Four rules that helped amateur trader Matt Tattis win at resources stocks
Punter Matt Tattis follows four guidelines when picking stocks: nearology, peer comparison, following the trend and listening to the smartest guys and girls in the room.
Mr Tattis is a bit of a legend among his friends (he’s one of 12 mates who invest together — they even have their own t-shirt) and Facebook groups where he is active such as ASX Penny Stock Investors.
Like fellow Penny Stocker Mark Trevillian, who Stockhead profiled earlier this month, Mr Tattis has picked some of the biggest stock market wins over the last five years — especially among resources juniors — though he says share investing is still a side gig.
“Eighty per cent of my portfolio is lithium and cobalt and I feel very blessed that the commodity has done so well over the last few years,” Mr Tattis told Stockhead.
Those companies include Force Commodities (ASX:4CE) which Mr Tattis “went large on” at 3.1c (it’s now 9.2c), AVZ (ASX:AVZ) which he bought for 2.1c and which is now at 28c, and Pilbara Minerals (ASX:PLS), a ‘multibagger’ he bought at 2.1c five years ago for his super fund — and sold two years ago at 68c.
The lithium specialist is a popular figure in the amateur trading forums on Facebook. He got into investing six years ago after moving to Port Hedland for work and reading about the iron ore boom.
He’s still keen on lithium, keeps an eye on vanadium, and is now all about the Democratic Republic of Congo.
“The DRC is a very resource-rich country that can yield great returns for investors that are willing to put their balls on the line.”
An investing strategy for resources
Mr Tattis says he is mostly a long-term holder.
“Selling 1 million shares in Altura at 3c for a quick profit years ago taught me to hold long and let it ride.”
Altura (ASX:AJM) closed on Tuesday at 38c.
He is wary of stocks with inflated market caps at very early exploration stages that have no significant or historical data.
As for following the smartest people in the room? The smartest people right now, he says, are activist investor Michael (SuperNinja) Langford, the man behind AVZ Klaus Eckhof, and Force Commodities director Jason Brewer.
“I listen to Michael Langford the most. What he wrote about Pilbara Minerals on social media was why I bought it,” Mr Tattis said. Pilbara Minerals (ASX:PLS) jumped from 35c as high as $1.25 between August and December).
Mr Tattis says Okapi Resources (ASX:OKR) is an excellent example of following people: Mr Langford is a top 20 shareholder, Mr Eckoff is the chairman.
The nearology trick (buying explorers with land holdings next door to successful miners) has got Mr Tattis some memorable wins (and a few losses).
“I actually scan through maps,” he says. “I look at the way ore bodies are structured and where it’s trending, and then I look on a map and see who is holding the tenements next door.”
He bought one company — which he declined to name — because it was next door to a major Western Australian lithium deposit found by another miner.
Mr Tattis bought in on the back of some excellent assay results only to have the company admit a month later that the figures they’d boasted about weren’t accurate.
That company’s shares slid 80 per cent and haven’t recovered, he says.
Marquee (ASX:MQR) was a nearology play that worked, up 50 per cent since he bought in.
Mr Tattis says peer comparison — comparing two stocks with similar resources or products and asking why one is cheaper than the other — is a key element of research.
“This is pretty important if you do it right.”
For instance Dark Horse Resources (ASX:DHR) — based on a resource target in Argentina of 75-100 million tonnes at 1.2 per cent lithium — could be twice as big as lithium darling Altura if they hit their target, Mr Tattis says.
Altura has a market cap of $690 million, while Dark Horse is $32 million. “It’s big potential, but high risk.”
When researching resources stocks, he’ll factor in things like how far from port they are, how close to infrastructure like roads, and how deep the deposit is.
Follow the trend
Mr Tattis says it’s also critical for investors to keep close tabs on the current buzz.
“You’ve got to follow the trend with what is happening. If the trend is baby formula you’ve got to go with the trend. If the trend is cobalt you’ve gotta go with that.”
Mr Tattis jumped on the blockchain trend, investing in Reffind (ASX:RFN) which he bought at 1c and sold blocks between 2.8c and 3.8c.
Reffind eventually made an investment into blockchain loyalty group Loyyal which closed on Monday.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.