Jeff Phillips: Using Tax Loss Selling to Your Advantage


Editor’s Note: I'm joined once again — in what is turning out to be a master class with one of the most successful contrarian resource speculators in the resource space — by Jeff Phillips. This week we talked about tax-loss selling, the opportunities he sees, and how to play it.


Let's get it!

Gerardo Del Real
Editor, Resource Stock Digest




Gerardo Del Real:  This is Gerardo Del Real with Resource Stock Digest. Joining me once again for what's turned into an ongoing educational series is contrarian speculator, mentor, and friend, Mr. Jeff Phillips. Jeff, how are you today?

Jeff Phillips: I'm great, Gerardo. Thank you for having me.

Gerardo Del Real:  No, listen, thank you for your time. Thanks for coming back on. The last time we spoke, we talked about lottery ticket commodity stocks to invest in, and we touched on the fact that we're right in the middle of tax loss selling season. And so of course, for those that are newer to the space, that's where people offset gains by selling losers that have been down for the year. Companies that are negative for the year. And so what we're seeing right now, I think it's a pretty unique opportunity in this space. You've always been pretty savvy and meticulous about playing October, November, December into January, and using tax loss selling to your advantage. So I wanted to have you back. And you promised some picks. I'd love to get your thoughts on what you're seeing out there, and then let's get into what you like.

Jeff Phillips: Sounds good, Gerardo. I'll try to be more brief than I usually am because we could go on for too long. Basically, just so we're clear, I invest in companies for the long term and the resource sector and in other areas. But resource sector is where I've been for 25 years, with a majority of my investments. But in the speculative side, I mean, I have large investments in other things. But in speculative I tend to be in the resource sector and I branch out in a few other things. But like you said, tax loss selling is an interesting time of the year. I have long-term positions in a dozen and a half companies that I believe in the underlying commodity, I believe in the asset that they have. And I believe that the deal is structured in such a way that it could be successful and deal structure and financings are incredibly important, more so than even the actual asset, a lot of the times.

Anyway, so the tax loss selling is a great time for people if you want to... And I do it every year, I play some stocks, some of those, I own longer-term, those positions are separate. But some of those, I don't own big positions in, I just play them for the 60 day, 90-day timeframe of making money by the end of January as the tax loss selling dries up. So would you like to start with a few of the precious metal stocks since most of these are trading near 52 week lows?

Gerardo Del Real: Absolutely. And look, we have gold perking up, it's at $1,826 today. Silver's had a good couple of days, despite the fact that the dollar index is above 94 again. So yeah, let's get right into the precious metal space.

Jeff Phillips: So again, I'm going to give you four stocks that I think are interesting, that are trading near their lows or there's reasons I think that they're close to their lows and that there's catalysts both with the tax loss selling and things with the company that make them compelling. So the first one is a company I own a lot of shares in, I also consult for just for full disclosure. It's called Almaden Minerals. Almaden had their first permit denied, down in Mexico, roughly a little over a year ago, which was their environmental permit. They're at a bankable feasibility study with a very robust gold and silver project that's 50% gold, 50% silver. Those numbers in the feasibility study there are about 85 million ounces of silver in the mine plan and 1.38 million ounces of gold. The exploration potential of the district there is very promising also. The NPV of that project is at $1,275 gold and $17 silver, is about $310 million worth of payback in 1.9 years. With an IRR of 42%, which is quite compelling.

So I mean, again, you're talking about a very robust gold and silver project. Again, the permit was turned down last year by the Mexican environmental branch of the government. Again, it's all politics, this project has community support. They've done a great job of involving the community, employing the community over the years since they've made that discovery. So again, what I think you'll see is early next year in the first quarter, I think now that they have some new people that are Mexican in Mexico and involved in permitting in Mexico that have joined the board and are walking them through this, I think they're going to talk to the right people when they resubmit this permit. I think when they do that, I think they know pretty well that they've taken care of everybody and done everything everybody wants.

So I'm pretty optimistic that that permit will be approved down the road. And again, that deposit is wildly undervalued. So that's one of those things you can play for tax loss, it's trading at a 52 week low. You're basically buying it for less than the price they've already bought to put that into production. It's very cheap. In the short term, I think you have an excellent chance by January to make a profit in that. I'm a long-term shareholder, I think that stock's worth many multiples of where it is at today.

Gerardo Del Real: I agree.

Jeff Phillips: Another stock that we could talk about, is Revival Gold (TSX-V: RVG)(OTC: RVLGF), which has a deposit in Idaho. Basically, there's two stages to that deposit. There's an open-pit heap leach, which they've already outlined to be about 72,000 ounces per year for a seven-year mine life, at a cost of just a little over $1,000 an ounce. It's a past-producing asset. So a lot of the infrastructure's there. It's run by Hugh Agro, very respected throughout his career in the gold mining industry. He started Revival Gold three years ago because he thought there would be a revival in the gold price, which there has been. They’re trading near a 52 week low. Last year I think they doubled out of their low into the new year. So I think that's excellent... Again, I'm a long-term shareholder. I am a large shareholder but again, I think it's an excellent play on the tax loss selling.

