“Second Chance to Cash in” from Dan Ferris

Looking into a teaser for Extreme Value's "buying Berkshire Hathaway 40 years ago" stock

Dan Ferris edits the Extreme Value newsletter for Stansberry, and he has teased a few interesting ideas for that letter in the past (including, starting several years ago, Altius Minerals (ALS.TO, ATUSF), which has become one of my largest personal holdings) … so I tend to pay attention when he starts to pitch a new idea, and we usually get quite a few questions from readers when that happens.

Now, whether that’s because Ferris is somewhat stingy with the recommendations (admirably, he doesn’t force a new stock idea each month and is usually patient), or simply because Stansberry has access to the largest mailing lists for his promos, well, we’ll have to guess at the answer to that.

But we don’t have to guess at the answer to this teaser pitch — that is, I’m sure, well within the wheelhouse of the Thinkolator.

He’s teasing an idea that he says he first recommended in 2003 for 267% gains, and he says we have a limited time opportunity to get in quickly for the next leg up… and, yes, he says that back in 2003 he said it was …

“… an opportunity that’s very similar to buying Berkshire Hathaway 30 years ago… and it’s still cheap enough to make a fortune on.”

And now…

“Thanks to a number of market events, which I’ll explain momentarily, the exact same situation that propelled the stock 267% is setting up again. Only this time, the gains could be even greater.”

Makes you wonder what the stock might be, right? Well, that’s why your friendly neighborhood Stock Gumshoe is on the case. Let’s start to sift through the pile of clues:

“… you must act quickly.

“This stock is small and, for reasons I’ll explain, it trades like a stock that’s even smaller. Meaning: as more and more people catch wind of this opportunity, shares could easily explode and never come back down….

“You see, when I said investing in this stock was like buying Berkshire Hathaway 30 years ago, it was no exaggeration…

“Berkshire Hathaway, Warren Buffett’s iconic holding company, has skyrocketed in value over the last few decades. And it’s done so following one very simple tenet: Only buy high-quality businesses at huge discounts to their fair market price – like Coca-Cola in 1988, when it was trading at just under $4 a share (it’s at $40 today)… or Wells Fargo in 1989, when it was trading at under $3 (split-adjusted), it’s at $49 today. With this new opportunity, we get the exact same investing strategy, we get to pay less than $8 per share for the opportunity to get in on a company that benefits from some of the most potentially explosive deals in the market.”

OK, so it sounds like we’ve got some kind of nimble little conglomerate here. Which one?

Well, it has something to do with the broad commodity markets — Ferris goes on to note that the collapse of stocks in iron ore, oil and gas, gold and other commodities has created a bargain-basement hunting ground for his secret company. Some more clues:

“This company has bought up interests in large stakes in oil and gas assets, iron ore, mineral miners, and other commodities that are in deep financial distress.

“And by doing what they do best, they recently got one of the best deals on a distressed business that I’ve seen in my entire investing career… and when the value of this particular asset is realized, it could send this stock soaring….

“… one company in particular, a Canadian based petroleum play acquired in recent years by the firm I’ve been telling you about, was minting money for a decade thanks to this resurgence in North American energy production.

“This petroleum company went public in 1996 at C$0.65 a share. By 2006, it was selling for C$18 a share. Their quarterly sales of oil and gas nearly tripled in just the six years between 2002 and 2008.

“Most of its production was natural gas. Natural gas prices shot up, from under $3 per thousand cubic feet (a unit of measurement known as MCF) in 2002 to a peak of nearly $11 per MCF in 2008….

“From IPO to peak, the company’s stock rose 2,800%. From peak to trough, it fell 99.97%.

“Enter our Extreme Value company…

“They stepped in and bought this company’s bank debt and converted it to stock. Then they bought the remaining outstanding shares at a bargain-basement price of C$1.25.”

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