Tools for Investing in Natural Resources with Nick Hodge, Outsider Club | SNN Network

Tools for Investing in Natural Resources with Nick Hodge, Outsider Club | SNN Network

this podcast includes information provided by the issuer and does not express the views of the interviewer this podcast may also include forward-looking statements by the issuer that involve certain risks and uncertainties to its business because forward-looking statements are subject to risks and uncertainties the issuers actual results could differ from those indicated in this podcast welcome to the planet micro-cap podcast I'm your host Robert Kraft and this is episode 2 thank you all so much for your support and for tuning in to the first episode of the podcast I want to thank and castle again for the interview and sharing his experience and insight into micro cap investing this week on stock we featured articles highlighting video interviews with the following companies bio Largo Inc B LG o on the oTCQB / Vectis bio Pharmaceuticals Inc PVC T on the NYC market writes core pink riht on the oTCQB and n of X Life Sciences Corp AV XL on the otcqx and the metals weekly wrapup with the Morgan report go check those out if you haven't already done so we also published a wall street view with Brent cook editor geologist of exploration insights and online newsletter publication you know we've spoken to Brent many times over the years about investing in the junior mining exploration sector and in this interview he and Shelley discuss how to invest in junior mining when commodity prices are at or near all-time lows what I like about our interviews with Brent is that he is a geologist and something I took from our last episode with Ian Castle is that you want to know everything about the company you may invest in and for a sector like exploration and junior mining how is this possible however I've been lucky enough to attend many mining and resource conferences and met a lot of people who have helped me understand the junior resource sector who were not geologists one such individual that I connected with was Nick Hodge editor-in-chief of The Outsider Club who's my next interview on the planet micro-cap podcast thank you again for tuning in to episode 2 of the planet micro cap podcast please enjoy my interview with Nick Hodge and you won't want to miss the latest ask mr. wall street following the interview but first a word from our sponsor a comprehensive streaming of market data research and portfolio management application for you quote stream is a real-time streaming quotes and research system designed for the day trader retail investor institutional investor both new and old quote stream offers low latency tick by tick data advanced charting comprehensive technical analysis news and research with no software to install and no servers to maintain quote Stream is the ideal solution for you go to stock News and start your free 7-day trial click the quote Stream banner in the header or real-time quotes in the nav bar to get started building and managing your investments so for this interview I wanted to speak to Nick Hodge and the reason is because I've covered a lot of mining conferences in the last few years where we met and he developed his own investing strategy while starting out as a bee reporter in clean technology I wanted to talk to him to get a better understanding about what it takes to invest in natural resources from someone who's not a geologist he's also 31 years old and has been on the beats since 2006 and with that I'd like to welcome Nick Hodge to the program Nick welcome me too man I'm excited to have you on before we get you know get down and dirty into the into the gold pit so to speak let's start off with a little background about you and how you came to to be ok so my name is Nick Hodge I run a free newsletter called The Outsider Club I obviously didn't always do that The Outsider club's only about 2 years old and I've been in this industry as you said for about a decade thus far started in around you know late 2006 early 2007 but then you know I was just a kid out of college right I I had a degree in advertising and writing communication but I really had no direction didn't know what I was doing and so I took a job as a research analyst an assistant editor at angel publishing and I just really took to it right I took to analyzing stocks and writing about stocks in a non-technical way for for a general retail audience an average Joe if you want to call it that and I'm certainly an average Joe so that was really became my mission right – to decode demystify the stock market and as it happened my original beat that I was assigned to was clean tech so I got to know a lot about the solar space in the wind space the energy space in general going on to write a book in 2007-2008 about investing in renewable energy and then on to sort of master the energy space in its entirety culminating with an energy investing for dummies book in in 2010-2011 so I really cut my teeth on the energy sector and then sort of you know jumped from there into into other resource sectors which i think is a natural leap especially once you get into you know things like coal and uranium they're all but those are energy minerals and then from there I jump to other minerals it's just sort of the hard asset space that I like to write something real something tangible but as far as how I got here it was really answering and had right for a research analyst and writer nearly a decade ago and then just building a knowledge base and a network from there before we get into really you know the technical or the the non-technical approach to investing in basic materials energy type companies you know what did you do how when you you know you're at angel publishing they assign you to clean tech you start writing about energy you know what is it that you did when you first started that you looked at that you're like okay I'm gonna use this as my resource as my you know my base and then I can probably learn from here did you go and read a couple books was there somebody you subscribe to you know how did you do it um