Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
USDT Ponzi Scheme FINAL WARNING To EXIT Before Tether Collapses Crypto Exchange Markets - 22nd Jun 21
Stock Market Correction Starting - 22nd Jun 21
This Green SuperFuel Could Change Everything For the $14 Trillion Shipping Industry - 22nd Jun 21
Virgin Media Fibre Broadband Installation - What to Expect, Quality of Wiring, Service etc. - 21st Jun 21
Feel the Inflationary Heartbeat - 21st Jun 21
The Green Superfuel That Could Disrupt Global Energy Markers - 21st Jun 21
How Binance SCAMs Crypto Traders with UP DOWN Coins, Futures, Options and Leverage - Don't Get Bogdanoffed! - 20th Jun 21
Smart Money Accumulating Physical Silver Ahead Of New Basel III Regulations And Price Explosion To $44 - 20th Jun 21
Rambling Fed Triggers Gold/Silver Correction: Are Investors Being Duped? - 20th Jun 21
Gold: The Fed Wreaked Havoc on the Precious Metals - 20th Jun 21
Investing in the Tulip Crypto Mania 2021 - 19th Jun 21
Here’s Why Historic US Housing Market Boom Can Continue - 19th Jun 21
Cryptos: What the "Bizarre" World of Non-Fungible Tokens May Be Signaling - 19th Jun 21
Hyperinflationary Expectations: Reflections on Cryptocurrency and the Markets - 19th Jun 21
Gold Prices Investors beat Central Banks and Jewelry, as having the most Impact - 18th Jun 21
Has the Dust Settled After Fed Day? Not Just Yet - 18th Jun 21
Gold Asks: Will the Economic Boom Continue? - 18th Jun 21
STABLE COINS PONZI Crypto SCAM WARNING! Iron Titan CRASH to ZERO! Exit USDT While You Can! - 18th Jun 21
FOMC Surprise Takeaways - 18th Jun 21
Youtube Upload Stuck at 0% QUICK FIXES Solutions Tutorial - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations Video - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations and Trend Analysis into Market Correction - 17th Jun 21
Stocks, Gold, Silver Markets Inflation Tipping Point - 17th Jun 21
Letting Yourself Relax with Activities That You Might Not Have Considered - 17th Jun 21
RAMPANT MONEY PRINTING INFLATION BIG PICTURE! - 16th Jun 21
The Federal Reserve and Inflation - 16th Jun 21
Inflation Soars 5%! Will Gold Skyrocket? - 16th Jun 21
Stock Market Sentiment Speaks: Inflation Is For Fools - 16th Jun 21
Four News Events That Could Drive Gold Bullion Demand - 16th Jun 21
5 ways that crypto is changing the face of online casinos - 16th Jun 21
Transitory Inflation Debate - 15th Jun 21
USDX: The Cleanest Shirt Among the Dirty Laundry - 15th Jun 21
Inflation and Stock Market SPX Record Highs. PPI, FOMC Meeting in Focus - 15th Jun 21
Stock Market SPX 4310 Right Around the Corner! - 15th Jun 21
AI Stocks Strength vs Weakness - Why Selling Google or Facebook is a Big Mistake! - 14th Jun 21
The Bitcoin Crime Wave Hits - 14th Jun 21
Gold Time for Consolidation and Lower Volatility - 14th Jun 21
More Banks & Investors Are NOT Believing Fed Propaganda - 14th Jun 21
Market Inflation Bets – Squaring or Not - 14th Jun 21
Is Gold Really an Inflation Hedge? - 14th Jun 21
The FED Holds the Market. How Long Will It Last? - 14th Jun 21
Coinbase vs Binance for Bitcoin, Ethereum Crypto Trading & Investing During Bear Market 2021 - 11th Jun 21
Gold Price $4000 – Insurance, A Hedge, An Investment - 11th Jun 21
What Drives Gold Prices? (Don't Say "the Fed!") - 11th Jun 21
Why You Need to Buy and Hold Gold Now - 11th Jun 21
Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval - 11th Jun 21
Top 5 AI Tech Stocks Trend Analysis, Buying Levels, Ratings and Valuations - 10th Jun 21
Gold’s Inflation Utility - 10th Jun 21
The Fuel Of The Future That’s 9 Times More Efficient Than Lithium - 10th Jun 21
Challenges facing the law industry in 2021 - 10th Jun 21
SELL USDT Tether Before Ponzi Scheme Implodes Triggering 90% Bitcoin CRASH in Cryptos Lehman Bros - 9th Jun 21
Stock Market Sentiment Speaks: Prepare For Volatility - 9th Jun 21
Gold Mining Stocks: Which Door Will Investors Choose? - 9th Jun 21
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? - 9th Jun 21
Scientists Discover New Renewable Fuel 3 Times More Powerful Than Gasoline - 9th Jun 21
How do I Choose an Online Trading Broker? - 9th Jun 21
Fed’s Tools are Broken - 8th Jun 21
Stock Market Approaching an Intermediate peak! - 8th Jun 21
Could This Household Chemical Become The Superfuel Of The Future? - 8th Jun 21
The Return of Inflation. Can Gold Withstand the Dark Side? - 7th Jun 21
Why "Trouble is Brewing" for the U.S. Housing Market - 7th Jun 21
Stock Market Volatility Crash Course (VIX vs VVIX) – Learn How to Profit From Volatility - 7th Jun 21
Computer Vision Is Like Investing in the Internet in the ‘90s - 7th Jun 21
MAPLINS - Sheffield Down Memory Lane, Before the Shop Closed its Doors for the Last Time - 7th Jun 21
Wire Brush vs Block Paving Driveway Weeds - How Much Work, Nest Way to Kill Weeds? - 7th Jun 21
When Markets Get Scared and Reverse - 7th Jun 21
Is A New Superfuel About To Take Over Energy Markets? - 7th Jun 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Dudley Baker on Gold Stocks Warants Buying Opportunity

Commodities / Gold & Silver Stocks Nov 18, 2008 - 06:15 PM GMT

By: The_Gold_Report

Commodities

Best Financial Markets Analysis Article“It's either the end of the world or a fabulous buying opportunity”

His pitch is irresistible: “Buy a basket of juniors with warrants and it could be the easiest 500% you'll ever make.” In this exclusive look at one of the most overlooked and misunderstood investment vehicles, Dudley Baker of PreciousMetalsWarrants.com explains to The Gold Report exactly what warrants are and how they increase the odds of winning vastly higher returns. With a little arm-twisting, Baker even reveals some of his most prized “unbelievable” opportunities.”


The Gold Report: Could you start by explaining what a warrant is and how it differs from a futures contract?

Dudley Baker: A warrant is basically a security. It gives the holder the right, but not the obligation, to purchase the underlying stock at a specific price within a specific period of time. It sounds very similar to a call option except that it really is a security and a warrant will trade in much the same way as common shares. A warrant is assigned a symbol and will trade on the exchange or, in the U.S., it will have U.S.-assigned symbol where it can be traded over-the-counter.

TGR: Are all the warrants traded in the over-the-counter market?

DB: No, no. Most will always be private. Many precious metals investors know ‘warrants' because they are frequently issued in a private placement. But most of those warrants never trade on any exchange and they're not transferable. On my website only cover those warrants that are trading, the ones you and I could go out and buy. For example, Warren Buffet conducted a private transaction with General Electric and Goldman Sachs. There will never be a market for those. That's the distinction, whether it's a warrant with a private placement or an initial public offering. In rare cases a company can get the warrants listed if they were issued in connection with a private placement.

TGR: So Buffet purchases the stock and then is awarded the warrants. Is it GE or Buffet who decides to make those warrants transferable?

DB: In this case it probably would be Buffet. Since he actually owns those warrants it's his decision.

TGR: Let's to back to the private placement example. Aren't warrants used as a sweetener for a private placement investment? In that case, who makes the decision as to whether those warrants are transferable?

DB: The company will make that decision. In Warren Buffet's case, let's say that he's the only holder of the Goldman Sachs and GE warrants. Even if the company said we want these to trade, there's nobody to trade them because there's only one guy, Buffet, who owns them and he's probably not going to trade them. The chances are that he would just convert the warrants or the company would buy them back at some point. But in the case of the private placement of a mining company, there may be hundreds or even a thousand participants. If the company decides to list those warrants, those 500 to 1,000 individuals could decide to trade them. So now we've got some liquidity. And we always need that liquidity. So there are a lot of opportunities even for the bigger companies that have warrants trading.

TGR: So when warrants are initially issued, they could be privately placed, or publicly traded.

DB: Right.

TGR: Are most of the warrants that are publicly traded related to financial transactions other than mergers?

DB: They could be issued in connection with the financing for an initial public offering. A lot of warrants start with the private placements, the initial public offerings, and mergers. So warrants that are trading come about through a number of different circumstances.

TGR: Given the current stock market and the merger and acquisition environment, would you expect increased interest in the purchase of warrants?

DB: You mean what is the future for warrants?

TGR: Yes.

DB: Let's put it this way. The most important thing is to have a solid understanding of the underlying fundamentals of the company. Do they have a good story? Is there potential for the stock to greatly increase in value? And then we have to ask, maybe before we buy the commons shares: will trading a warrant give us a lot more leverage? If so, what is the remaining life of that warrant? It is especially important in this environment to have as long a life on a warrant as possible. Many of the warrants in our database have three years or more of a remaining life, which is really great. Some of them have four or five years. One actually has an 8-1/2 years going out to 2017. I see great opportunities going forward.

Are we going to blast off in a rally this week, next week, next month? I don't know. But I'm very confident that in the coming months and years that gold and the junior mining shares are going much, much higher. So I'm very comfortable buying warrants in the juniors. It is critical to have as long a life as possible. I cannot stress enough how important it is to look at that underlying common stock. If the company's common stock does not go up, there's no way the warrants are going up. So we have to be confident that the company will be able to execute its business plan. Then we hope for a skyrocketing market here in the coming months and years.

TGR: So the real advantage of a warrant as opposed to the common shares is the leverage.

DB: Exactly and that's why we'd start looking at a warrant. It gives us a lot more bang for our buck, a lot more leverage. I'm always looking for a minimum of two times the leverage. So if we're looking for a common stock to go up 100%, I'm leveraged to make at least 200% by buying the warrant.

TGR: How would you compare a warrant to a call option?

DB: Good question. A call option is just going to trade on the Chicago Board Options Exchange, whereas a warrant is actually going to trade like a common stock on the TSX. The main difference we've got is time and we always want as much time as possible. There are so many call options out there on the mining shares, but maybe they've got 90 days or 180 days, one year at most. That's not enough time for me. In this treacherous market environment that we've had over the last two years, options are really just speculating. I like to think that if we can find a long-term warrant on a good company that has a two-year minimum life—if not three years or more— now we're investing. This way, time is on my side. On my website I've got some examples of my trades and the common denominator of those that generated roughly 1,000% or more return was the fact that all of those warrants had over a three year remaining life when I bought them. Time is the key to my success with warrants.

TGR: I would think time really plays very well right now with the market being at 52-week, if not 5-year, if not 30-year lows.

DB: Incredible, yes.

TGR: It probably can't go much lower in the next three years.

DB: That's exactly how I see it. You can make a blanket statement that nearly all of the juniors and warrants are off by at least 90% in value. Either you believe this is the end of the world and the game is over or this is just a fabulous buying opportunity. I was buying this morning. I've usually do several transactions each week, so I just continue to build inventory, accumulate mining shares and warrants, which I'll sell in the future at substantially higher prices. So, if we can find a warrant that, say, has a three-year or longer remaining life, it's going to be hard to imagine how high it might go in a few years. It used to be that if a stock were trading for less than 10 cents, you'd be crazy to consider it. In this environment, a lot of juniors are selling for less than 10 cents; good companies with cash in the bank. The opportunities out there today are truly incredible.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in