Rick Rule: Don’t Speculate Until You’ve Bought the Best of the Best

Interview by Georgia Williams; article text by Charlotte McLeod.

What’s the ideal way to get into gold stocks right now? According to Rick Rule of Sprott (TSX:SII), investors should begin by buying the best of the best.

“In the equities we are suggesting to people that at the beginning of a gold bull market you want to buy the best of the best stocks,” he said at the New Orleans Investment Conference.

“If you have a cycle where the index has moved 200 percent to 1,200 percent on the upside, you don’t need to outperform the market, you just need to perform with the market. So rather than increase risk to try and outperform an already hot market, our belief is that most investors should try to reduce risk — buy the best five or six stocks in the industry, hold on for the two or three year time frame.”

Once that’s done, there’s room for investors to be more adventurous. “It doesn’t mean that you don’t speculate with some of your portfolio. What it means is that you don’t take your whole portfolio in effect to Las Vegas,” he explained.

Rule also sees potential in silver stocks, although he cautioned that high-quality silver equities are extremely rare, numbering only 10 or 11 worldwide.

But what they lack in number they make up in potential. “What I would suggest is (silver equities) have extraordinary speculative upside,” he said.

Rounding out the conversation on precious metals, Rule expressed optimism about palladium, saying it offers a structural advantage over its sister metal platinum in the near term.

“In terms of the metal palladium, as long as the economy holds together, we think palladium will do well. There’s a legitimate physical shortage of palladium,” he said.

“There were a lot of fabrication technologies that were put in place when palladium was cheaper that give it in the near term a structural advantage over platinum. And of course gasoline engine sales are doing better than diesel engine sales, and palladium is more efficient in catalytic converters for gasoline. So as long we don’t go into a global recession, I think the palladium markets are very, very intact.”

Listen to the interview for more from Rule on precious metals as well as uranium. You can also click here for our full New Orleans Investment Conference playlist on YouTube.

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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.