I always like reading Dan Ferris’ stuff — he does the cranky loner act so well I can only assume that it’s real, and the latest ad for his Extreme Value newsletter is no different. This newsletter is slotted in as the “deep value” letter at Stansberry & Associates, and he has often recommended either solid blue chips and megacaps or underappreciated “discount to net asset value” stocks in the past.
Today, he throws out a good grouchy spiel all about how lots of Wall Street brokers subscribe to his newsletter, and then turn around and give the opposite advice to their brokerage clients — including some great statements as we go through the letter: “Trends are for Idiots” and “‘Hot’ is for Suckers” and “80% of Stocks are Trash.” Maybe I just like reading his stuff because deep down, I agree with most of it. There’s something reassuring about value investing that you just don’t get from technical analysis or trend following — though of course, you also often have to be really patient … and right.
And then he eventually gets into teases of two stocks — both of which I’ve written about before.
The first one is an old favorite of his (well, old meaning he teased it starting a year or so ago) — here’s the pitch, in case you’re late to that particular party:
“Recently, I took a helicopter ride to a remote hilltop in western Newfoundland… to visit a company I believe could return 2,800% or more.
“I was traveling with 3 of the world’s most talented mineral-exploration geologists and two of the best mining analysts in the business.
“Once clear of the helicopter… we had barely walked 10 feet when all six of us stopped, bent over, and picked up the first rock we saw. There it was…
“Gold… visible to the naked eye.
“You see, I was at a gold mine – run by a little mining firm with so much “extreme value” ($194 million, by my estimate), early investors could make a killing.
“I put on coveralls, steel-toed rubber boots, and a mining helmet with lamp… and descended straight into a giant hole in the ground, 20 feet high at the entrance… to see the gold deposits in person.
“Again, to me – this is the only way to make real money in stocks. You have to get to know the executives… scientists… miners… engineers… and anyone else who’s involved in key money-making decisions.
“For example, on the plane ride back from Labrador, I sat next to the firm’s CEO, and had a detailed conversation with him.
“Bottom-line: I urge you to look into this opportunity immediately. As I wrote in my research report: “If this doesn’t qualify as extreme value, nothing does.”
“Based on what I’ve learned, I expect this stock could return 28 times your money, at least. At that rate – a $5,000 stake right now (while it’s still cheap) could easily make you $46,600 a year… for the next 3 years.
“The last time I found a mining stock like this, ROY, we saw a 239% gain.”
So this sounds like it must be our old friend Altius Minerals, a stock I’ve written about a few times both here and on the Irregulars site, and which I still own and would like to buy more of (though now, since I’m writing about it again, I’ll have to wait at least three more days — might not be a bad thing, since recent interest has driven the shares up substantially and I’m kind of hoping they recede to the background again and get a bit cheaper). Ferris initially touted Altius in February of last year, when it was in the neighborhood of $5, as a “prospect generator.” The more recent teaser of his touting Altius is the one that focused on this trip of his to “Newfoundland’s Golden Mountain” and the sighting of visible gold — that particular pitch started back in November, with the shares a bit over $7, and has been repeated. If you happen to be a paid member of the Irregulars, you can see my additional Altius comments on the members site here.
I’ve written about this one enough times that I don’t wish to repeat myself, but Altius holds significant land holdings and mineral rights mostly in the far eastern provinces of Canada (Newfoundland, Labrador), and they generally try to explore their holdings, delineate resources, and then get a joint venture partner to put up most of the cash for drilling and developing a potential mine. In exchange, Altius gets some negotiated royalty and/or junior ownership position to allow them to profit from any eventual success at that potential mine, without having to take any additional risk or invest in the mine development.
It seems to me that they’re trying to slowly and carefully build the next Franco-Nevada, building up a diverse future revenue stream from iron, nickel, gold, uranium and other mining operations. Right now their biggest assets are a royalty on the huge Voisey’s Bay mine, and a big pile of cash and RGLD shares that they got in exchange for their opportunistic investment in International Royalty (ROY) before RGLD won the bidding war for that company. Most of their potential “royalty streams” and joint ventures are many years away from being “monetized” as properties are explored and mines are developed. For a while, the stock traded at a discount to the value of their readily ascertained cash and liquid investments, but it now arguably trades at a small premium — partly because of extra attention from folks like Ferris and many other, more vocal investment pundits, and partly because some of their joint venture projects, including a big new iron ore development, are moving forward nicely, so more investors are willing to pay more than their “cash on the books” value for the company.
So that first “extreme stock” seems almost certain to be Altius Minerals, which many of you know and which, not to repeat myself, I like quite a bit. Ticker is ALS in Toronto, ATUSF on the pink sheets.
And Ferris throws in a second tease in the ad as well:
“How to Always Make Money
“I’ve come across a company that owns over half a million acres of land in Florida – bought decades ago for, in many cases, JUST $2 an acre…
“The last time I found a situation like this – the sugarcane fields in Maui I told you about – my readers saw a small fortune. This time, I expect you could see 3 times your money… beginning just weeks from now, on May 23, 2010.Are you getting our free Daily Update
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“You see, on that date… in less than 2 months… the United States will open its first international airport built in 16 years.
“And after months of research – I’ve discovered this little-known Florida company owns every inch of land beneath it. (Even better, this land is right in the middle of one of the largest concentrations of military personnel in the U.S.!)
“Bottom-line: Beginning May 23rd – the stock could begin a 100%+ climb… as the airport and all its traffic drives up the ‘extreme’ value of the land. “
Well, Florida real estate is not quite the same frightening contrarian investment that it was a year or so ago, but it still gives people the heebie jeebies — so perhaps this stock is still a value? From those clues, it seems quite certain that he’s teasing St. Joe (JOE), a long-time value investing favorite.
And I don’t think I’ve every written about a Ferris teaser for JOE, but I suspect he’s probably been on this one for a long time as well — like the other “land bank” stocks this one is a prime value investor favorite thanks to the fact that, like many companies with similar assets, it values the land on its books at a price far lower than it would be worth to a buyer today (in many cases, the value is their initial purchase cost, often from many decades ago). St. Joe owns a huge swath of land — including a lot of beachfront — mostly in Northwest Florida (they own about 580,000 acres, and about 40,000 of those are “entitled” and ready for subdivision and development — much of the rest is wilderness or timberland). Those landholdings are largely a relic of its days as a timber company, and their current business is in managing a pipeline of real estate projects that make this land more valuable — gradually creating subdivisions, neighborhoods, and even towns in the panhandle. The airport is opening this Spring, after a long wait and several court battles from environmental groups, and JOE is heavily invested in making sure the airport “works” — there was an article in the NY Times a few weeks ago about that. They also have a