Another Look at Sprott Resource

By Travis Johnson, Stock Gumshoe, September 11, 2009

I’ve picked a lot of stocks that have stunk for my “Idea of the Month” writeups, especially the first few I did before the market collapse last fall … and many more that are within a stone’s throw of the S&P 500 in either direction (and therefore not very exciting).

But one that has been a pretty good performer ever since I wrote about it has been Sprott Resource … and I think it merits another look right now, especially if you’re a believer in the long-term attractiveness of gold, silver, and industrial and agricultural commodities.

In fact, I’d like to be buying several of the stocks I’ve highlighted now, including Activision, and I regret selling Seadrill and Otter Tail shares and may well buy them back shortly (that was part of a swathe of selling I did recently to free up capital for a non-stock investment), but there are two that jump out at me today as compelling — FTI Consulting (FCN), which has done far worse than the S&P since I wrote about it, and Sprott Resource (SCP in Toronto, SCPZF on the pink sheets).

FCN is a bet on a company that has both a big bankruptcy consultancy and a large and globally diversified consulting business in general, with significant work for them ahead as regulations change dramatically, mergers and acquisitions recover, and corporate restructurings continue to proliferate (that’s my expectation, at least) … plus, they may get some extra business thanks to the accounting scandal at competitor Huron Consulting, and they trade at as low a forward PE as I can remember (about 13), for a company that over the past ten years has been among the strongest growers in the world. Their bankruptcy business didn’t spike as immediately as I thought it might, but I still like their overall positioning in what I expect will continue to be a tough economy and a tough regulatory environment around the world.

But what I want to write about today is Sprott Resource … Sprott is not particularly different today than it was when I wrote about them back in mid-May, though the shares have gone up a bit. They remain to a large extent a “blank check” bet on the investing acumen of their management, but the cash and gold backing up that blank check represents an incredibly formidable backstop to the shares, ...

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