What 10 Baggers (and 100 Baggers) Look Like

By Jeff Clark, Senior Precious Metals Analyst

Now that it appears clear the bottom is in for gold, it’s time to stop fretting about how low prices will drop and how long the correction will last—and start looking at how high they’ll go and when they’ll get there. When viewing the gold market from a historical perspective, one thing that’s clear is that the junior mining stocks tend to fluctuate between extreme boom and bust cycles. As a group, they’ll double in price, then crash by 75%..... then double or triple or even quadruple again, only to crash 90%. Boom, bust, repeat.

Given that we just completed a major bust cycle—and not just any bust cycle, but one of the harshest on record, according to many veteran insiders—the setup for a major rally in gold stocks is right in front of us.

This may sound sensationalistic, but based on past historical patterns and where we think gold prices are headed, the odds are high that, on average, gold producers will trade in the $200 per share range before the next cycle is over. With most of them currently trading between $20 and $40, the returns could be stupendous. And the percentage returns of the typical junior will be greater by an order of magnitude, providing life changing gains to smart investors.

What you’re about to see are historical returns of both producers and juniors during three separate boom cycles. These are factual returns; they are not hypothetical. And if you accept the fact that this market moves in cycles, you know it’s about to happen again.

Gold had a spectacular climb in 1979-1980, and gold stocks in general gave a staggering performance at that time—many of them becoming 10-baggers (1,000% gains and more). While this is a well known fact, few researchers have bothered to identify exact returns from specific companies during this era.

Digging up hard data from before the mid-1980s, especially for the junior explorers, is difficult because the information wasn’t computerized at the time. So I sent my nephew Grant to the library to view the Wall Street Journal on microfiche. We also include information we’ve had from Scott Hunter of Haywood Securities; Larry Page, then-president of the Manex Resource Group; and the dusty archives at the Northern Miner.

Note: This means our tables, while accurate, are not at all comprehensive.

Let’s get started…...

The Quintessential Bull Market: 1979-1980

The granddaddy of gold bull cycles occurred during the 1970s, culminating in an unabashed mania in 1979 and 1980. Gold peaked at $850 an ounce on January 21, 1980, a rise of 276% from the beginning of 1979. (Yes, the price of gold on the last trading day of 1978 was a mere $226 an ounce.)

Here’s a sampling of gold producer stock prices from this era. What you’ll notice in addition to the amazing returns is that gold stocks didn’t peak until nine months after gold did.

Returns of Producers in 1979-1980 Mania
Company	Price on 12/29/1978	Sept. 1980 Peak	Return
Campbell Lake Mines	$28.25	$94.75	235.4%
Dome Mines	$78.25	$154.00	96.8%
Hecla Mining	$5.12	$53.00	935.2%
Homestake Mining	$30.00	$107.50	258.3%
Newmont Mining	$21.50	$60.62	182.0%
Dickinson Mines	$6.88	$27.50	299.7%
Sigma Mines	$36.00	$57.00	58.3%
Giant Yellowknife Mines	$11.13	$39.00	250.4%
AVERAGE			289.5%

Today, GDX is selling for $26.05 (as of February 26, 2014); if it mimicked the average 289.5% return, the price would reach $101.46.

Keep in mind, though, that our data measures the exact top of each company’s price. Most investors, of course, don’t sell at the very peak. If we were to able to grab, say, 80% of the climb, that’s still a return of 231.6%.

Here’s a sampling of how some successful junior gold stocks performed in the same period, along with the month each of them peaked.

Returns of Juniors in 1979-1980 Mania
Company	Price on 12/29/1978	Price Peak	Date of Peak	Return
Carolin Mines	$3.10	$57.00	Oct. 80	1,738.7%
Mosquito Creek Gold	$0.70	$7.50	Oct. 80	971.4%
Northair Mines	$3.00	$10.00	Oct. 80	233.3%
Silver Standard	$0.58	$2.51	Mar. 80	332.8%
Lincoln Resources	$0.78	$20.00	Oct. 80	2,464.1%
Lornex	$15.00	$85.00	Oct. 80	466.7%
Imperial Metals	$0.36	$1.95	Mar. 80	441.7%
Anglo-Bomarc Mines	$1.80	$6.85	Oct. 80	280.6%
Avino Mines	0.33	5.5	Dec. 80	1,566.7%
Copper Lake	$0.08	$10.50	Sep. 80	13,025.0%
David Minerals	$1.15	$21.00	Oct. 80	1,726.1%
Eagle River Mines	$0.19	$6.80	Dec. 80	3,478.9%
Meston Lake Resources	$0.80	$10.50	Oct. 80	1,212.5%
Silverado Mines	$0.26	$10.63	Oct. 80	3,988.5%
Wharf Resources	$0.33	$9.50	Nov. 80	2,778.8%
AVERAGE				2,313.7%

If you had bought a reasonably diversified portfolio of top-performing gold juniors prior to 1979, your initial investment could have grown 23 times in just two years. If you had managed to grab 80% of that move, your gains would still have been over 1,850%.