so at a very basic level I was in over my head right and so I needed to get a knowledge base of clean tech and energy very quickly so the places I I started I mean then we're talking you know very initially now like the first things I started reading were CIA reports right I II a reports I'm talking about you know the the Energy Information Administration for the for the United States and then the International Energy Agency for the world you know reading the reports about you know what's installed already right what is the world's energy mix what percentage is coal what percentage is oil what percentage is natural gas and what is the mix in different countries and where does it come from what are the top 10 producing oil States the top 10 producing natural gas States and then really just from there go into other aspects of policy right what is the United States energy policy what is the Canadian energy policy what are the subsidies that are being offered or the land that is being given under the Bureau of Land Management how do those leases work and then from there you know learning about the the biggest players and what they're doing and then so that comes going to conferences so I would go to as many conferences as I could I would get in with a press pass and I would go to you know solar energy industry association conferences as the ia conferences I would go to SEPA conferences solar energy photovoltaic Association conferences I would go to wind conferences and I would just you know meet people sit in sessions talk to executives try to talk to policy makers you know and in my early years right it was the kid who doesn't know much but I got to meet you know T boone Pickens and I got to meet Ted Turner and I got to discuss you know some other energy investments with them just by hanging out at these conferences in these different industry events so I think immersion is key right it's just like learning a new language you can you can study it at your desk and you can read in Italian all day long but unless you you know you go live in Rome for three months or you go live in an energy conference for three months then that's the really the way you're going to pick up the stuff and be able to discuss it fluidly and fluently you're so right you know you listen to these guys and you and and you you're really taking a ton of information and but you brought up an interesting point when you first like the very first initial thing that you looked at and I think that's kind of key when you're considering the first approach from a non-technical perspective and that is you analyze the government policies around the world with regard to basic materials and resources how did when you first took in that initial information you know how did you categorize is that categorize it in your mind you know was it something where you're like okay these are the countries where there's a little bit of political instability this is a potential opportunity these are the countries that you know there's a it's more stable you know these are the resources that they're producing and exploring forth these are the places that you know they haven't really maximized their exploration potential you know how did you category oh absolutely so again this was through the lens of clean tech right in a tea day in 2007-2008 so I would identify you know who had the the most robust you know subsidy schemes and regimes right at the time it was Germany that was offering a generous solar subsidy so the obvious way to go invest and solar was through you know German manufacturers and so and module producers at the same time we also saw the a big push for to reduce carbon emissions right so there was various carbon reduction schemes in Europe and I would looked at companies that were getting or selling carbon credits basically on new exchanges that they had created as a new form of you know revenue generation not only are they installing a clean tech asset or a an asset that reduces their energy consumption thereby reducing carbon you know like heat from waste water or wastewater recycling or something like that and then getting carbon credits from that so I would look for you know different sorts of new markets that were being established then and look for companies that were going to profit because of that at the same time you know shale was coming online so I would look to see what the deal he was saying about you know the Bakken and North Dakota and see you know with the potential reserves that they thought were there and then the companies that were going to get it so yeah it was very much looking at the overall you know the broader movement and world energy markets but then seeing which countries in particular where we're making you know moves on certain sectors or policy decisions to to make a certain sector what more beneficial than another for example in the u.s. back then we had solar energy credits and the big debate or to be worried among energy investors then was whether these credits going to end and our the plan is the policy going to be extended for another year to get you know a solar tax credit for another year and the stocks would really move on that right if it was thought that the tax credit would be allowed to expire then you know solar stocks would become so and when it was announced that you know some committee or the Senate was voting to extend them or that they were going to be renewed then that was a bi catalyst so you know these things went hand in hand with the market especially with a clean tech market that was so NASA that needed you know the training wheels of governments around the world let's let's say okay you did your research you're looking at let's say can let's say right now you know the last last couple months you've been writing about uranium for the website you talked a little bit about palladium 2 in the magazine and you know let's say there is a junior mining company that look you know exploring for uranium in one of these countries you know what what are the different catalysts that you're looking for well two things jump to mind first is you take a macro approach