 Not long ago, I was introduced to one of the least known — and potentially greatest — bull markets in the world today: Canadian natural resource companies selling for a small fraction of their true value.
These companies are not on Wall Street. And yet they’re very close by, easily accessible through U.S. brokers. The shares are not risk-free. Yet they can be as powerful as highly-leveraged, cheaply-priced options … and they never expire. Nor should you count on overnight riches. But if you can commit to about three years’ time, you have the potential to duplicate similar situations which recently produced gains of 406%, 444%, or 558%, and these are not the most extreme examples. Even if you can achieve only half those results, I don’t think you’d be unhappy. Details in a moment. But first, the big picture. Canada Is Easily the Strongest, Most Stable, Unlike emerging nations, Canada has all the technology it needs to exploit its resources. And unlike other high-tech nations, it has all the raw materials on its own soil. For many years, Japan and Australia have been trying to forge a closer relationship to achieve a similar combination. Canada already has it. Also for many years, other commodity-rich nations have been clamoring to gain direct access to the huge U.S. market. Canada already has that, too. Canada has modern, deepwater port facilities on the Atlantic Ocean, giving it a direct line to European markets. And Canada has similar facilities on the Pacific Ocean, giving it equally good access to the rapidly growing Chinese and Southeast Asian markets. In Alberta, Saskatchewan, British Columbia and beyond the Arctic Circle, Canada has massive deposits of gold, uranium, coal, oil, and other vital resources, with more waiting to be discovered. On the Edge of a New, Great, Canada is already cashing in. In September, while the U.S. recorded its worst trade deficit in history, Canada has just reported its fifth best surplus in history. Canada’s biggest trading partner is the United States. But China is coming up fast. Last year alone, Canada’s trade with China jumped 50%. And at $15.5 billion, trade with China is just beginning to take off. Most of this rapid trade growth is fueled by the rising Chinese demand for Canada’s natural resources. That’s why China just bought one of Canada’s large oil companies. And that’s also why more Chinese companies have sent their scouts to trek through Canada’s hinterland, armed with bagfuls of money to scoop up coal mines, oil sand fields, natural gas pipelines and producers of rare metals. On Thursday, Larry told you how growth continues to explode in China and Southeast Asia. This parallel explosion in Canada is the natural consequence. If these resources were currently in abundant supply … or if the demand for them were shrinking … all these great strategic advantages that Canada has might not merit your immediate attention. But the situation we face today is precisely the opposite: Demand for natural resources — especially from the East — is skyrocketing. Available supplies — mostly from emerging nations — are limited, or, worse, even disappearing. Once you remove these resources from the ground, they don’t grow back. These are NOT renewable commodities. So nearly any country or company that can help fill the void is booming … and Canada is on the leading edge of that boom.
Canada’s success should not be news to you. In fact, if you’ve been following me for a while, you may have already invested in Canadian companies — with results that far exceeded our expectations. Example: You may have bought Enerplus (ERF), a Canadian natural resource company designed mostly for income. Our main goal was to earn about 10% yield, and we would have been quite satisfied with that result. As it turned out, in addition to getting nearly all the yield we hoped for, the price of the stock also surged 2.7 times: On October 3 of this year, the stock closed at $48.05. Exactly three years earlier, it sold for only $18.11. My subscribers didn’t get in at the bottom nor sell at the top. But if they were following my instructions, they had the opportunity to pick up a good chunk of that gain. Now, if you like the gains you saw in Enerplus, consider the results you can achieve in Canadian companies explicitly designed for rapid growth.
I was referring to a Canadian natural resource company, Innova Exploration. And this company is not alone in this type of performance: Two other Canadian companies, Paramount Resources and Real Resources, rose 406% and 444%, respectively, to mention just two. And even the worst-performing stock in this group, Nexen, grew by 216%, a result I don’t think you would have minded too much. Nor are these the most extreme examples. Transglobe Energy, for example, the one stock on this list that sold for less than $1 per share in November 2002, rose 1,192% through last week. Even if you can only achieve a fraction of that performance, you could still double or triple your money.
