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Dudley Baker

Dudley Baker

Dudley Pierce Baker is the founder and editor of Common Stock Warrants and its predecessor, Precious Metals Warrants and a 1967 graduate of St. Mary’s…

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Time for a Paradigm Shift in Your Investment Portfolio

With gold and silver hitting new highs the markets are finally getting very exciting for those of us investing in the natural resource sector. Great gains are being made and the big move which we expect is still in front of us and could possibly unfold within the next 6 months.

This is the time investors should be asking themselves if they are correctly positioned to maximize their gains should this big move occur. One of the legends in the precious metals sector once said, "An investor invests 100% of their money to make 10% a year while a speculator will invest 10% of their money in the attempt to make over 100%."

To follow up with this philosophy we still want to use sound judgment and not merely focus on the short term giving ourselves every opportunity to achieve our objective of maximizing our gains.

The time is now to seriously consider getting creative with your investments and to explore the use of long-term warrants, options and LEAPS. The use of these investment vehicles can double, triple or more your gains in the coming months. If you use these choices wisely and with proper money management you will be confident in your new found approach to investing.

Most investors are familiar with options on stocks, calls and puts, right? I, like many of you, realize this is a very dangerous game for most investors. An option gives you the right, not the obligation, to acquire the underlying security/stock at a specific price and expiring at a specific date in the future. However, options are very short term, usually 30 - 90 days, so you have to be not only correct with respect to your timing but also with respect to the direction of the stock market. Perhaps you are a better market timer than I but it does not work out well for most investors. LEAPS available on the Chicago Board of Trade, CBOE do give investors more time and currently the longest life takes us out to January 2012 on many resource companies.

A warrant is very similar to an option but with one major difference, TIME! Warrants are usually issued with a minimum of 2 years to 5 years of life. Time is now your friend.

This means we as investors have the right to acquire the underlying stock at a specific price (determined by the company) and expiring at a specific date in the future. Warrants are usually issued by companies in connection with a financial arrangement and/or public offering and are a "kicker" to sweeten the deal. As investors in warrants our objective is to only trade the warrants with no intention of ever exercising them.

Warrants are all about Leverage. Leverage is why an investor should be interested in warrants. If your favorite mining stock has a warrant trading you should take a serious look to see if they fit your investment criteria which means "how long does the warrant have until expiration and does it provide good leverage?" It is not always easy to find all the facts on the warrants for some companies but you should always do your homework.

What does leverage mean? Leverage means getting the maximum return with the least amount of your investment capital at risk.

Our objective is to earn returns of over 2 to 1 over the gains on the common shares and there are many interesting opportunities today in the markets for accomplishing this potential.

This is not rocket science by any means; you just have to do the math and we do this for subscribers.

Of course, warrants like options and LEAPS do not come without some risk. If the underlying stock is trading below exercise price on the expiration date, the warrant will be worthless which is why we strongly recommend that investors focus on warrants that have a remaining life of at least 2 years, and preferably 3 or more years.

Each investor determines the content of their investment portfolio and if some of your favorite companies have long-term warrants trading it might be worth your time to investigate this option. Whether you decide to invest in the common shares or some of the long-term warrants your timing could not be better as we expect substantially higher prices in the coming weeks, months and years.

We are being given the rare possibility of a once-in-a-lifetime-opportunity, what will you do with it?

 


For those readers unfamiliar with our services:

PreciousMetalsWarrants.com provides:

1. An online database for all warrants trading on the natural resource companies in the United States and Canada. Our database is the most comprehensive database that you will find.

2. In addition for our Gold Subscribers we provide:

A. "A Look Over My Shoulder" - This is my entire personal portfolio and I provide an audio update each Thursday evening and emails as I buy or sell securities or warrants. Each subscriber can decide whether to follow me but this is your decision and we suggest that subscribers do their own due diligence before buying any securities.
B. Insiders Trading Data:
We track the insider trading on the Canadian Securities and issue BUY and SELL Alerts as we deem necessary. We have a great track record of approximately 100% gains on all closed trades.

We encourage all readers to sign up for our free weekly email

 

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