just as I described for when I first you know started dipping my toes into this world and by that I mean you look at all the macro factors in the uranium space what is uranium treating at per pound what has it been treating at you know over the past five years or the past ten years and tried to establish a pattern and see if you can establish a cycle because I truly believe these markets are cyclical and then you look at you know what's going on inside the world of uranium and then nuclear generation right what countries are building and adding which countries if any are taking away were there any you know major task catalysts that you can look to and see why they were a catalyst historically and if they could you know become a catalyst again with uranium in particular the the most recent big event was obviously the Fukushima disaster that you know send uranium prices from over a hundred dollars a pound down to in the mid 20s so you call these macro factors right the same as I read policy reports for clean tech I start going to the you know the world nuclear Council and seeing who is building new nuclear reactors and who is building them right and where is the uranium going to come from what is the fuel cycle look like how much uranium is coming from mine supply versus secondary supply and by that I mean you know decommissioned warheads and things like that and so you just really got to get in tune with the macro picture and try to embed yourself in a cycle and say okay where we at today where have we been and where do I think we're going and why and I'd be glad to talk about some of those things why I think the uranium sector is going but I'm not quite sure that's what you're after at this point so the second thing I would say in addition to immersing yourself in the macro situation is to leverage a network right and I know not everyone one can do that because not everyone has spent you know ten years in the in the resource business writing about it but if you go to some conferences you know speak to the speakers afterward get their card you mentioned you know we're not geologists no and I'm certainly not a geologist but I have several geologists card in my rolodex right so if I see a project or a company I'm following does put out a resource estimate or a preliminary economic assessment or a feasibility study I can email that geologist that I have a rapport with and say hey what do you think about this document what do you think about this asset what do you think about this drill hole what do you think about the economics of this project and so you have to have to create a leverage and network or find someone who can do that for you and be willing to learn be willing to say you know what I'm not a uranium geologist I'm not a uranium expert by trade but I can read as much as I can to become you know a jack-of-all-trades of uranium and then find some real experts in the sector that that you can leverage even more to gain more knowledge more specific knowledge about individual companies or individual assets or what's going on behind the scenes right I have a gentleman that's the CEO of a uranium producer and whereas you know I can't get with the simple click of a mouse you know what are the last couple utilities that have entered the spot market purchased for the next fuel cycle he can tell me that he can say you know what Nick exelon heard the market earlier this year that the largest nuclear utility in America and they're now entering the spot market to buy for the 2017-18 cycle well that's not something you can find from a Google News search or a Google search in general right that's something somebody has to tell you because they know it because they're inside the industry and I think that's very important I got I got a two-part question now and it kind of has to do a little bit with the last interview that I just did and also with something that you said regarding conferences so how did you especially when you first got started because I know you know when I when I was first there you know I was a you know I bought in I was like you know I was 22 years old and just hearing of you know these guys are quite charismatic so you're just like oh my gosh the the world is gonna come to an end I got it load up on gold and silver and you know I got to do this right now you know but through time you you start to kind of realize okay okay calm down calm down but let's really analyze the situation here and figure out what's going on so for you what was that experience like for you and how did you manage what others were saying that were very strong proponents and then the second part of my question is you know using uranium as an example or any junior mining company or sector how do you analyze management sure well so the first part of the question I have a couple of answers I think first of all you you're going to take your lumps right the CEOs that are giving these presentations at this about an individual company as opposed to you know an analyst or a specialist in a sector that's talking about more macro you know the CEOs their company is always the best company in the world right it's always the stock you should be buying now and so that's the story they're going to present on stage and that's what their slides are going to be about then you're right they're very charismatic they're their salesmen by nature and it's very easy to buy into those stories and so I think originally you're going to take your lumps you're gonna make some missteps you're gonna buy into things that you shouldn't have bought into or you're going to you know buy stock at the wrong time because someone told you to we're in reality you know some some restricted shares are about to come to and insiders are gonna dump on you're buying things like that I mean those are just mistakes you learn from and you take your lumps and you try not to make those mistakes again and that's if the mistake is your own part right you bought into something and then you know some guys are perpetual like you say either schmoozers I don't want to use the word con artists but they use public companies to fund