This means a junior priced at $0.50 today that captured the average gain from this boom would sell for $12 at the top, or $9.75 at 80%. If you own ten juniors, imagine just one of them matching Copper Lake’s better than 100-bagger performance.

Here’s what returns of this magnitude could mean to you. Let’s say your portfolio includes $10,000 in gold juniors that yield spectacular gains such as the above. If the next boom cycle matches the 1979-1980 pattern, your portfolio could be worth $241,370 at its peak… or about $195,000 if you exit at 80% of the top prices.

Note that this does require that you sell to realize your profits. If you don’t take the money and run at some point, you may end up with little more than tears to fill an empty beer mug. In the subsequent bust cycle, many junior gold stocks, including some in the above list, dried up and blew away. Investors who held on to the bitter end not only saw all their gains evaporate, but lost their entire investments.
You have to play the cycle.

Returns from that era have been written about before, so I can hear some investors saying, “Yeah, but that only happened once.”

Au contraire. Read on…...

The Hemlo Rally of 1981-1983

Many investors don’t know that there have been several bull cycles in gold and gold stocks since the 1979-1980 period.

Ironically, gold was flat during the two years of the Hemlo rally. But something else ignited a bull market. Discovery. Here’s how it happened…...

Back in the day, most exploration was done by teams from the major producers. But because of lagging gold prices and the resulting need to cut overhead, they began to slash their exploration budgets, unleashing a swarm of experienced geologists armed with the knowledge of high potential mineral targets they’d explored while working for the majors. Many formed their own companies and went after these targets.

This led to a series of spectacular discoveries, the first of which occurred in mid 1982, when Golden Sceptre and Goliath Gold discovered the Golden Giant deposit in the Hemlo area of eastern Canada. Gold prices rallied that summer, setting off a mini bull market that lasted until the following May. The public got involved, and as you can see, the results were impressive for such a short period of time.

Returns of Producers Related to Hemlo Rally of 1981-1983
Company	1981 Price	Price Peak	Date of High	Return
Agnico-Eagle	$9.50	$21.00	Aug. 83	121.1%
Sigma	$14.13	$24.50	Jan. 83	73.4%
Campbell Red Lake	$16.63	$41.25	May 83	148.0%
Sullivan	$3.85	$6.00	Mar. 84	55.8%
Teck Corp Class B	$17.00	$21.88	Jun. 81	28.7%
Noranda	$33.75	$36.38	Jun. 81	7.8%
AVERAGE				72.5%

Gold producers, on average, returned over 70% on investors’ money during this period. While these aren’t the same spectacular gains from just a few years earlier, keep in mind they occurred over only about 12 months’ time. This would be akin to a $20 gold stock soaring to $34.50 by this time next year, just because it’s located in a significant discovery area.

Once again, it was the juniors that brought the dazzling returns.

Returns of Juniors Related to Hemlo Rally of 1981-1983
Company	1981 Price	Price Peak	Date of High	Return
Corona Resources	$1.10	$61.00	May 83	5,445.5%
Golden Sceptre	$0.40	$31.00	May 83	7,650.0%
Goliath Gold	$0.45	$32.00	Mar 83	7,011.1%
Bel-Air Resources	$0.81	$1.60	Jan. 83	97.5%
Interlake Development	$2.10	$6.40	Mar. 83	204.8%
AVERAGE				4,081.8%

The average return for these junior gold stocks that had a direct interest in the Hemlo area exceeded a whopping 4,000%.

This is especially impressive when you realize that it occurred without the gold stock industry as a whole participating. This tells us that a big discovery can lead to enormous gains, even if the industry as a whole is flat.

In other words, we have historical precedence that humongous returns are possible without a mania, by owning stocks with direct exposure to a discovery area. There are numerous examples of this in the past ten years, as any longtime reader of the International Speculator can attest.

By May 1983, roughly a year after it started, gold prices started back down again, spelling the end of that cycle—another reminder that one must sell to realize a profit.

The Roaring ’90s

By the time the ’90s rolled around, many junior exploration companies had acquired the “intellectual capital” they needed from the majors. Another series of gold discoveries in the mid-1990s set off one of the most stunning bull markets in the current generation.

Companies with big discoveries included Diamet, Diamond Fields, and Arequipa. This was also the time of the famous Bre-X scandal, a company that appeared to have made a stupendous discovery, but that was later found to have been “salting” its drill data (cheating).

By the summer of ’96, these discoveries had sparked another bull cycle, and companies with little more than a few drill holes were selling for $20 a share.