Another company you might want to look at, I know you're familiar with... I don't own shares in this company, but if you look at the past three, four, five years, which any of your listeners can do, and look at the chart, you'll see that it's often a good buy come November, December, and often has good first quarters — GoldMining Inc.(TSX: GOLD) (NYSE American: GLDG). GoldMining is overseen by Chairman Amir Adnani who has brought in CEO  Alastair Still.

Amir understands how to raise money and build companies and Alastair is an excellent addition to the management team. 

GoldMining Inc is an optionality play with a number of different deposits. It equates, I think, over 20 million ounces of gold or gold equivalent. So it's an optionality play when gold does well. They're very good at letting everybody know how many ounces they have out there. They also own 20 million shares of the spin-out company, Gold Royalty Corp, which is listed on the NYC. And I think that trades around five bucks a share. So again, GoldMining Inc, you can go back and look at past Decembers to the January, February or November to January, February, it's always a good tax loss candidate play. It’s trading near a 52 week low.

Another company that I've played for tax loss before and done quite well, is Sabina Gold and Silver Corp. (TSX: SBB) I do not own shares currently in that. I do plan on probably playing some tax loss selling there and maybe holding my position. Sometimes you hit the market right and it's that two-year period in the resource sector where everything just flies. And I think we're coming to that market, but again, for a tax loss play, you can go back and look at a chart over the last several years, but Sabina Gold and Silver has the Black River Gold district. Their Goose project is a multi-million-ounce deposit. The 2021 feasibility study at $1,600 gold, I believe it was a project after tax at 5% of about 1.1 billion Canadian dollars in value, with an IRR a little over 27% if I remember correctly.

But again, it's an interesting project. It's in a very difficult environment, Northern Canada, but again, it's always been a good tax loss sell. It's trading near 52-week lows so you might want to take a look at Sabina Gold and Silver Corp. So those are some examples in the precious metal space. There's different spaces that I play every year. And it's not just in the natural resource space, it's in these speculative areas where companies if it's been a bad year, tend to be good short-term investments.

Gerardo Del Real: Well, I think that's a heck of a list, especially coming from someone that's been as successful doing this for as long as you have. Any words of advice to people that maybe are newer to the space that are harvesting gains from crypto gains, or maybe gains in the uranium sector here recently and are looking for out of favor sectors like the gold space that present pretty compelling value.

Jeff Phillips: Yeah. I mean, I think there's again, it's spaces that are down and tend to be very speculative spaces anyway, and people take their tax losses because they want them. And then they redeploy capital and they often go back into some of the same companies in that space. So you and I talked about the cannabis space. For the last two, three years I've done really well playing four or five cannabis stocks that all seem to be sold off at the end of the year and all seem to have pretty good first quarters. If your listeners want to go look at Canopy Growth  (TSX: WEED) (NASDAQ: CGC), which is a very recognizable name in the space, for the last five years, if you bought December and sold it in roughly January, go look at the charts, you'd make pretty good money.

So Canopy's trading near a 52 week low. I think they're all bouncing pretty good today. But I bought some of that. I bought some Cronos Group, which four out of the last five years again has been a great tax loss selling display in the cannabis space. Another one would be Tilray (NASDAQ: TLRY), also another recognizable name in the cannabis space. Four out of the last five years, Tilray's had a very good December to January, February run. And if you want to be safer in the cannabis space, Horizons Marijuana Life Science ETF (TSX:HMMJ)(OTC:HMLSF) again, look at it but I believe it's five out of five or maybe four out of five years, it's had a great bounce into the new year. And all of those Canada stocks are selling near 52 week lows so again, use stop losses, but they're great potential 20 to 50, 70% returns in a short period of time.

Gerardo Del Real: Well, there you go, everybody. That's a lot of names in two very different sectors, out of favor sectors. Pretty compelling opportunities, I think. Jeff, thank you so much for your time. I hate to keep asking, but hopefully we can have you back on again. These are always very well received. I always get great feedback. So thank you for your generosity and your time today.

Jeff Phillips: I think maybe next time you have me back on Gerardo, again, we've talked a lot about tax loss selling, but again, that's sort of like having fun and gambling and making sure you have stop losses and playing the odds. I've done most of my investing and made my real gains and being a shareholder in out-of-favor sectors like gold or like uranium was for the last several years. It's not out of favor anymore.

But continuing to buy good companies with good deposits, good management teams that know how to finance, not to do death spiral financing, not to go to these large private equity funds in the precious metal space that will basically take your next four children from you. So again, looking at a good company and understanding the space and being a long-term shareholder is what I'd like to do. So maybe next time we talk, we can talk about structure and companies again, I think if you're patient and you're not too concerned with what it's doing in the short term, you can do really well with it.

Gerardo Del Real: I'm looking forward to it. Thanks, again.

Jeff Phillips: Thank you, Gerardo.