacks.
• It has the potential to be a multi-bagger and there are lots of catalysts in the near future (12-24 months).

This article is from nearly 18 months ago, so it’s kind of old news. But it’s a good article explaining why I consider Minera Alamos to be an interesting speculative investment. When this article was written, Minera was trading at around a $220 million market cap. It’s trading at less than half that today. But I don’t think the fundamental story has changed at all. They’re still on target to do everything this article talks about.

True, the timelines have slipped by a good bit since then. Some of the reasons the timelines slipped were out of their control. And it’s still highly speculative. But…it may be the best setup for a junior minor that I’ve seen in quite a while when you consider risk vs reward. They’ve done a good job of managing their balance sheet. They haven’t diluted shareholders. So all of the upside potential is still there. They just need to have a few things go right, starting with permits for expanding Santana, and for the mine at Cerra de Ora, and I think it will be off to the races. In order to find 10-baggers, you need to take some risks. And 10-baggers are often created by negative sentiment from temporary setbacks, which in turn creates the drawdown in market cap which then allows you to put on a large position.

Needless to say, I’ve got a large position in this one. I’ve been averaging into this position for the past two years. Holding it for several years allows you to understand the story and get comfortable with the risks involved. Sometimes, in investing, when you feel the odds are on your side, you just need to take a swing. I’m taking a swing. I think I’ll know if it’s a winner or loser within the next year.

How Minera Alamos Turns $20 Of Exploration Spending Into $2,000 Of Gold

And here is an update from their President from earlier this year where he lays out the thesis: