US Global Investors (NASD:GROW) CIO Frank Holmes, the always energetic and insightful natural resources fund manager, made two simple yet profound observations regarding identifying junior resource management teams worthy of your investment dollars during a private conversation at Canaccord Genuity's Global Resources Conference in Miami yesterday.
1) Junior resource companies operating internationally should always have senior managers or board members with strong political ties and good reputations in the regions in which they're operating. Holmes was able to cite multiple examples of companies lacking local partners experiencing permitting and other regulatory difficulties. While this is no guarantee of success, it's extremely important and obvious, according to Holmes, who praised promoters Robert Friedland, Lukas Lundin and Serafino Iacono for their care on this issue. Does your favourite junior deal have the local political situation figured out?
2) While a track record of success is key in junior resource investing, some CEOs have made so much money that their lives have become too comfortable to make great junior resource executives, who in Holmes opinion, need to be "road warriors" [ed. note, Holmes is the ultimate road warrior], presenting their company endlessly to investors, while simultaneously managing global operations. "Some of these CEOs have big waterfront houses, boats, cabins at Whistler, etc., and it takes the fire out of them," Holmes said. He complimented Silver Wheaton CEO Randy Smallwood for constantly braving a gruelling travel schedule, despite having already achieved tremendous success... Is your CEO a road warrior?
On a final note, during the Thursday keynote luncheon at Canaccord's event, Holmes suggested Canaccord Genuity stock (TSX:CF) as a way to play the junior resource sector recovery. Canaccord is one of the strongest investment banking firms in the sector, and would likely see a huge increase in M&A and underwriting revenue in the event of a rebound. Sprott Inc (TSX:SII) is another "financial" with great exposure, but lets not forget Holmes' own US Global Investors (NASD:GROW). Mr. Holmes's thought leadership and track record in the resources sector justifies GROW being the beneficiary of epic capital inflows when the turnaround takes place, which could see revenues for his asset management firm once again take off. As the resource sector recovers, GROW shares will surely grow.
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These are opinions and not advice. Always do your own due diligence. Thank you.