their lifestyle especially on the venture exchange in Canada right and so you know I have a strict fool me fool me twice policy the first time it's my fault but you know if you lie to me again or or you you tell me about a bad deal again or you tell me about a deal just so you can make an exit or something like that then you know I lose your I lose your car and I lose your phone number very quickly so you just have to find the right people you have to keep talking to the ones who give you good information and good tips and good analysis and you have to stop talking to the ones who don't and here's a real clear example I have to go back to clean tech but those solar stocks were going up you know ten percent a day literally in 2007 and 2008 right and solar analysts and solar CEOs are saying you know this is going to the moon solar is you know the next big thing and and I still agree that it is but you know you had the 2008 financial crash you had the cost of poly-silicon plummet off a cliff which no one saw coming in 2008 and then you saw you know stocks that were 50 60 70 80 dollars or more quickly trading for you know under five dollars or less and so I think that that just experiences is what comes along with that being I don't want to say jaded but definitely a little bit cynical and definitely taking everything with a grain of salt yeah go ahead oh no I'm sorry I didn't mean to interrupt but yeah I mean at the end of the day it's all about just taking it as much information as possible and yeah I mean you said it man you know you're you're gonna take your lumps yeah for sure and I've taken mine and I probably still take a couple more I mean you alluded to it earlier but we're still young guys I think we're about the same age I'm 31 so definitely still learning definitely have to admit that you don't know everything and and then just have to be receptive as possible to the most quality information and I can't speak highly enough about just creating a good network of mentors and peers that you can you know talk about stocks and discuss things with and and especially gentlemen that have been in the the business longer than you would have seen more than just the last cycle that we've seen but I've seen you know cycles since the 70s and 80s and I think seeking those people out and befriending them and many of them are more receptive than you think I mean they love this stuff they love rocks they love investments and so if you can find a couple people like that to feed you ideas and sort of Mentor and coach you a little bit that comes a long way and that and that goes right into your next question about analyzing management right I think the first thing you have to do and this is something I picked up from hearing Rick rule speak a lot is you know you have to make sure they're doing something they've done before right if you have a guy trying to bring a gold asset into production in Mexico that's only brought a rare earth element project into production in Sweden then you know where's his skill set for for gold in Mexico so you have to make sure and I think this is key is make sure they're doing something they've done before you don't someone you don't want someone who is green you don't want someone who doesn't have the specialty that's needed for the current project at hand that's the first thing the second thing is you want to look to someone that's had success you don't want to look for a serial CEO that's jumped around to stocks or companies that never went anywhere and never made any make profitable exits not just for themselves but for shareholders as well so you want to look for a positive track record and then beyond the information that you can find out just from doing research on this individual names you have to you have to go back to your network which is why I said there was a perfect lead-in to this question right you have to go to your one of your mentors or one of your people that you talked to and say hey what do you know about this guy have you ever worked with them how does he treat shareholders what do you think his priorities are and I think that goes a long way I mean they say women talk but I think I think men and the resource business talk more and so you really have to you know talk to people where do you go to find your new ideas for for companies that you may be interested in and to you know do you have any books or recommended reading that you know our audience or people who are just getting started investing in resources and energy sure I think you have to read general securities books right so you know first of all how to approach a stock we're talking about books like you know security analysis or the intelligent investor those are I think solid reading foundational reading for for any resource investor and from there I think you need to maybe take some online courses I've definitely done this for myself something like free geology 101 courses to learn what you know what grades are to learn what how different resources are quantified in the ground what is a measured resource what is an indicated resource what is an inferred resource that can be a textbook but it can also be you know a free online course there's there's plenty of things for learning those those types of skills online and companies will send you things as well I mean companies there are departments they want you to be educated they wants you to understand the things you're investing in and so sometimes I'll hit up a you know a copper company and say hey is there any foundational or seminal reading you can send me about you know copper mining or the copper resource market and they're the more than glad to do that so again leveraging the network as much as possible and I don't know about resource books individually most of the books I've read are like in the water space because I like that space as a resource as well like water wars and things like that so you know I think online courses and increasingly they're offered for free or a great place to go and and to the first part of the question you know where do you go to find new ideas or to check in on old ideas