Some prime examples … Red-Hot Canadian Tungsten Producer An esteemed colleague of mine — I will introduce you to him in a moment — is looking at one small mining company with a total value of only $87 million. Meanwhile, the company has as much as $17.3 BILLION in reserves of a rare metal which is currently in scarce supply and great demand worldwide — tungsten. Do the math: The company’s tungsten reserves, when mined, could be worth 199 times more than the total current market value of the company’s shares. In that sense, the company is selling for only HALF A PENNY on the dollar. Of course, minerals in the ground and minerals ready for market are two different things. But even if this company’s valuation per dollar of tungsten reserves rises to a lowly 5 cents, you’d be talking about a 10-fold increase in its shares. And if the company’s valuation rises to 50 cents on the dollar — a not-so-far-out possibility in a commodity superboom — you could be looking at a gain of 100-to-1 in its share price. That’s the kind of profit potential which you usually see only with cheap stock options! Like options, there’s no obligation beyond your initial small investment in these shares, plus any minor commissions you pay your broker. And like most options, they’re very cheap, as little as $1 per share. If they work out, great. If not, you write them off. But unlike options, this is an investment with no expiration date. You can hold it as long as you want. And provided the company remains solvent, no one can place a time limit on your opportunity. Tungsten Is Up 150% in the Past Year, You probably know tungsten as the super-hard metal used to harden blades and drill bits. But tungsten is also essential for electrical circuits, ordinary light bulbs, space-age superalloys and a whole range of other industrial processes. In the last year alone, the metal’s price has zoomed 150%, easily eclipsing the parallel surges in oil, natural gas, gold, and silver. Right now, China supplies about 85% of the world’s tungsten production. And outside of China, Canada is the largest viable source. In the past, China pushed the price of tungsten down by flooding the market with exports. No more! Now China is close to needing all the tungsten it can lay its hands on for itself. As a result, The World Faces a Supply Shortfall of This could be a far more serious — and concentrated — supply-demand squeeze than the one we’re witnessing in oil. For one, there are few viable substitutes for tungsten. Even if the price doubles and triples again in the next couple of years, it’s going to still be in fierce demand. That’s why we like this tungsten producing company. With the metal price already up 150% in the last year alone, with China’s demand surging, and with few viable substitutes for tungsten, this company is in the catbird seat. Small-Cap Canadian Coal Producer Another major Canadian resource sector we’re looking at is coal. Right now, large-cap coal companies have already seen huge run-ups in their shares. For example, Fording Canadian Coal Trust has surged from just $6.85 per share to as much as $44 in less than three years.
Peabody Energy (BTU) catapulted from about $12 to $86 in the same period. Looking ahead, there are still good opportunities in major coal companies. But at $40 – $90 per share, the big money has already been made in these large-caps. That’s why investors aiming for bigger growth should also look at the smaller companies that could be in the forefront of the next wave. And that’s also why we have our sights on Canada, which most investors have so far failed to explore. For example, we’re looking at one red-hot Canadian company that has grown into one of the best small-cap miners in North America. Right now, the company is exploiting high-quality, low-cost assets covering over 100,000 acres in western Canada. It doesn’t have to spend much on infrastructure because it can take advantage of existing facilities in the region, including rail lines, ports, and a nearby town. Plus, it has little debt. Meanwhile, it’s sitting on more than 40 million tons of proven and probable reserves in the higher-priced metallurgical coal. Assuming an average of about $90 per ton, you’re talking about $3.5 billion. And yet the company only has a market cap of $298 million, or less than 10 cents on the dollar. If the company’s market cap goes to a still-cheap 20 cents on the dollar, you’d already be looking at a nice 100% gain. Red-Hot Uranium Company with One of A third stock we’ve uncovered is an uranium explorer that has been striking one rich find after another and now has over a dozen active exploration sites in Saskatchewan. According to the company’s president, it has recently made the highest-grade uranium discovery in a region