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Warrants
The
Most Overlooked
And MisUnderstood Investment Vehicle Today
Houston we
have a problem!
Simply
put, I don't understand why all investors are not
interested in warrants.
Warrants are merely one investment vehicle, albeit, an
important piece that can greatly increase your overall
investment gains in the years ahead. Even for myself, the value of warrants in my
personal portfolio has rarely exceeded 20%.
Many of
you are probably smarter and more educated but let me share
with you some of my personal trades in warrants:
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Some Examples of Past Performance |
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|
Average |
|
|
Percentage |
|
Company |
Cost Basis |
Sales Price |
Profit |
Return |
|
Desert Sun Mining Wt |
$0.36 |
$4.48 |
$4.12 |
1144% |
|
Breakwater Resources Wt |
$0.19 |
$2.21 |
$2.02 |
1063% |
|
Metallica Resources Wt |
$0.26 |
$2.95 |
$2.69 |
1035% |
|
Yamana Gold Wt |
$0.396 |
$4.25 |
$3.85 |
973% |
|
Silver Wheaton Wt A |
$0.26 |
$2.10 |
$1.84 |
708% |
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Rio Narcea Gold Wt |
$0.267 |
$0.91 |
$0.64 |
241% |
All of these trades had one common denominator working in my
favor:
TIME
The first
decision always is selecting the underlying company and
second, if there are warrants available, how much TIME
is remaining on the warrants until expiration. When I
purchased these warrants all of them had well over 3 years
until expiry date. TIME was on my side, TIME was
my friend, and TIME allowed the markets to ebb
and flow while I maintained my positions and picked the
right TIME to sell my positions for excellent
profits.
An
incredible amount of money is being spent by the investment
community in the promotion of options. It's almost
impossible to visit any investment website and not see
advertisements by brokerage firms and analysts encouraging
the use of options. Why? They are making a lot
of money off of commissions and selling you 'systems' or
investment strategies. The fact is 'investing' is not
the correct word as statistically we know that 80% to 90% of
the time, individuals lose their 'investment dollars'.
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Your
Best Option Is A WARRANT
Would you be
interested in an investment vehicle that offers:
•
Increased Leverage
• Decrease
your Investment at Risk
(yes, that’s correct)
•
Time (much more time than options or leaps – up to
8 years
•
No margin
•
Trades like a stock thru your brokerage account
•
Incredible opportunities and choices
•
Often overlooked by 90% of investors and analysts
Of course you
would be interested, who wouldn’t,
so read on my friends as your only investment here
is a few minutes of your time.
If
I told you, you could buy up to a 5 year call on perhaps
one or more of your favorite mining companies or energy companies,
would you be interested? Of course you would. Who
wouldn’t?
Can
you imagine having the right, but not the obligation,
to purchase the common shares of one of your favorite mining
or energy companies with up to 5 years before expiration?
As with options and
LEAPS, we would suggest an allocation of no more than 10% to 20%
of your portfolio in long-term warrants.
This
investment vehicle has been around literally for decades and
has been overlooked by the investment community. Most of
the analysts today do not even understand or take the time to
understand the benefits of this investment.
Allow me to present you with
this quote:
"...Common stock warrants turn in the most spectacular
performance of any group of securities....the speculative
potentialities
of common stock warrants are enormous....
With potential profits and potential losses so great it
is a source of
wonder that so little understanding of the nature of common stock
warrants exists not only among the investing 'public', who might be
forgiven
this sin, but even among the many 'professionals' of the
business upon whom the 'public'
depends for information and
guidance."
By Sidney Fried, 'The Speculative Merits of Common Stock
Warrants',
1949.
In the 1960’s and 1970’s there was
a service called, ‘The RHM Warrant Survey’ by Sidney
Fried to which many investors subscribed and which was available
only in hard copy. To the best of our knowledge, this service
stopped in the late ‘70’s or early 80’s and very little
information has been available since to investors.
The investing public and
professionals of today are, for the most part, not aware of the
enormous profit potential of warrants and thus absolutely
nothing has changed since Sidney Fried's comments in 1949. By
providing this website and learning center on warrants, we also
are trying to educate the investment public and professionals to
wake up to this greatly overlooked investment vehicle.
There are numerous advantages
to owning this vehicle and virtually no disadvantages. So,
why is there a disconnect?
Personally, I have to sum up the lack of interest in warrants as
merely a lack of knowledge and information. So many
investors and professionals just do not take the time to
investigate the incredible opportunities which warrants can
provide.
