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SN3165 (< 20)

PM Warrants - A Huge Boost to Fool's Portfolios

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September 06, 2011 – Comments (20) | RELATED TICKERS: NGD , SLW , KGC

Warrants are powerful - yet still relatively misunderstood to the general investing community. If you are long gold and silver, they AT LEAST deserve some of your attention! Read up. 

January 2011 - Franco Nevada stock: $30 ish. Franco '12 Warrants (Strike of $32) : $3.5.

The Call  -  "I like for example the Franco-Nevada warrants... I think they will perform much better before expiration and now have >3:1 leverage. These could easily return 4-5x your money. This is in light of them basically stealing gold wheaton which adds immediate cash flow to the company, to the tune of 30,000 ounces each quarter at a cash costs of $400. Following this acquisition, using a 1400 gold price in perpetuity, Franco should be trading for about double the current price." That's in a message from Hyperinflation on Seeking Alpha, better known as Speedybure on here. 

Today - Sept. 2011 - Stock:  $45+, which I expect to go much higher in coming months due to NYSE listing this week, and of course a great 3q and 4q, where you can expect revenue to top $100 mill in both quarters).

Warrants: $13+! A little over a 3-bagger for me.  Good call, Speedy. A powerful example of the leverage warrants offer.

Please read up on New Gold '12 and '17 warrants, and Kinross '14 warrants (currently my favorite).

 **Invest carefully. Never invest more than you are not comfortable with in warrants, as they do pose obvious risks. You can lose it all. I like to split up my money in them, for example, and they are always among the smallest positions in my portfolio (at least in the beginning). I never invest more than I am willing to lose. And they generally lack liquidity, so I try to start selling well before the exp. date. Place LIMIT orders only. Though I must add, I've started to shed the aforementioned Franco warrants, and have had no problem at all. My initial investment is already off the table, into another investment. Houses money!

US Symbols: New Gold 2017 -


NGDAF.pk

New Gold 2012 - NEGWF.pk

Kinross 2014 - KNCGF

And of course, I like the Sandstorm 2014 warrants.  SNXXF

Must see websites: Full list of warrants available plus leverage and "bargains." Canadianwarrants.com, and read up on warrants atPreciousmetalswarrants.com

Long all of the above. 

20 Comments – Post Your Own

#1) On September 06, 2011 at 2:53 PM, BillyTG (32.97) wrote:

What are the advantages to warrants over option calls? The companies you name probably don't offer options, so warrants would be the only way to see these kinds of returns. Why not buy calls on bigger, safer, more liquid companies? From the quarterly report, it talks about a warrant being a full share and a half share, but the language used makes it difficult for me to know exactly how it works.

For those interested in Sandstorm warrants, see page 14, 34 of their most recent quarterly report for specifics.

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#2) On September 06, 2011 at 3:20 PM, Jbay76 (< 20) wrote:

In order to purchase and sell warrants, do you need to set up a margin account?

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#3) On September 06, 2011 at 4:12 PM, Frankydontfailme (27.45) wrote:

Nope jbay, just like owning common shares (just much more volatile)

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#4) On September 06, 2011 at 4:15 PM, SN3165 (< 20) wrote:

@JBay76, nope.

 @BillyTG, more leverage, less risk, IMO. The Kinross '14 warrants, for example, expire in April of 2014 with a strike of 21.50. They offer 5.5x leverage. As far as I know there are no call options available on the stock, but I could be wrong.The 2012 new gold obviously hold more risk over the 2017 warrants, but with 13.5x leverage (over 2.8x for the '17).

You must read - http://www.preciousmetalswarrants.com/LearningCenter.html. I am not a subscriber here as it's a little pricey (not saying it's a bad investment, though). 

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#5) On September 06, 2011 at 4:23 PM, SN3165 (< 20) wrote:

They are volatile beasts. Buy on the dips if you choose. I lucked out with Sandstorm wts as I got in during .35 (when the stock was .65, which I bought as well).  I am hoping this to be my first 10-bagger. :-)

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#6) On September 06, 2011 at 4:24 PM, SN3165 (< 20) wrote:

New Gold Inc. NGD.WT.B 644535 13 0 NGD T.NGD NEGWF.pk   $15.00 13.37 3-Apr-12 211 -1.63 13.37 NGD.WT.B 10 53.8% 0.1 $0.18 Bargain

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#7) On September 06, 2011 at 4:34 PM, SN3165 (< 20) wrote:

OK, so Primero also has some warrants, and I think they look really good.