which, itself, has the highest grade uranium in Canada. Meanwhile, since 2000, the price of uranium has surged from $7.10 to $33 per pound, a 364% rise that we believe is just beginning to gain momentum. Reason: New nuclear reactors are being built all over Asia — eight under construction in South Korea … three in Japan with 12 more planned … four in China, with six more planned and 17 proposed … 9 in India with 8 more on the drawing board … plus up to 25 expected in Russia alone. With this new boom in nuclear power, uranium demand is already outpacing supply by 13 million pounds. And within the next decade, that gap could widen to 20 million pounds. In short, uranium, once forgotten and forsaken, is now red hot. We believe its prices will shoot up to $50 per pound — or more — within three years. The share price of this best-of-class uranium company could surge. The Risks of Investing We rarely recommend penny stocks — they’re too small. But even stocks such as the ones I’ve told you about this morning, selling for less than $10 per share, harbor some risks you should be aware of. First, they’re not as liquid. In other words, unlike large-cap stocks, they’re not for traders who like to jump in and out. They’re also not for big crowds. If too many investors pile into these companies all at once, it may give you the illusion that the company’s value is doubling and tripling overnight. But that illusion rarely lasts very long. The way these companies can really make money for investors is with the natural growth that comes with the march of time … and with the wholesome, constructive expansion that comes with a commodity superboom such as we’re seeing today. The only way you can make money quickly is if a big-cap company swoops down and gobbles them up. But you can’t count on that. So if your goal is overnight riches, this is not for you. As I said at the outset, three years is the more reasonable time horizon. Second, it could be risky to invest in these companies strictly based on information you can get from your broker or on the Internet. Unlike most larger, long-established companies, you can’t blindly assume that they have sound management. Yes, their financial statements are useful to help narrow down a list of possible buy targets. But before you can confidently pull the trigger and spend real money, you need to know more … which leads me to an important announcement on this very subject. I’ve Hired a Team of Experts to Personally The leader of the team is Sean Brodrick, my colleague who originally introduced When Sean first talked to me about them, the first thing that came to mind was the Vancouver Stock Exchange which had a bad reputation some years ago. But he has demonstrated to my complete satisfaction that these opportunities have nothing to do with that old situation. I quizzed him about his sources of information. I was pleased to learn that he has not only conducted thorough research from home, but he is also doing extensive fieldwork in Canada. To me, that’s a must for small-caps. Unless you have someone who will talk to the engineers or management, visit the company, and kick the tires, I’m not comfortable, and I don’t think you should be either. You might get a company that holds its own and whose shares stay stable. But that’s not what this opportunity is about. This opportunity is about buying companies that have a good chance of giving you superlative growth for your money — like Innova Exploration’s surge of 558% in three years … like the coal producer, Peabody Energy, which surged from $12 to $86 per share in roughly the same time frame. And even failing that goal, this is about achieving double- or triple-your-money gains in less than three years. Sean Brodrick is a great analyst. He worked as a disciple of Larry Edelson’s for several years, focusing on natural resources. He is a contributor to MarketWatch. And now he has rejoined our company as the editor of a new service he’s heading up, “Red-Hot Canadian Small-Caps.†Also on the team is Larry Edelson, as Sean’s natural resources consultant, our research analysts, and yours truly, to keep a watchful eye on any downside risk. How to Buy Red-Hot There are many brokers, including Ameritrade, E*Trade, Fidelity, InterActive Brokers, and Merrill Lynch, that can handle these shares seamlessly. No special accounts need to be set up, and no special arrangements need to be made. So they’re easy to buy. But buying them right takes a lot more care and attention. First, avoid companies that are essentially one-engineer, big-debt operations.
Second, you need to watch the market activity each and every day, including the volume of trading and the pattern of the price movement.
Third, you need to avoid scooping up a very large number of shares all at once.
