“Worst Pricing Mismatch I’ve Ever Seen” (Nick Hodge)

Another look at Hodge's recurring Graphite teaser pick that he says is still "the one to buy."

By Travis Johnson, Stock Gumshoe, July 25, 2012

Nick Hodge has been teasing a favorite graphite stock since late last year, and he’s lately been pushing it hard again, saying that this particular mine is now the source of the “worst pricing mismatch” he’s ever seen.

Which gets the blood boiling at least a little bit, right? After all, what is the point of investing in individual stocks if you’re not looking for “pricing mismatches” — the stocks that are trading for less than they’re really worth? So let’s see if we can check and make sure he’s still teasing the same pick, and you can see if you think it sounds like the kind of investment you’re interested in.

Here’s the new chatter about this stock from his latest email:

“Whenever the price of a commodity rises as dramatically as it did with graphite, inevitably companies try to find more graphite to mine.

“Makes sense, right? If the price is flying, why not mine it and sell it?

“Well that’s exactly what happened.

“Before graphite prices took off, there were only a couple graphite companies outside of China. Now there are 36.

“But the one to buy is still the one I went to visit late last year, when this bull was just getting started.

“And that’s what I want to tell you about today….

“this graphite company is simply restarting a mine that was already in production. Mining stopped there decades ago because graphite prices were in the toilet.

“The mine it owns has already been thoroughly tested. And it’s closer to new graphite production than any other company outside of China…

“The conservative estimate is that this company has at least 470,000 metric tons of high-quality graphite.

“So to put a total value on the mine, we have to multiply that by the current price of $2,600 per tonne.

“Right now, if graphite prices remain unchanged, this company is sitting on AT LEAST $1.22 billion. And it could be much more than that if the price of graphite rises, as expected….

“this company’s entire market cap is only $46.9 million.”

He basically draws a picture that’s similar to what we saw from the rare earth stocks a few years ago — when the “story” of the rare earths shortage and Chinese hegemony reached the front pages, and every company that could claim they had a potential rare earth exploration project was able to raise millions of dollars and send its share price flying, even if there was never any hope that they’d actually mine anything within five or ten years. You’ve probably noticed that even the “real” rare earths companies that helped to spark that mania — stocks like Molycorp (MCP), Avalon Rare Metals (AVL) and Lynas (LYSCF) that in some cases even have real production and revenuem — have collapsed in the years since, and are still, well, trying to develop extremely complex projects.

He says there are now graphite companies popping up all over the place to meet rising demand and increasing investor interest, but that it will, similar to the rare earths, be the few actual advanced projects that are worth your attention … and, of course, that the best one is the one he teased and recommended a bit over six months ago (yes, we covered it back then, too, but it seemed time to catch up). Hopefully the survivors of the expected graphite “bubble” will be stronger than the rare earths survivors, but I suppose time will tell.

So what is the stock he’s picking?

Well, yes, it’s the same one we already covered — here’s the intro in case you forgot about it in the interim:

“This Makes Everything Obsolete

“50,000x thinner than a human hair…
“230x more powerful than silicon…
“200x stronger than steel…

“New ‘miracle material’ promises breakthroughs
“in everything from batteries and medical science…
“to oil exploration and defense systems…

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If you don’t remember our last piece about this one, we mentioned it a few times in passing in March when the ad was running hot and heavy and then covered it more fully in April. The stock teased is Northern Graphite (NGC in Canada, NGPHF on the pink sheets)– and while it’s pretty disingenuous to tease