Paul Kingston Age: 67 Occupation: Retired economic geologist
Paul Kingston
Age: 67
Occupation: Retired economic geologist
Portfolio: Enerplus Resources Fund, Penn West Energy Trust, ARC Energy Trust, Canadian Oil Sands Trust, Baytex Energy Trust, Goldcorp Inc., Silver Wheaton Corp., Franco-Nevada Corp., Premier Gold Mines Ltd., Sabina Silver Corp., Royal Gold Inc., Kinross Gold Corp., Gold Wheaton Corp., International Royalty Corp.
PRECIOUS METALS EXPERT
It was "look but don't touch" during Paul Kingston's working life. An economic geologist for the governments of Ontario and New Brunswick, he was immersed in the exploration efforts and drill results of many mining companies, but wasn't allowed to buy their shares.
When he took early retirement and an accompanying reduced pension, he put a good deal of money into 25- and 30-year bonds that are paying more than 6 per cent. "They're better than an annuity because I get my money back at the end." And he also began putting his expertise to work, investing in gold and other precious metals stocks for long-term inflation protection.
CHOOSING STOCKS
An attractive mining company for Mr. Kingston would have half a dozen properties in production, positive cash flow, be profitable and have stable management. He also picks through a company's annual reports and website to assess the properties. "Most have pretty detailed descriptions of geological grades and the property, so somebody like me can say, 'That's a cracking good deposit I'd like to own, so I'll buy a piece of it.'"
WHAT HE AVOIDS
Mr. Kingston stays away from companies focusing on countries he deems politically risky, including most countries in South America, as well as Russia, Turkey and China. He also dislikes companies where management is getting huge bonuses and salaries. "Their minds aren't focused on shareholder value, they're focused on what they can take out of the company."
ROYALTY TRUSTS
Mr. Kingston is a fan of royalty trusts - companies that borrow money, approach a mine going into production, and buy a small piece of the royalty stream in return for financing the operation. "Royalty companies don't have equipment or operations, they just have a small head office, an accountant, and a few guys who go out and look at these deals."
WHERE WE'RE AT
For Mr. Kingston, the market's recent uptrend is simply a bear market rally. "It's like a giant bonfire of wet wood. If you pour enough gas on, anything will burn." The "gas" he's referring to is the easy money the U.S. Treasury is pumping into the system. "Because of that money, the market has to go up, but the U.S. will realize it can't keep printing money."
BEST MOVE
For Mr. Kingston, sitting down a decade ago to develop a long-term investing plan - and making the decision that the plan would focus on gold and silver stocks - has proved profitable. Just as important, he says, was sticking with the plan. "Early on, we tended to get a little excited and sold a few things we shouldn't have," he says. "But we learned to roll with the punches and forget about it."
WORST MOVE
Last fall, Mr. Kingston was holding a huge number of Silver Wheaton warrants that he converted into shares. That left him with a large capital gain. When the market began to fall, he sold some of those shares at a loss to offset his gains for tax purposes. But Silver Wheaton subsequently came back so strong that the tax bill he had been facing was a quarter of what he could have made had he held on to the shares.
ADVICE
Mr. Kingston keeps an eye on the Dow/gold ratio, which compares the level of the Dow to the price of an ounce of gold. "When it falls to three or less, then it will be time to get out of gold stocks and into blue-chip stocks."
Special to The Globe and Mail
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