Bargain mining stocks deliver big returns for Ben Graham's Net Nets strategy

Tuesday, Sep 03 2013 by
Bargain mining stocks deliver big returns for Ben Grahams Net Nets strategy

Small cap mining stocks have endured some of the hardest price falls on the market this year, with ‘basic resources’ putting in the worst performance of all the 19 industry sectors on AIM during the past two quarters. But while investors continue to be cautious about mining minnows, a handful of recent price rises among these companies has led to an astonishing performance by one of our most ruthless bargain-hunting stock screens. 

Ben Graham’s value-oriented Net Nets approach to finding out-of-favour shares at the very bottom of the market was one of the best performing of Stockopedia’s GuruModel strategies earlier this year. It focuses on shares that are trading at a price well below a conservative liquidation value of the entire company (you can read more about how it works here). Since then, bullish sentiment has tended to favour momentum and growth investing strategies, with deep value stocks losing some of their appeal (click here to read about how that change has unfolded). But over the past month, some of the shares currently held in the Net Nets portfolio have produced some remarkable advances – and most of the big gainers have been small cap miners. This suggests that the market has been pricing a number of junior exploration and development companies at less than the value of their assets – and those prices are now beginning to bounce back. 

As you can see from the chart, Net Nets was losing ground against the FTSE earlier in the summer but its fortunes changed in August and it now boasts a year-to-date return of 38.5% (up 32.4% over the past month alone). Ten of the 25 shares in the current portfolio are mining companies and some of them have seen strong individual gains. They include ECR Minerals (LON:ECR), a micro cap gold and base metals project developer, which has saw its shares rise by 212% to 0.33p during August helped by news that it is close to confirming an earn-in on the Itogon gold-silver project in the Philippines. 

With a price gain of 154% to 10.8p during August, Red Rock Resources (LON:RRR) has been another strong performer for the Net Nets portfolio. Red Rock has an iron ore project in Greenland, a…

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As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested. ?>

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ECR Minerals plc is a United Kingdom-based holding company for its subsidiaries and other investments. The Company is engaged in the identification, acquisition, exploration and development of mineral projects. The Company operates through the mineral exploration and development segment. Its areas of activity are in Argentina, Australia and the Philippines. It has interest in Danglay gold project (formerly Itogon gold project) in the Philippines and SLM gold project in Argentina. The SLM project is located in La Rioja Province, Argentina and is held by the Company's subsidiary Ochre Mining SA. The Danglay gold project has approximately three gold mineralized zones, including Danglay Ridge, Hillside and Bito, with strike length of approximately 600 meters and individual widths of over 100 meters. The SLM gold project consists of approximately three prospects, including El Abra, JV and Maestro Aguero. It is also focused on the Avoca and Bailieston gold projects in Victoria, Australia. more »

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Red Rock Resources plc is a United Kingdom-based natural resource exploration and development company. The principal activities of the Company include gold exploration in Kenya and Ivory Coast. The Company's segments include Investment, which consists of Jupiter Mines Limited and other investments; Exploration, which consists of Australian exploration and African exploration, and Other. Jupiter Mines Limited holds interests in Tshipi e Ntle's manganese mine in South Africa; a direct shipping ore iron project at Mount Mason in Western Australia, and a magnetite project at Mt Ida. The Company holds interest in the Migori Gold Project, which is located in south-west Kenya, and includes two contiguous special prospecting licenses (SPLs): SPL122 and SPL202. The Company carries out gold and manganese exploration in approximately three licenses in the Birimian greenstone belt in the Ivory Coast. It also holds interest in approximately three wells in the Shoats Creek Field. more »

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  Is LON:ECR fundamentally strong or weak? Find out More »

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