Debt is evil, as shareholders in ABC Learning Centres have sadly been taught just this week.
Cash is king, as are resources, with oil, gold, platinum and silver all hitting multi-year highs.
We exclusively reveal the name of one of our specially selected uranium stocks, and give you details of one of our favourite gold explorers PLUS an explorer that could be about to strike oil in a big way.
Dear Fellow Stock Market Investor,
If you thought January was a bad month on the stock market, February hasn’t turned out to be a whole lot better.
Last week marked the fourth consecutive weekly decline in the stock market, the longest weekly losing streak since July-August last year when the sub-prime crisis was first unfolding.
Unlike January, February hasn’t seemed quite as volatile a month. It has felt more like death by small percentages…with a down 3% here, an up 0.5% there, here a down 4%, there an up 1%, everywhere a down 2%, E-I-E-I-O.
With apologies to Old McDonald and his farm, we wouldn’t be surprised if you are feeling some serious stock market pain.
Take a look at the year to date performance of some of these household names, companies who also happen to be some of the more popular stocks in ordinary investor’s portfolios…
Commonwealth Bank – down 24%
ANZ – down 18%
Harvey Norman – down 29%
Seek – down 18%
Allco Finance – down a whopping 82%
(Prices taken on February 25th 2008, not taking into account dividends.)
And then there’s ABC Learning Centres, who saw their shares absolutely hammered this week over doubts surrounding their debt levels. The lesson in this unforgiving stock market is clear – debt is evil, cash is king.
It’s blindingly obvious now, but it seems many CEO’s, many investment banks and many stock market investors had forgotten about debt and all the added risks it entails in the great bull market of 2003 – 2007 (RIP). They haven’t any more!
It’s a gloomy picture no doubt.
Oil, Gold, Platinum and Silver All Power Higher
Yet amidst the pain, the prices for oil, gold, and platinum all hit record highs last week, and silver reached a 27-year peak.
It should be no secret to regular readers of this email that we continue to advocate an “overweight in resources” approach to investing in this stock market, with a particular emphasis on gold and oil.
We have more on our stronger for longer resources boom theme a little further down, including…
· Details of one of our favourite gold plays, a company that looks like it could be sitting on an amazing 3-5 million ounces of gold, and;
· A mid-sized oil exploration company set to drill 17 wells within five separate project areas during 2008, about whom we recently said “…is sure to generate exploration excitement.”
But first, we have a little more on the stock market, including the name of one of our top uranium stocks, a company we think could be on the cusp of something huge.
The Uranium Explorer On
Many commentators, including us, have been quick to describe the stock market conditions of the past few weeks as extremely volatile.
Sure there has been increased volatility in recent weeks, with the markets been jumping several percentage points one day and falling several percentage points the next, but the truth is that stock markets have been volatile for about four years now.
The difference is that markets positively volatile before, and are negatively volatile now.
It’s an important difference, because if effects how many people invest. They are only too happy to invest in positively volatile markets, but suddenly do the exact opposite in negatively volatile markets. They are more likely to panic-sell and/or do nothing, like they are frozen in time.
It’s bizarre behaviour. Just a couple of months ago people were prepared to pay over $4 for a share in promising emerging uranium producer Bannerman Resources, yet today the shares languish around the $2.15 mark. If they were a buy at $4, surely they are a buy at almost half that price, aren’t they?
Cricket And Uranium – A Strange But True Mix
We could have picked any number of companies other than Bannerman who have seen their share price halve in the past couple of months. A little further down, we’ll show you why we’ve chosen Bannerman, and why we think this exciting uranium company could be on the cusp of something huge.
For cricket fans, as an aside, did you know that the company is named after Charles Bannerman, the Australian opening batsman who, in 1877, had the honour of facing the first ball ever bowled in Test cricket? He went on to score 165, which still today remains the highest score by an Australian batsman on debut. Also, his 165 runs, out of
Jumping back to Bannerman the uranium company, the share price movement over the past couple of months is quite enlightening. It shows more than anything how in the short-term, share prices often move more because of fear and greed than the performance of the underlying company.
Many investors make the simple mistake of assuming the short-term performance of the share price accurately mirrors the performance of the underlying company.