But keep in mind another risk... if the company gets bought out before the warrants are in the money...you could be kind of screwed. See: Gold Wheaton. I say kind of, because there still is the chance Gold Wheaton warrants will be in the money one day ($64 a share by the end of July 2013) Gold Wheaton - http://finance.yahoo.com/q?s=FNGHF.PK&ql=0.

So, what happens if Primero gets bought out? I really don't know.Here are their warrants ex:July 15 at a strike of $8, 6.79x leverage. 

Primero Mining Corp P.WT 74164W 11 4   V.P     $8.00 3.6 19-Jul-15 1397 -4.4 6.79 P.WT 1 74.2% 0.53 $1.42 Bargain

 

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#8) On September 07, 2011 at 12:19 AM, Bays (34.32) wrote:

My biggest regret.... not buying SLW warrants in 2008 instead of the commons.....   Id have close to a 40 bagger instead of a 10 bagger!!!!!!!!    Then again, you can't complain about a 10 bagger.

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#9) On September 07, 2011 at 12:57 AM, Raambo20 (< 20) wrote:

Thanks for the great post, I have been eyeing the LEAPS on kinross and even the shorter term options for a while now, and was not aware of the warrants. Seems like they are trading around 3.50, and with a strike of 21.50 like you say these seem to be an unbeleivable deal.

My only worry is these seem to be very thinly traded, so liquidity is a major concern.

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#10) On September 07, 2011 at 1:42 AM, BillyTG (32.97) wrote:

Good links. Thanks!

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#11) On September 07, 2011 at 4:07 AM, mhy729 (40.88) wrote:

My biggest regret.... not buying SLW warrants in 2008 instead of the commons.....   Id have close to a 40 bagger instead of a 10 bagger!!!!!!!!

Ah yes...investing just wouldn't be the same without those missed opportunities.  :p 

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#12) On September 07, 2011 at 6:02 PM, SN3165 (< 20) wrote:

Dude, you bought SLW stock in 2008? Nobody is going to feel bad for you! :-)

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#13) On September 07, 2011 at 6:25 PM, mhy729 (40.88) wrote:

Think I found the Primero warrants trading on the pinks (for U.S. investors without direct access to Canadian markets):

MNCWF 

http://finance.yahoo.com/q?s=MNCWF.PK

http://www.google.com/finance?q=PINK%3AMNCWF 

Very thinly traded though. 

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#14) On September 07, 2011 at 7:33 PM, BillyTG (32.97) wrote:

mhy729, nice find! I was looking for those today, and the best I could get was P.WT, trading on the Canadian exchanges.

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#15) On September 07, 2011 at 10:49 PM, Bays (34.32) wrote:

Ya because of Sinch!!!!!  He was very convincing :)

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#16) On September 07, 2011 at 11:17 PM, SN3165 (< 20) wrote:

Just remember, LIMIT orders, only. I like the Primero warrants.

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#17) On September 08, 2011 at 12:01 AM, SN3165 (< 20) wrote:

An absolute must read! http://www.theglobeandmail.com/globe-investor/investment-ideas/warrants-an-investing-option-that-gets-no-respect/article1927479/

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#18) On September 08, 2011 at 7:01 PM, mhy729 (40.88) wrote:

Re: the Primero warrants MNCWF trading on the pink sheets for US investors, I just today attempted to place an order with Scottrade after the trading halt on PPP, and it was declined.  Online orders for MNCWF are not authorized at Scottrade, and you have to call it in to your local branch office to make a broker-assisted trade (they will actually place an order for the P.WT shares directly on the Canadian exchange).  I suspect this will also be the case for the Silver Wheaton warrants SLVWF.  Perhaps I will try placing an order (with a ridiculous bid to prevent execution) just to see if it will place online.

Anybody here (US not Canada based) been able to successfully trade either MNCWF or SLVWF as an online order?  Please let me know what broker you are using!  (I do like Scottrade but it has a few limitations like the above.)

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#19) On September 08, 2011 at 11:09 PM, SN3165 (< 20) wrote:

Etrade... no trouble.

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#20) On September 08, 2011 at 11:53 PM, mhy729 (40.88) wrote:

Cool, I've always been meaning to look into alternative brokers, and this is one good reason to consider E-trade...thanks!

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