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We were asked to provide a chapter
to a book,
Junior Mining Investor,
which is a must have addition to any investors library.
Kevin Corcoran invited many of us in the business to
contribute a chapter to his book which is now available
at
Amazon.com.
Other
contributors include:
David Morgan, Jason Hommel, Ken Gerbino, Dr. Richard
Appel, Scott Wright, Adrian Day, Brian Fagan, Clif
Droke, Dr. Russell McDougal, Neil Charnock, James Finch
and Julie Ickes, and Roland Watson. |
 |
Precious
Metals Warrants
"The Authority on
Warrants"
But
now, let me ask you a question.
Where do you
see the price of oil, uranium, gold, silver, copper, zinc, etc.
in the next few years?
If
you follow many of the popular analysts/newsletter letters,
i.e., Jim Dines, Doug Casey, The Aden’s, then you are already
bullish on the commodity sector, particularly, gold, silver,
oil and uranium. Most of these analysts are expecting
gold to ‘greatly’ exceed $1,000 per oz and crude oil to
exceed
$150 per barrel within the next few years.
Some of the
reasons for the uptrend in commodities:
• Long Term Up-Cycle in Commodities
• U.S. Budget Deficits
• U.S. Trade
Deficits
• Coming Implosion of the U.S. Dollar
•
Geopolitical Risks (Iran, Iraq, North Korea, etc.)
• Peak Oil
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Check out
this 200 Year Chart on Commodities. On a historical basis,
this bull market has barely begun.
Since 1803, for instance, there have only
been five mega up moves in commodity prices,
lasting about 22 years on average. The sixth
mega up move is just beginning and it’s
coinciding with the war on terror, just as
previous up moves also coincided with wars.
A look back at history shows a very
interesting pattern. There have been 5 commodity bull markets in the past 200
years, with almost rhythmic frequency. The
longest has been about 40 years with the
shortest at 15 years.
1st boom-1823 to
1838 (15 years)
2nd boom-1848 to 1865 (17
years)
3rd boom-1878 to 1918 (40
years)
4th boom-1929 to 1950 (21
years)
5th boom-1963 to 1980 (17
years)
Current:
6th boom-2001 to ????
(2016 to 2023)
(15 to 22 years in length)
We are using 2001 as the beginning of this commodity bull market,
specifically for gold in following the lead
of The Aden Forecast.
This tells us that the current rise in
commodities, gold and oil could last for
another 15 years or so. But that doesn’t
mean they’ll go straight up. There might
even be a year or two of a decline during
this upward path but if that happens, the
major trend indicators will identify this so
we can protect ourselves accordingly.
Some
investors will make a killing, if correctly positioned to profit
from the rise in gold, silver, uranium, etc., the sky is the
limit. This is not just my personal opinion but that
of many analysts.
These
analysts believe ‘this bull’ can be bigger than the technology
and internet bubble. Can you imagine?
You cannot afford to be left out in the cold.
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Did
You Miss Out On the Tech and Internet Bubble?
Well
this is your second chance to make a fortune so keep on reading.
The
BIG MONEY, we believe, will be made by investing in the mining
and energy sectors. Yes, the last 2 years or so have
been very challenging and disappointing for junior mining
shares, but we and many other analysts expect this to change
soon.
These
challenging and dangerous times remind us of the Chinese symbols
for Danger and Opportunity. With junior shares and
warrants selling at such Dangerously low prices,
we consider this to be an Opportunity of a
lifetime.
Many of these small companies are
now trading for less than $1.00. Some of our personal
favorites are currently selling for pennies. When the
top of the bull market in commodities is reached within the
next several years, we believe these stocks will be selling
for many, many, many dollars per share. One of our favorite
analysts believes it will be difficult to find ANY mining
shares selling for less than $5.
If
you are in the majority of investors who do not ‘yet’
believe in the bull market in commodities, then I suggest you
do some serious reading and soul searching. This explosion
in prices will happen with you or without you, the choice is
yours. Now you can still get in early or in a few years
you can be one of the last investors to join this party. No
doubt those ‘Johnny come lately investors’ will loose
their butts. This is what always happens for those who
wait and wait and wait.
So,
what are you waiting for?
Are
you waiting for your broker to call you? I guarantee you
that one day your broker will call you and recommend
you purchase mining and energy shares, but why wait for his/her
phone call?
Are
you waiting for your gardener or perhaps the taxi cab driver
or the classic shoeshine boy story who tells you of a
great mining stock selling for pennies? That is too late
my friends, as that will be the indication of a top and the
party will be nearing the end and the clock will be striking
midnight.
