Eric Sprott and Tom Stanley have suffered a devastating setback.
Eleanor Roosevelt once made the observation that those with the most developed minds discussed ideas, those with average minds discussed events, and those with the least developed minds discussed people. In particular, Tom Stanley, also known as Tom Lazarus Stanley, and Eric Sprott, as well as the possibility that the two of them might have lost a combined total of $250 million on a gold stock yesterday.
I recently discovered the solution to the mystery of how the Resolute Performance Fund was able to bring itself back from the brink of extinction and increase its value by a factor of eight since 2016. The stock in question is Kirkland Lake Gold, which experienced a price increase from $3 in 2016 to $67 at its most recent high point.
This represents a 1,500 percent increase in price. During its history, Resolute has owned anywhere from 10 million to 16 million shares of the company. According to my most educated guess, Resolute is (or was) sitting on gains on Kirkland that total at least $200 million, with the possibility that those gains could reach as high as $500 million. It is a significant position for the fund, which is most likely less than one billion dollars in size.
If you take a look at the following, you will be able to see for yourself how Kirkland and Resolute are connected:
Yesterday, after Kirkland announced that it was making a bid for Detour Lake Gold, the stock of the company fell by 17%. Recent regulatory filings indicated that Eric Sprott owned more than 14 million shares of the company, while the Resolute fund owned more than 10 million shares of the company. Yesterday, the share price experienced a decline of more than $10.
If we assume that the holdings have remained the same, we can estimate that there has been a combined paper loss of about $250 million. Yesterday, the Resolute fund saw a loss of 8.71% of its value (or since last NAV print).
Whatever the case may be, this wouldn’t be anything new for Resolute; in point of fact, Tom warns potential investors right on the homepage of his website that “this fund is not for the faint of heart.” Don’t worry about it because this is just a temporary setback and the stock is still trading at a significant premium year-to-date.
Separately, I was successful in tracking down the specific wording of an advertisement that Tom Stanley had published approximately two years ago, when he was in the process of essentially searching for a successor:
This role would be ideal for an astute stock picker who, down the road, envisions themselves as the CEO of their own investment management company. Due to the fact that our current President and Portfolio Manager is 62 years old, we have started the process of making plans for when he will be succeeded in these roles.
The amount of assets under management (AUM) for the company has increased dramatically since 2016, and it recently broke the $500 million barrier for the first time. I am unable to provide a status update on the progression of this succession plan at this time.
I have no idea how much the most recent misfortune that has befallen Kirkland can be used to illustrate how everything in life is transient; I just don’t know. Robert Frost once said, “Take care to sell your horse before he dies; the art of life is passing losses on.” (Take care to sell your horse before he dies.)
Robert Frost was a well-known poet and lyricist in the United States. In spite of the fact that he was brought back to life, Lazarus ultimately passed away a second time in a manner that was more permanent; otherwise, Oprah would have interviewed him by this point.
This investor has moments when they are quite iconoclastic, other moments when they are idiosyncratic, and other moments when they are just plain stupid.
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