In the ideal world you need to be fully invested in shares when they are rock bottom and gradually sell as they rise in value creating a new cash reserve for your next investment and getting out of markets when share prices are peaking.
The majority of investors do the very opposite. They own very few low priced shares (reasoning that must have low value for some good reason) while at the same buying into high priced shares at the top of the market (because everyones is buying and the index is on a (seemingly) one way destination to Mars)
Maarten Verheyen takes a completely different approach.
He buys into assets that are viewed negatively but are actually undervalued (a slight difference from just being cheap). Even though this approach may seem weird or unusual there is far less risk involved.
If a share has a worth of 50 euro when does an investor entail the greatest risk? When the share is priced at 20 euros or at 70 euros?
Investors generally only start to notice those particular shares when they come in the price range of 70 euros, because that is when everyone is noticing them and buying them, so it must be good. It just feels safer.
You should actually start doing the very opposite. Once you have built up a strong position in a certain share and their price starts increasing then this is the time that you slowly start decreasing your position in those shares by gradually selling them.
Maarten reasons that if has 10% of his portfolio in a certain number of shares that increases in value by 50% then those shares now occupy 15% of his total portfolio.
If he then decides to sell one third of those shares then he comes back to his original 10% ratio, but in addition he now has 5% liquid cash available that can be immediately put to use whenever there are any significant adjustments in share prices that then make them a worthy buying option. Overvalued shares will always experience this phenomenon sooner or later and when it comes it is good to have some available cash ready.
Maartens strategy is basically to sell as the index rises, building up a large cash reserve in preparation for the inevitable downward price adjustment. This is what he has been doing the last couple of days.
A large number of mining shares are laying in a dormant but very favourably pricing position at the moment that indicates to Maarten that now is the time to raid his piggy bank of cash reserves in preparation for a big buying spree.
Especially when we observe the charts with virtually no sign of any significant movement.
He is keeping that ready cash available also because the price of silver can still drop to §18-$19, which would inevitably have a negative effect on the mine share prices (that is actually positive if you are buying).
This would be one of those rare golden opportunities to buy into a number of mining shares that have the potential of becoming phenomenal mining moonshot discoveries.
In times like these he is not focusing on the S&P 500 or DOW Jones averages, he never has been. He is always keeping the words of Rick Rule in mind.
Rule once said, that he has never seen a world class discovery that its price at a particular moment was not at least 50% discounted from its real value. This apparently occurs several times during a major bull-run.
(personal input: Rick “Rule: When World Collides” Cash Up ,buying those shares anyway that you really really did not want to buy. <https://www.nasdaq.com/articles/rick-rule-when-worlds-collide-2011-03-29>)
He then reasons, “Well if that is the case why don’t I just sit and wait for that moment to buy?”
All credits: Maarten Verheyen
With Maarten Verheyens permission, a translated version of one of his latest emails that may help you understand why I compare him to Lyn Alden in certain ways.
I have done my best to translate it as closely as possible to his original script with one additional link to amplify a certain point he makes. My excuses if any errors are still to be found.
The usual disclaimer that there are no 100% guarantees in any financial strategy and there will always be the risk of losing money. This is not financial advice and everyone needs to do their own personal research before making any financial decision.