Yes,
before this party is over the excitement, the enthusiasm, and
craziness will make it impossible for any investor NOT to be
in the market. True, we all will need the wisdom to get
out on a timely basis before everything unravels as it surely
will several years in the future.
But
today, the important thing is to get invested - NOW
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A
Different Approach
What
if instead of buying the common shares of mining and energy
companies, I could educate you in a few minutes on a different
investment vehicle as I referred to earlier which will give
you not only increased leverage but up to a 5 year ‘call’
on many individual mining and energy companies.
Would
you be interested?
Some
of us seasoned investors, like myself at age 62, and Martin Weiss,
remember The RHM Warrant Survey. Martin Weiss
as you probably know is the editor of
SafeMoney. Also see
MartinWeiss.com and
MoneyandMarkets. Sometime back, I and a few of
my associates had dinner with Martin Weiss and Sean Brodrick,
(one of Martin’s bright young editors of MoneyandMarkets) in
Las Vegas while attending an Investment Conference. We had a
great discussion on the benefit of warrants, the markets and
potential business opportunities. We agreed The RHM Warrant
Survey was a very popular service back in the 1960’s and
70’s but for some reason faded out in the late 70’s or early
80’s, probably at the bottom of the bear market.
But few investors
TODAY even know what I am talking about when I speak of Warrants.
So,
allow me to share with you how I once again became interested
in this exciting and extremely profitable and leveraged investment
vehicle; warrants.
In
September 2004, while attending one of the Gold Shows in Las
Vegas, I heard the highly respected Frank Holmes, Chairman
of
U.S. Global Investors (A family of Mutual Funds) and
Endeavour Mining Capital make a brief mention of
warrants.
Well, that was the spark I needed to get interested in warrants
once
again.
We
quote from the recent article, entitled, “Anticipate
Before You Participate: Part 2” from U.S.
Global Investors:
“We
have used long-term warrants combined with higher cash
levels to maintain a highly liquid portfolio and at the
same time participate in a rising market and still be
able to buy attractive securities during corrections….As
we said earlier, we are active money managers. We
will at times have a large defensive cash position combined
with exchange-listed warrant positions as a way to manage
risks and volatility and to capture opportunities.”
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Upon
returning home from the conference, I began researching for
an investment service providing me the complete details on all
mining and energy companies. Yes, there are warrants
trading on companies other than mining and energy companies,
but for me, my hot button and my belief in the current bull
market was my only area of interest for warrants.
“Well,
I could not find any company providing this service”.
As
an investor I wanted to know ‘ALL’ of the mining and energy
companies with warrants. I enjoy making my own
decisions but I needed the detail list of ‘ALL’ companies with
warrants. Sure, I knew a few of the companies with
warrants, like Bema Gold, but I wanted to know ‘ALL’
of them, from the biggest of the companies to the smallest.
I would have paid any price to get this information
but it did not exist in any form acceptable to me, if at all.
It
was obvious that if I was to have the information needed to
make my investment decisions; then I was going to have to accumulate
the information myself....and so I
did.
In
March 2005, with the encouragement of several good friends,
thanks guys, I launched Precious Metals Warrants
providing not only myself but all investors interested in learning
about warrants the opportunity to do so. My subscription
service is very reasonably priced and one of the big time newsletter
writers has suggested that I greatly increase the price.
Why? To my knowledge, we are the only
comprehensive source of
this valuable information.
We are "The Authority on
Warrants"
and
the leading source for information on warrants.
Precious
Metals Warrants
"The Authority on
Warrants"
Precious
Metals Warrants
is a market data service in which we provide the complete details
on mining and energy companies which have Warrants trading
in the United States and Canada.
For
visitors to my website, I offer a wealth of FREE
information:
• Learning Center for Warrants
•
Links to all of my articles appearing on the internet
•
Links to my favorite analysts and investment services
•
Free sign up for my weekly email,
The Warrant Report
Our articles are posted on many of the popular gold websites including:
321Gold, Kitco, Safehaven, Gold-Eagle, Goldseek
Financial Sense,
Stockhouse, HoweStreet and others
Basically
we do the work for you and you make the decisions as currently
we do not make any specific recommendations on which warrants
to purchase, other than in our premium services.