The table below, which includes some of the better-known names of the day, is worth the proverbial thousand words. The average producer more than tripled investors’ money during this period. Once again, these gains occurred in a relatively short period of time, in this case inside of two years.

Returns of Producers in Mid-1990s Bull Market
Company	Pre-Bull Market Price	Price Peak	Date of High	Return
Kinross Gold	$5.00	$14.62	Feb. 96	192.4%
American Barrick	$28.13	$44.25	Feb. 96	57.3%
Placer Dome	$26.50	$41.37	Feb. 96	56.1%
Newmont	$47.26	$82.46	Feb. 96	74.5%
Manhattan	$1.50	$13.00	Nov. 96	766.7%
Cambior	$10.00	$22.35	Jun. 96	123.5%
AVERAGE				211.7%

Here’s how some of the juniors performed. And if you’re the kind of investor with the courage to buy low and the discipline to sell during a frenzy, it can be worth a million dollars. Hold on to your hat.

Returns of Juniors in Mid-1990s Bull Market
Company	Pre-Bull Market Price	Price Peak	Date of High	Return
Cartaway	$0.10	$26.14	May 96	26,040.0%
Golden Star	$6.00	$27.50	Oct. 96	358.3%
Samex Mining	$1.00	$7.20	May 96	620.0%
Pacific Amber	$0.21	$9.40	Aug. 96	4,376.2%
Conquistador	$0.50	$9.87	Mar. 96	1,874.0%
Corriente	$1.00	$19.50	Mar. 97	1,850.0%
Valerie Gold	$1.50	$28.90	May 96	1,826.7%
Arequipa	$0.60	$34.75	May 96	5,691.7%
Bema Gold	$2.00	$12.75	Aug. 96	537.5%
Farallon	$0.80	$20.25	May 96	2,431.3%
Arizona Star	$0.50	$15.95	Aug. 96	3,090.0%
Cream Minerals	$0.30	$9.45	May 96	3,050.0%
Francisco Gold	$1.00	$34.50	Mar. 97	3,350.0%
Mansfield	$0.70	$10.50	Aug. 96	1,400.0%
Oliver Gold	$0.40	$6.80	Oct. 96	1,600.0%
AVERAGE				3,873.0%

Many analysts refer to the 1970s bull market as the granddaddy of them all—and to a certain extent it was—but you’ll notice that the average return of these stocks during the late ’90s bull exceeds what the juniors did in the 1979-1980 boom.

This is akin to that $0.50 junior stock today reaching $19.86… or $16, if you snag 80% of the move. A $10,000 portfolio with similar returns would grow to over $397,000 (or over $319,000 on 80%).

Gold Stocks and Depression

Those of you in the deflation camp may dismiss all this because you’re convinced the Great Deflation is ahead. Fair enough. But you’d be wrong to assume gold stocks can’t do well in that environment.

Take a look at the returns of the two largest producers in the U.S. and Canada, respectively, during the Great Depression of the 1930s, a period that saw significant price deflation.

Returns of Producers During the Great Depression
Company	1929 Price	1933 Price	Total Gain
Homestake Mining	$65	$373	474%
Dome Mines	$6	$39.50	558%

During a period of soup lines, crashing stock markets, and a fixed gold price, large gold producers handed investors five and six times their money in four years. If deflation “wins,” we still think gold equity investors can, too.

How to Capitalize on This Cycle

History shows that precious metals stocks move in cycles. We’ve now completed a major bust cycle and, we believe, are on the cusp of a tremendous boom. The only way to make the kind of money outlined above is to buy before the boom is in full swing. That’s now. For most readers, this is literally a once in a lifetime opportunity.

As you can see above, there can be great variation among the returns of the companies. That’s why, even if you believe we’re destined for an “all boats rise” scenario, you still want to own the better companies.

My colleague Louis James, Casey’s chief metals and mining investment strategist, has identified the nine junior mining stocks that are most likely to become 10 baggers this year in their special report, the 10-Bagger List for 2014. Read more here.

The article What 10-Baggers (and 100-Baggers) Look Like was originally published at Casey Research.

They Just Rang A Bell On Gold and Gold Stocks

Our trading partner David A. Banister of Market Trend Forecast has been the go to guy on gold and precious metals. Let's check in with Banister and see if he thinks the bottom is in for gold.

As they say on Wall Street, “They don’t ring bells at the top” and for sure they usually don’t give you a phone call at the bottom either. Many heads have rolled trying to call this recent near 2 year downdraft in Gold in terms of bottom callers, me included. I thought we would never get much below 1440 or so from the 1923 highs, but alas we all know we did.