you know for new news or information well number one right I mean you guys put on a fantastic conference in Vegas this year there were some new ideas there and not just the companies that are presenting right but people you run into at the you know the refreshment bar or at a breakfast or people that approach you you know in the exhibit hall I think conferences are by far the place I get the most new ideas other than that there's two other places one is just good old-fashioned legwork and research I spend several hours a day just you know reading and researching the sectors of the market I'm interested in and just by doing that alone I see new things all the time and then going back to the network which i think is very very crucial people will tell you about things right because other people know things that you don't and so one time you tell somebody about a stock that they haven't heard of and the next time you know you get an email hey have you seen this deal have you seen this company so I think those three things are definitely the primary places I get new ideas conferences my network and it's good old-fashioned research all right Nick so we're about to wrap up here give yourself a plug where should people go to find out more information about the one and only mr. Nick Hodge you can go to outsider there's a free newsletter there published six days a week plus we also do a couple extra articles a day you'll find most of the resource market covered there and also a lot of other things outside the resource market specifically you know income generation and dividends so we have a pretty wide focus and it's not just me we have several other editors including Jimmy mango who's running a publication for us and we just got Jim Collins who is an asset manager on Wall Street so we're definitely growing and we're definitely constantly you know growing the amount content and the specificity of the content so check out outsider club comm for sure and where can they and work in our audience find you on Twitter Oh at Nick C Hodge so just my name with a C in the middle Nick C Hodge that's H OD GE okay everybody I'd like to thank Nick for coming on to this episode of the planet micro-cap podcast Nick it's always a pleasure and and thank you so much I look forward to seeing you soon ended up becoming an event and maybe coming back on the podcast soon I agree and thanks for having me as well alright take care have a good one I'm Shelley Kraft and thank you for listening to ask mr. Wall Street today's question is as a former investment banker what is the due diligence process like and how does it differ from the due diligence process of a private investor investment bankers are a clearinghouse of company facts figures future potential valuation but most of all how does the management team of the company plan to use the investors capital this is called use of proceeds the process of determining pre-money valuation of the company is a negotiation between the issuer and the banker with the issuer pulling for the most money for the least amount of shares and the bank are pulling for invest 'value upside stock price increased potential in the aftermarket determining the after money valuation is a great deal easier and determined by the liquidity and by side of the aftermarket buying which determines the valuation given by investors for example a company is priced by investment bankers at $5 per share and it closes the first day of trading at $6 per share the after money valuation is higher than the pre-money valuation of $5 per share which is great for investors and also means the investment bankers were fair with the issuer on determining the price the due diligence process of an invest when banker carries very harsh results and sometimes penalties if they don't look under every rock for potential problems including full background checks on oil investors directors insiders and private placement investors investment bank is retained outside professionals to engage with the issuers counsel and CPA firm to verify the essential documents before the company can receive any capital this due diligence process takes at least 90 days and oftentimes longer if oddities need correction and to answer SEC comments in general the investment bank and due diligence process provides an accurate assessment of the company including full disclosure with a centric focus on providing a company's financial MRI investors due diligence is so much easier the process begins by reading what is provided by the investment banker and public information provided by the issuer via the company website Edgar FINRA and press releases investors should dig deep for information as it is said the deeper you dig the greater your due diligence also as an investor you should have access to research and comps of other companies such as competitors access to trade magazines analysts reports scuttlebutt and of course stock News thank you all for tuning in to the planet micro cap podcast and thank you Nick again for coming on to the program what I learned this week was the importance of developing your network coming up with as many questions as you can about the company industry or sector you're interested in investing in and doing your best to try and find those answers you can access the podcast by going on to stock News under podcast go to pod being calm and search planet micro-cap podcast or on iTunes and search planet micro-cap podcast stay tuned for the next episode of the planet micro cap podcast where we'll have our next week in review answer a new question for masters to Wall Street and have another exciting guest to discuss all things my Karkat if you have any questions or comments about the podcast or for ask mr. wall street please send an e-mail to info at stock News I'd love to hear from you this podcast has been brought to you by snn incorporated publishers of stock the official micro-cap news source and the micro-cap review magazine I'm your host Robert Kraft and thank you again for joining me on the planet micro-cap podcast have a great week everyone

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