Our
Warrant Database is presented to subscribers currently in HTML
format and in an Excel Spreadsheet with
links to the website of the companies, quotes, charts, leverage
calculations, intrinsic value, capitalization of the company,
email alerts for new warrants as they begin trading and much
more. We also provide the CUSIP number (the
9 digit, legal identification) for each Warrant. With
the cusip number, any broker in the world can retrieve the appropriate
symbol for the warrant to place your order.
Recently,
we have added an additional database for All options and
LEAPS trading on the natural resource companies as well as a
database for selected ETF's on currencies and some indices.
Remember
that some of the most savvy and respected professionals in the
business, Frank Holmes, Martin Weiss, David Morgan,
James Turk and Adam Hamilton, among others, agree that warrants
have a place in an investor’s portfolio. This fact
alone should peak your interest.
If
you are still with me, you are probably asking the Who, What,
Why and How questions.
•
WHO is this guy’?
•
WHAT is a Warrant?
•
WHY
should I be interested
•
HOW do I Trade (Buy & Sell) Warrants
Who
Is This Guy?
My
name is Dudley Pierce Baker and I am the owner/editor of Precious
Metals Warrants.
Born
and raised in San Antonio, Texas I graduated from St.
Mary’s University in 1967 with a BBA, with a major in
Accounting. I went to work for the Internal Revenue
Service as an IRS Agent. My intention was to spend
5 years or so, learn as much as possible and then get
‘a real job’; but now looking back this ‘early
retirement’ is working out great. ’Yes, I know,
many of you may not like this IRS thing, but, that was
many years ago and I accepted an early retirement in 1996
at age 50 and 29 years of service.
Many
of my years were as a ‘Revenue Agent - Team Coordinator’
heading up the audits of some of the largest corporations
in the world and I have gone head to head with some of
the big law firms in Washington and New York. Those years
and experiences are but a distance memory and I currently
do not represent any clients nor in anyway offer tax advice.
I come from a numbers background and that is what should
be important to you as a subscriber or potential subscriber
to my service.
Personally,
I fear one day that with the budget deficits the Fed’s
will one day reduce not only federal retirement checks
(including mine) but social security benefits as well. It
is up to each of us to be responsible for ourselves and
not rely on anyone which is why making the correct investments
decisions today is more important than ever.
While
in Texas I also maintained a Real Estate Broker’s
License for 18 years before retiring and moving to in
Ajijic, Mexico (outside of Guadalajara) on the north shore
of Lake Chapala.
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What
is a Warrant?
A
Warrant is a security issued by a company which gives the holder
the right, but not the obligation, to purchase the underlying
stock at a specific price, within a specified time period.
In essence, a Warrant is a long-term call option.
Warrants are usually issued by a company in connection with
a private placement or financing arrangement. Many of
these Warrants remain privately held and do not trade in the
open marketplace.
Our
service only covers Warrants which are traded on the exchanges
and which can be purchased by you and me.
As
individual investors, our objective is usually to only trade
the Warrant, not to exercise the Warrant. The Warrants
trade, freely, just like the common stock.
Currently there are many Warrants trading with expiration
dates out to the year 2012 and one which expires in 2017. Warrants expiring within,
say, 2 years, while they may possess great upside leverage,
also pose a greater risk. It is widely recommended
for most investors to focus on Warrants with at least 2 years
left before expiration date giving you more time to play
this bull market. Remember, warrants, like options
and LEAPS can expire worthless, so we are looking for warrants
on our favorite companies with the longest remaining life
possible. We want Time to be on our side.
Why
should I be interested?
Increase your Leverage & Decrease your Risk
Incredibly, warrants offer the investor the best of both worlds:
increased leverage and a means to decrease your risk.
Leverage:
The
reason most investors acquire Warrants is to increase their
Leverage.
Most investors are looking for at least a 2:1 ratio.
In other words, if the common stock doubles (100%), we are looking
for a minimum 200% move in the price of the Warrant.
Risk:
Another primary reason for buying Warrants, in lieu of the common
stock, is to decrease your investment dollars and thus your
risk all the while maintaining the same equity position.
Recent
Outrageous
Examples
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2003-2004 |
2005 |
2006 |
|
Company |
Kimber
Resources |
Peru
Copper |
Blue
Pearl
Mining |
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Common stock
Return on Investment (ROI)
|
394%
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160%
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1,310%
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Warrant (ROI) |
2,542%
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1,657%
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3,729%
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Leverage |
6.1
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10.4
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2.8
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A $5,000 investment in the warrants would be worth |
$127,100
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$82,850
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$186,450
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The above calculations are using 'c | | 