Nothing could be further than the truth. Forget short-term share price movements, except when they allow you to buy great companies at cheap prices, and to sell mediocre companies at great prices.
The one key thing to remember is that in the long-term, it is the performance of the underlying company that drives the performance of the share price.
72 Million Pounds Of Uranium
As for Bannerman Resources, the company recently announced an updated resource statement, increasing its contained uranium from 27 million pounds to over 72 million pounds.
In our most recent report, we estimated its uranium project could generate operating cashflow of $160 million a year, which compares extremely favourably with its total market capitalisation of $280 million.
Bannerman remains one of a select few uranium plays our portfolio, and we look forward to continuing to follow its progress as it heads towards full production around mid-2011.
You Can Be An Investing Genius With An I.Q. Of 25
The human mind thinks in weird and wonderful ways. It’s our greatest asset, yet when it comes to stock market investing, the brain can be our greatest liability.
It makes us do irrational things, like buying shares in obscure companies based on a “hot tip” from a friend of a friend’s uncle’s electrician who heard that the company was about to announce a major iron ore find in the east of Western Australia.
It makes us do irrational things like selling shares in great companies at knock-down prices, just because you read some “expert” say the US economy was headed into recession and that China will be next.
Successful investors use their heads. They focus on the long-term and make rational investing decisions. We think these two quotes from master stock market investor Warren Buffett sum things up perfectly…
“Success in investing doesn't correlate with I.Q. once you're above the level of 25. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing.”
“You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with the 130 IQ.”
Have You Got The Guts To Buy?
We suspect most people reading this email have an I.Q. above 25, in which case Warren Buffett, the $50 billion man and the greatest stock market investor of all time, thinks you ALL can be successful investors.
· Have you got the will to invest in the stock market during good times and bad?
· Have you got the guts to buy when all others are selling?
· Can you keep your head whilst all those around you are losing theirs?
· Can you be fearful when others are greedy and be greedy when others are fearful?
· Can you ignore short-term “noise” and concentrate on long-term reality?
The list could go on. We hope you get the picture. With a reasonable level of intelligence, in the months, years and decades ahead, you can build significant wealth from investing in the stock market.
The Tiny Company That Struck Oil
Picking the right shares is obviously the key to making your stockmarket riches, and that’s where we think we can help you.
We generally focus on smaller companies. Smaller companies are often over-looked and under-researched, allowing us to find companies with outstanding prospects, yet valued at a fraction of the price of larger companies.
Some of our very best past recommendations have been smaller companies.
Take Carnarvon Petroleum for example. This small oil company typifies exactly what we are looking for when we search for stockmarket hidden gems.
We first recommended the stock as a BUY back in February 2006. At the time, the share price was a lowly 5.4 cents and the total company was worth just $17 million.
This was your typical under-researched small company. The share price had gone nowhere for the previous two years. As far as the market was concerned, it was a corporate basket case, a perennial under-performer, destined to spend the rest of its days stuck in penny share land, going nowhere fast.
But we noticed things were changing for the better. In our initial report in February 2006, our special buy email alert said…
“Over the past 12 months, key board and management changes have occurred that indicate exciting times ahead for investors. Carnarvon Petroleum now has all of the key foundations in place for success – a dynamic board and management team, a solid producing oilfield in
The Cheap Tiny Company That Struck Oil
We also had the opportunity to meet with the company’s new Chairman and Chief Executive Officer to hear first hand about their plans to reinvigorate the company. Crucially, these two men had extensive mining sector experience, something we always look for with junior mining and resources companies.
Finally, the company was cheap, based both on its underlying oil assets and our positive view of the oil price. We concluded our BUY report by saying…
“The company’s market capitalisation is modest by industry standards, particularly given the quality of its board and management team, and its level of drilling activity. We believe the share price downside is limited and we recommend Carnarvon Petroleum as a Buy to all Members around 5.4 cents.”
How You Could Have Turned $20,000 into over $175,000
Fast forward to now, and the Carnarvon Petroleum share price is around 48 cents.
For Members who bought at 5.4 cents, at 48 cents they’d be sitting on a profit of almost 790%.
To put that into perspective, an investment of $20,000 would now be worth a quite unbelievable $177,777.78.
