“Like Buying Standard Oil at its Birth”

By Travis Johnson, Stock Gumshoe, August 16, 2007

If you want to get my goat, just start your teaser, “If you could own but one stock for the rest of your life, this would be it!”

Come on people, something a little more original, please!

Well, this fella is selling his service by essentially promising that this stock will turn you into a Rockefeller (not in so many words, of course). Buying these shares now is compared to buying Standard Oil before everyone had cars, or Boeing before air travel was commonplace, Microsoft, McDonald’s, bla bla bla.

Easy to find these in retrospect, of course.

And of course, he addresses his letter to “Aspiring Billionaire.” Myself, I’m a bit more modest. “Aspiring couple-extra-thousandaire” doesn’t really sound quite right though, eh?

The letter is from Luke Hodgens, of Powerhouse Profits from Trinity Research. I get terribly confused about all these incestuous companies in the investment newsletter world, but I don’t think I’ve heard from Mr. Hodgens before. His newsletter is “on sale” for $99 a year at the moment.

So where do we begin? What is this earth-shaking company that’s going to turn us all into John D. Rockefellers and Bill Gates’ and Ray Krocs?

Well, to start with this adviser calls ethanol “the only practical, realistic fuel of the future.” I find that kind of hard to take seriously, but I’m sure some people agree with him. So this is an ethanol company we’re dealing with.

Sooooo last year, don’t you think?

And in fact, the company in question is down quite a bit from where it peaked in 2006. Ethanol craze got a little long in the tooth there, I suppose, though these guys are actually (barely) profitable at the moment.

Anyway, on to the clues: if we skip all that stuff about how high oil prices and global warming and voting farmers and eminently available switchgrass and government mandates all pile on to make ethanol the single best investment EVER …

deep breath …

One final tease for you from Mr. Hodgens: “I’m talking about a stock that has the potential to turn an investment of $10,000 into $100,000 in a matter of months…as much as$500,000 in a year or so…and down the road, millions as the world comes to depend on this one company for the fuel of the future.”

Doesn’t that make you want to slap someone? $10,000 into $100,000 in months, $500,000 in a year? Lets make our tantalizing promises a little bit more realistic, shall we? A simple double or two would suffice, I’d think, maybe over a few years?

So then, when I’ve blown off my steam, we get some clues about the actual company:

Bill Gates invested $84 million into this company.

(OK, so for the sophisticates out there, that’s probably enough — anyone can check out those SEC filings. For the rest of us, any more clues?)

Not really any exciting ones … but there’s this:

“This is your chance to make your own fortune by getting in early on the only purely-ethanol company with the manufacturing, marketing and distribution experience to take the ball and run with it.”

And this:

In “2004 they were selling $82 million worth of ethanol. In 2005 they did $100 million.”

“And by 2008, when a total of 6 new production facilities should come on line, it jumps to a whopping $380 million.And that’s just for the state of California.”

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He also tells us that this company is the only “pure play” public company for ethanol. That dates him a bit, there is at least one more now — after all, wave a pile of money around and someone’s going to throw together a public company to take it from you. And of course, there are all the stocks, like Archer Daniels Midland or Deere, that are profiting a little bit less directly from ethanol.

So the ad is clearly pretty long in the tooth — But still, a reader came across it recently, the ad is still up, and it’s not like the company has already gotten its 100% or 500% gains (well, to be charitable, depending on when the ad came out it might have gotten a couple hundred percent if he timed it perfectly, but unless he sold he gave it all back in a matter of weeks) … so let’s check it out, maybe there’s something here.

Going primarily from the Bill Gates clue, this company has to be …

Pacific Ethanol (PEIX)

Gates’ Cascade Investments bought $84 million worth of this one way back in 2005 … so he’s probably