You can do this on your own, following these general guidelines. Or Sean and his team will help you with their Red-Hot Canadian Small-Caps service. They will give you explicit, easy-to-follow instructions on exactly when to place your orders, how much to pay, and how many shares to buy. Then they will watch the market to see if the orders were executable, following up with revised instructions if they’re not. All subscribers are sent exactly the same instructions at the same time, instantly via e-mail. And under our company’s Personal Securities Transactions policy, no employee is allowed to buy, sell or hold the same securities recommended in the service. Their trading activity is monitored by our compliance officer, and if they break the rules, they are subject to immediate dismissal.
When you join, you will immediately receive Sean’s “Guide to Canadian Natural Resources,†a guidebook designed to give you a broad understanding of the big picture plus all the specific details you need to help maximize your chances for success. The service is concentrated in Canadian natural resource companies where we see the best combination of stability and opportunity. But for diversification, Sean is not adverse to recommending Canadian small-caps in other sectors as well, if he sees a special situation. Overall, this is a high-powered service, using investments that require continual, intensive monitoring to maximize the chances of achieving those goals. It’s not for your keep-safe funds or funds that you’ll need for emergencies. It’s for money you can afford to risk, aiming for unusually high returns in a three-year timeframe. And, of course profits are not guaranteed. You CAN lose money. But the risk is strictly limited to the small amounts you invest. Moreover, unlike options, there is no time limit. Two Essential Limitations If you’re interested in joining Sean and his team, please be aware that there are two essential limitations to this service: Limitation #1. The service is capped at 500 members. As I told you a moment ago, there’s no room for a crowd of investors piling in all at once. Limitation #2. The membership term is essentially three years. By the end of the three-year period, our intent is to help you cash out and then close the service. With some stocks, we could cash out sooner, maybe even within six months. If so, great. The service will of course continue for the full three years to give all remaining stocks the full opportunity to grow. Plus, we will be continuing to issue new recommendations as we move along. Conversely, if it takes longer than the three years, we won’t be a stickler for time. We’ll extend the service at no charge. Our goal is to make this work for you in a big way, and we can’t let the calendar make the timing decisions for us. The one-time cost of the membership is $5,000, but that’s all you’ll ever have to pay for the service. There will be no yearly subscriptions and no renewals. However, if you decide to cancel at any time, that’s OK. In the 33 years since I began my company, I have never rejected a refund request. Or, if you prefer to do this on your own, that’s also OK. I recommend you stick with the big-cap stocks like the ones I discussed earlier. Enerplus, for example, has recently come down from its peak, but seems to be finding good support at these levels. Ditto for Peabody Energy, which closed up a nice 1.8% on Friday, at $76.03. The downside: With most of those big cap stocks selling for close to $50 or more, by the time you’ve bought just a couple hundred shares, the additional investment will already be far more than the entire cost of Sean’s service for the three years … and with greatly reduced growth potential. First Recommendations to Be Sean is planning to send his first recommendations early in the week of November 28, just after the Thanksgiving holiday. So if you want to guarantee your membership and be on board before he issues the first recommendations, be sure to contact us by Sunday, November 27. And if you anticipate being distracted by the holidays, it may be a good idea to call us sooner. The number is 800-871-2374. Ask for Brandon and he will answer any questions you may have. Or, you can order online at our secure website. Good luck and God bless! Martin About MONEY AND MARKETS MONEY AND MARKETS (MAM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Larry Edelson, Tony Sagami and other contributors. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MAM. Nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MAM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical inasmuch as we do not track the actual prices investors pay or receive. Contributors include Marie Albin, John Burke, Michael Burnick, Beth Cain, Amber Dakar, Scot Galvin, Michael Larson, Monica Lewman-Garcia, Julie Trudeau and others. © 2005 by Weiss Research, Inc. All rights reserved. |
Red-Hot Canadian Natural Resources
You’ve Already Seen 
Earlier, for example, I told you about a company whose shares have gained 558% in the past three years (from 11/8/02 through 11/8/05). 
Looking beyond Canada, Massey Energy (MEE) has jumped from about $8 to as high as $54, also in three years.
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