About The Resource Sector

With the exception of the air you breathe, everything you use in your daily life is made from raw materials that are either grown or mined. The chair you are sitting on, the computer terminal you are viewing, the fiber optic cable bringing you this feed – all are products of agriculture or mining, the most basic of all industries.

While other industries come and go, efforts to extract the earth’s natural resources have been in existence since the beginning of mankind and will continue through its destruction.  As the population of the world expands, so does society’s need for natural resources. Unfortunately, most resources are non-renewable – once a barrel of oil is refined and burned, it is gone and must be replaced by a new barrel of oil. As the easy discoveries are exploited, new supplies are more difficult and expensive to locate. It is in this environment that both opportunity and risk are created. It is also the environment in which Global Resource Investments operates, managing this trade-off between risk and reward for our client base.

Resource companies range in size and risk from multi-billion dollar producers to junior exploration companies. For obvious reasons, the share prices of the large capitalization producers tend to move in tandem with the underlying price of the commodities that they produce. In theory, the shares of the smaller exploration companies should be less sensitive to commodity price movement, since they have no reserves. The share prices of these companies are driven more by exploration potential and results. When investing in the resource sector, it is important to differentiate between the various categories of companies, making sure that you are selecting investments in the appropriate sector and risk category to accomplish your objective. The brokers at Global can help you assess this risk.

Global focuses on the natural resource sector for three reasons. First, it is an investment sector our company’s founder has been involved with for over 25 years. Second, we believe we can provide you with the greatest value by specializing in one sector and being the best in that sector. Finally, management believes carefully selected exploration mining stocks can lead to better than average returns, provided you are willing and able to accept the higher risk inherent in these stocks.

Our Investment Philosophy

Value-Based Investing

Global employs fundamental analysis in virtually all of its research efforts. While technical analysis (evaluating trading patterns) might be useful to some investors, we have found value-based investing to be a much more reliable tool in the long run.

What do we mean by value-based investing? At any given moment during market hours, a company’s share price reflects the level at which a given buyer and a given seller are willing to execute a trade with each other. That price may not accurately reflect what the company, as a whole, is truly worth. It’s only a reflection of what those specific shares were worth to those two parties at that moment. In a perfect world, where corporate and economic information is disseminated instantly, understood by all who receive it, and acted upon immediately, the share prices of all stocks would reflect their underlying value. But we don’t live in a perfect world, and that’s what value-based investors, like Global, attempt to capitalize on.

Very simply stated, underlying value is a mathematical calculation that considers a company’s existing net assets (assets less liabilities), along with its future cash flow potential. This calculation incorporates numerous operating and economic assumptions. Because those assumptions may differ considerably from one analyst to another, estimates on the value of a company’s share price may vary considerably as well. Value-based investors attempt to buy stocks when they are trading in the marketplace for less than their estimated underlying value, and sell them when they are trading for more.

Why do these disparities in the market occur? First, as mentioned above, assumptions used to calculate underlying value may vary from one analyst to another. Second, many investors don’t utilize fundamental analysis in making investment decisions. Finally, investors have a tendency to overreact to economic or corporate news, causing a share price to move more radically than it rationally should.

It is the goal of every value-based investor to profit from these disparities. At Global, we constantly look for investment opportunities that are currently out of favor with the general investment community. We track political and economic cycles, as well as asset classes that are being ignored. We dig deep in an attempt to identify value in the market. That’s why you won’t find us talking extensively about the stocks you hear about on the nightly business news. That is also why our research can be so valuable.