Now not every share we recommend to our Members will perform as well as Carnarvon Petroleum. Some will fall in value – after all, we’re only human, and mistakes can and will happen.
But, we hope it gives you an idea of what’s possible by investing in the stockmarket, and by our share recommendations.
The Hunt For The Next Huge Stockmarket Winner
The hunt for the next Carnarvon Petroleum is now officially on.
Could it be Platinum Australia – up an amazing 697% since we first recommended it as a buy back in November 2005?
Or could it be Andean Resources, up an astonishing 648% since we first recommended it as a buy also back in November 2005?
Or could it be Terramin Australia, up a breathtaking 574% since we first recommended it as a buy back in December 2005?
(Prices taken on February 25th 2008; gains don’t include dividends.)
Despite the massive increase in the share prices of each of those three companies, we are still confident of further gains in the months and years ahead.
This Emerging Gold Player Could Be Sitting On 3-5 Million Ounces Of Gold
But it’s only one of those companies that we currently recommend as a BUY. In our most recent update, we said…
“…we believe an eventual global (gold) resource in the vicinity of 3-5 million ounces is virtually a certainty. The discovery cost remains extraordinarily low at less than US$10 per ounce.”
“…we believe the future….has never been rosier.”
We concluded the report by saying…
“…we recommend the stock as a BUY…”
For potential investors in this exciting emerging gold player, there are two pieces of good news…
1. The shares are currently trading slightly below our latest BUY price, despite them at one stage being some 19% higher than our most recent buy price.
2. Since our latest buy report, the gold price has continued to rise, recently hitting an all time high of US$958 an ounce. The psychologically important US$1000 an ounce gold price is closer than ever, as is our 2008 target price of US$1100 an ounce.
To put the size of the gold resource into perspective, a chart recently produced by the company showed that between 1999 and 2006, there have been a grand total of only 24 one-million plus ounce gold discoveries. This compares with 23 in 1996 to 1998, and a further 128 from 1985 to 1995. No wonder the price of gold is near record highs, and we think is headed significantly higher.
As you can see, we’re excited about the prospects of this company. Could it be the next Carnarvon Petroleum? We’ll find out in the weeks, months and years ahead.
The Oil Price Surges Through US$100 A Barrel
Then there’s the mid-sized oil exploration company we previously mentioned, the company about whom we recently said “…is sure to generate exploration excitement.”
Just before we give you some more details on this company, first a word on oil.
Over the past five months, the price of oil has been contained to a relatively broad range between support at US$85.82 and resistance at US$100.09.
We see this as a period of consolidation, typical of this part of the price cycle, and not surprising considering the strong gains achieved throughout 2007. Although we anticipate further consolidation within this range, given the resilience of the longer-term upward trend we expect oil prices to break higher in due course.
Given our confidence on the oil price, the challenge is to unearth hidden stock market gems that are set to not only benefit from the record high oil price, but who are likely to make significant new oil discoveries in the not too distant future.
We think we have several such companies in our portfolio, the names of who can be accessed the instant you sign up to become a Member.
Is This Mid-Sized Oil Explorer Set To Explode?
But we think one oil exploration company in particular could be set to benefit from its 2008 aggressive and extensive drilling programme.
Not only that, one of the locations the company is drilling is
If that’s not enough, the potential oil resource in place in the area they are drilling is estimated to lie somewhere between 6 million and 40 million barrels, with mean oil resources estimated at 20 million barrels.
We first recommended this exciting oil explorer as a BUY in January last year when the shares were $1.64. We re-recommended them as a BUY in January this year at around the same price, despite the company making excellent progress over the intervening 12 months.
Fast forward to today, and largely courtesy of the sub-prime fall out, the shares currently trade around the $1.40 mark, and that’s even after the shares jumped over 6% on Monday this week on positive news from its first well in
Then there’s their six well Indian drilling programme, expected to commence any moment now. We understand the quality of the 3D seismic data to be excellent.
All in all, we think this company adds up to an excellent medium-high risk/high reward oil explorer.
We wish you happy and profitable investing.
P.S. As we’ve said previously, we think the world is experiencing a once-in-a-century boom via
P.P.S. The Australian Financial Review this week featured an article titled “Upside all the way for resources” in it saying, amongst other things, “In a strange way,
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