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Year-end clean out: Aberdeen gets dumped!

December 19, 2012

I just completed my year-end cleaning of the stables. Goodbye Aberdeen International (AABVF)! I’ll be the first to admit my mistake on this one; I was wrong to buy into Aberdeen in the first place and even ‘wronger’ to hold on as long as I did.  This was a clear case of bad due diligence and bad psychology. With Aberdeen I focused solely on discount to NAV. But it turned out that NAV that was sinking sharply even while I was doing the calculations. I wanted to have some leveraged exposure to gold due to my long-term macro view on the economy and inflation and thought the ‘junior’ status of the mining shares in this closed end fund would provide that leverage, with the discount to NAV also giving me some margin of safety. Somehow I overlooked the ‘quality of management’ issue and instead listened to the siren song of what management was promising, a strategy to reduce the discount. As it turned out, not only did I get the timing for junior gold miners wrong (something I should always take for given), but I also pathetically succumbed to the  ‘promises of management’. These are classic mistakes of a neophyte investor and I am chagrined and appropriately humbled. What more can I say? The only saving grace was that this was little more than a tracking position in my portfolio. Phew!

My ‘macro’ vision, as myopic or stigmatic as it is, still makes gold a desirable holding for my portfolio. Over the coming decade I think we stand a good chance of seeing significant inflation, during which, hard assets will be rewarded. So rather than take the dollars invested in Aberdeen off the table I have simply rolled them over into additional shares of NovaGold, where I have a bit more than a tracking position. This latter was my primary ‘leveraged’ speculation in gold. Leveraged because the company is just in the permitting stage and will take another 4 years to bring the Donlin mine to production. As I think I have mentioned, I like NovaGold because it holds a 50% interest in the Donlin tract and has no current production. The balance of the Donlin rights are held by Barrick Gold, which can be thought of as the successful operating partner and potential buyer of NovaGold’s interest IF gold prices rise and the mine pans out (excuse the pun).

I think that’s it for housekeeping until the new year. Happy Holidays everyone…may we all have a healthy and profitable New Year.

From → Positions Closed

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