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Tales of a Commodity Superstar

Christopher Barker
July 21, 2009

Welcome to my dark little corner of the investment world. Miles away from conventional wisdom, and concealed from view beneath hovering forests of hopeful green shoots, a CAPS member by the name of silverminer hikes a solitary path.

You will find my approach entirely unconventional -- and potentially very high-risk if my underlying thesis proves faulty -- but by sharing my strategy and experiences with you I hope to promote discussion on a range of investment topics. You can achieve investing success (or failure) by traveling any number of potential paths, but silverminer represents the strategy I personally will follow until I see the U.S. dollar emerging from crisis mode.

A quick background story
My flagship CAPS portfolio, TMFSinchiruna, became a nightmare of a roller coaster last year. Made up almost exclusively of commodity-related equities, both my CAPS and real-life portfolios took a monster dive that tested my commitment to my investment thesis to the core. From the top CAPS scorer among long-only players in February 2008, I fell to the absolute opposite end of the spectrum. 

Exasperated, I added picks that strayed from my core focus. Second chances are free in CAPS, but not in real life, so fortunately I changed nothing in my actual portfolio and have since found some welcome relief. The whole episode serves as a terrific reminder that my sector-focused investment strategy carries a high degree of volatility and risk. Confidence in my fundamental macroeconomic analysis, however, lessens my own perception of risk.

By the fall of 2008, the massive disconnect I perceived between the deteriorating fundamentals of the U.S. dollar and the continued free-fall in commodity-related equities sparked a renewed commitment to communicate my bullish outlook for dollar-defensive investments. With the passion of all my conviction, I encouraged Fools to consider precious metal producers like Yamana Gold (NYSE: AUY  ) and Silver Wheaton (NYSE: SLW  ) at the moment they reversed into a dramatic recovery.

A silverminer is born
Around the same time, on Nov. 19, I started the silverminer portfolio to focus narrowly on my investment strategy. As a long-term buy-and-hold investor, I find it ironic that timing played a significant role in this new portfolio's outperformance of the S&P 500. Started near the (presumed) bottom of the commodity correction, after four months the portfolio climbed to that same No. 1 spot among long-only players where my original portfolio had once sat. I try to dissuade investors from attempting to time the market, especially a market as volatile as precious metals. Sometimes, however, opportunity smacks you square in the face.

Core holdings for the long haul
I had a short list of equities and a few exchange-traded funds in mind for each of the four sectors I sought exposure to. I started out with companies like those mentioned above for gold and silver, Southern Copper (NYSE: PCU  ) for copper, Peabody Energy (NYSE: BTU  ) for coal, PotashCorp (NYSE: POT  ) for agriculture, and Petroleo Brasileiro (NYSE: PBR