What makes me think that last week put in the final Gold low for the bear cycle? Too many things to mention, but based on the work I do enough to give me some chutzpah to make this call now. The 1180’s are very close to a classic ABC 61.8% Fibonacci retracement of the prior 34 month bull cycle. That cycle ran from October 2008 to August 2011 with a rally from $681 to $1900’s area. The most recent 21 plus month decline dropped right into the 61% pivot retracement of that entire move, and over a Fibonacci 21 month period as well! Human behavior does repeat over and over again, and as we all know in hindsight at the tops everyone is bullish and at the bottoms everyone is bearish.

I think it’s pretty much as simple as that. Investors get overly optimistic and exuberant in all kinds of asset classes and finally at the highs everyone believes the rally can only go on and on forever. At the opposite near the bottoms nearly everyone is calling for lower prices and further catastrophe ahead. Stocks in the sector are priced for near bankruptcy. Newsletter writers are universally bearish, and the small trader has a big short position. Only a few weeks ago the Bullish Percentile index measurement on the Gold Stock Index was at 0! That means nobody was bullish on the Gold stocks by the measure that is used. We quickly had an 8% rally in the index after that reading, then in the last few weeks we came all the way back down again to even lower levels!

If you watched the action last Thursday as Gold was melting down below $1200 a curious thing happened. The gold miners were ignoring the move and going green! On Friday, as Gold reversed to 1234 they went ballistic with one of my favorite miners going up 16% on Friday alone on the highest volume in 5 years! Those are the signals I’ve been waiting for to call the capitulation lows. My guess is some money managers are front running the coming 3rd quarter rotation they see in Gold and Gold Miners, Copper, Coal, and other commodity stocks.

So below is my basic GLD ETF multiyear chart using very simple monthly views to see the big picture. You can see a classic ABC pattern of bear market correction and now a near 61.8% perfect Fibonacci retracement of the prior leg up. I’d say enough is enough, pick your spots and start buying.




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Seven Keys in Timing Stock Market Tops – Part II

Timing stock market tops and bottoms is risky business and we all know the more the more risk we take the more potential gain would could also made. Correctly timing a top or bottom for any investment is flat out exciting not to mention financially rewarding. But this high risk trading tactic does come with some major issues which you must FULLY understand so that you can protect your capital and self confidence.

On May 13th I wrote a special report on how to spot market tops just before they happen and how to do it with a very high probability of success. I also explain the major pit falls to be aware of so you stay on the right side of the market.

I recommend you read this special report right now.... "How to Spot and Time Stock Market Tops"

That special report truly showed you what was going to happen a few weeks before it did. Much like how this report shows you what is likely to happen in June.

Looking at the market with my YOU ARE HERE type of using cycles, volume, price patterns and momentum to forecast what is likely to unfold in the coming weeks. Depending on the time frame used for my analysis I can figure out with a high probability where price will be in a few minutes, hours or days also. Mall Market Directory – You Are Here

Stock market tops are tough to trade and time. That is because there are so many things happening in the media and emotions running wild that it’s tough to get a grasp on what you should really be focusing on to keep a level head trade around it.

Market tops are typically not an event but rather a progression that takes much longer than most individuals expect. I still find myself jumping the gun at times and I know this and have been through this process hundreds of times in various investments. The human brain is a powerful tool but emotions can force you to override your rules/strategy still.

Stop Fighting! – Bulls & Bears are BOTH Correct at this Stage

It does not matter where you go to get your stock market news and reports… Everyone is arguing their bullish or bearish case more than EVERY. There is a reason for this and it’s because the SP500, DJIA, RUT and NASDAQ appear to be entering a cycle top. What does this mean? It means the uptrend is almost over from a technical analyst point of view, and those who are have been bearish for a long time feel the market topping out more now than ever in their gut that this is the top.

Keeping it simple removing news, economic data, emotions and biases we are left with one thing which is technical analysis. This is based on price alone and that is important to remember because the only thing that pays you money for an investment is when price moves in your favor. Believe it or not price only has blips on the charts here and there which is based off news, economic data etc… In the big picture stock prices tend to lead economic data by several months and in some cases years.

So the big question is this… If price action is the only thing that pays you when trading why bother worrying about all the other opinions, news out there. That stuff only adds to the confusion and in most cases gets you on the wrong side of the market.

Timing the Market Top Conclusion:

In short, from a technical point of view the SP500 remains in an uptrend. But according to technical analysis the upside momentum is starting to slow. If we get a few more down days then the trend will flip and be down but it has not yet happened.

When the trend does reverse down you must remember that 80% of the time price will bounce back up to test near the recent highs before truly rolling over and collapsing. Think of it like a zombie movie. Just when you think you killed one it comes back to life for one last scare before its dead.

Just to touch on stock market bottoms so you do not get confused. Stock market bottoms are little different than tops so they are traded differently. I will cover them when the time comes.

Trading the market is not easy during this type of condition, which is why members and myself got long SSO on the 23rd and two days later sold out for a 3.5% gain. I am now looking to reload this week for another bounce/rally play but only time will tell if we get another setup.

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