This is the part of Mark Skousen’s recent gold-related pitch that caught my eye:
“Today, I’m going to show you how to retire on a single stock…
“My ‘Alpha-Gold’ investment.
“By this time next year, you could be enjoying 10X… 20X… even 30X your money.
“But only if you get into it now, before the gold rush really takes off.”
10X or 30X your money in one year? Um, yep, please sign me up!
Oh, wait, I’m supposed to be the thoughtful and cautious guy. Maybe I should figure out what it is first?
Here’s some more from the initial email:
“… my #1 gold stock is set to dominate the $190 billion gold industry.
(It’s already quietly making boatloads of money – and it soundly beat the Street’s earnings expectations a little more than a month ago)….
“You have the opportunity to be one of the early investors and reap the biggest rewards.”
OK… so it’s a gold stock, it’s already making money, and you can be an “early investor?” That’s a lot of catnip for gold investors even if you don’t throw in that “30X returns” greedbait. What’s the stock?
For that, we’ll have to dig into the actual ad and see what clues we can surface as we seek to “Live Out the Retirement of Your Dreams With This Single Stock!”
The spiel, which comes in from Skousen’s publisher Roger Michalski, is, of course, largely about gold and the likely rising gold price…
“The Gold Rush Is On!
“With each day that passes, more Americans are rushing to the protection of gold as a safe haven for their retirement accounts.
“It wasn’t long ago we saw the price of an ounce of gold move from just under $1,500 to more than $1,800 in a few months’ time — That’s a 20% gain — and then a 15% uptick in the price in more recent months….
“So where does Dr. Skousen think gold falls on this timeline?
“It wouldn’t surprise him at all to see gold soar to $3,000… maybe even $5,000 an ounce before all’s said and done.
“The reasons for this are pretty clear…
“From the never-ending fighting in Congress…
“To the constant political tensions between the U.S., China, Russia and Iran…Are you getting our free Daily Update
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“To the shocking ‘Black-Swan’ event Coronavirus that shut down the entire world…
“All these factors add up to a new gold bull market charging all the way through 2021 and beyond….
“As the media catches on to the new gold rush, this could turn into a gold mania like we haven’t seen since 2011.”
I can at least vouch for the fact that my email inbox was chock-a-block with junior gold teasers from 2011-2013 or so, as gold soared following the financial crisis, something we haven’t really seen reignite yet — with the exception of the first six months of 2016, when gold had a quick 20% run and took all the junior miners with it. Will it happen again? I have no idea… gold did have its “post-crisis” surge, which in retrospect is somewhat typical of the price of the shiny stuff immediately following times of crisis, gold ran up 30% or so in the few months following the pandemic shutdowns in the US… but most of the chatter about another surge for gold over the coming years is really about the US Dollar — about gold’s “store of value” status when the world begins to worry more about inflation and the falling value of the dollar thanks to the massive stimulus and spending programs engineered by the government and the Federal Reserve last year (if you create more dollars, each one must be worth less, right?). And maybe this year, too, if the spending surges continue and inflation accelerates.
That’s pretty firmly in Skousen’s wheelhouse as an “Austrian rules” economist, libertarian and critic of central banking, and, of course, as a longtime fan of gold (we’ve looked at plenty of his gold teases in the past).
And apparently it’s a low-priced stock as well, which speculators always love…
“Even if you capture just a fraction of this new bull market in gold, this could be your chance to retire on just one gold stock.
“Right now, you can still get shares of this “Alpha-Gold” stock for pocket change – under $6.
“The stock is still cheap and unknown. But that won’t last long.”
And he begins to hint at what makes this “Alpha Gold” stock special:
“What would make up the perfect “Alpha-Gold” stock?
“It would be a leader in its industry.
“It would have explosive growth.
“It would consistently bring in the highest profit margins in the industry.
“And it would have a rising dividend policy.”
And along the same lines, goes through some of the more general “Alpha” criteria that he considers important for stock picking, which is mostly a screen of reasonable financial metrics…
- “Earnings-per-Share Growth of 15% over the last year…
- Return on Assets over 1%…
- A Piotroski score of at least 6 (out of 9)…
- Altman Z-score of at least 2…
- Price/Earnings Ratio below 20…
- Dividend Policy…”
And the ad says “he also checks to see if a stock has a return on equity of at least 15%…”
So those are some of the financial clues… how about the story behind the stock? We get a bit on that as well…
“The CEO of this company could very well be ‘the world’s most interesting man’….
“He grew up in South Africa, where he became a professional rugby player.
“His instincts on the field served him well in a career that’s taken him from the harsh Yukon bush as a contractor in the early 1980s…
“To forming back-to-back multi-billion-dollar gold companies.”
And there’s one very specific clue, which will be helpful for the Thinkolator…
“In 2007, his company was acquired by Kinross Gold Corp (TSX:K) for $3.5 billion.
“It was a huge payoff, and also lucrative for his close-knit team, who had been together for 25 years.
“That’s when they decided to form a new company with plans to do it again….
“Since its IPO in 2007, it has gone from being a junior miner with no production to an owner of four gold producing mines – with a fifth on its way.
“More importantly, this “Alpha-Gold” company just crossed $1 billion.
“It has quickly become the lowest-cost, senior gold producer in the world. But it’s just getting started.”
OK, so the Thinkolator made short work of that one… good thing, since I forgot to refill those propane tanks after our last winter cocktail party. That’s a reference to B2Gold (BTG) and its CEO Clive Johnson, who did previously build Bema Gold, along with his team, and sell it to Kinross.
And yes, that sale to Kinross Gold went through for C$3.5 billion in 2007, mostly on the strength of Bema’s Russian mines. B2Gold was formed out of the ashes by Johnson and his partners, and went on to find a few attractive assets, again searching in politically dicey areas (particularly in Mali in the early 2010s). And just as a reminder of how mercurial the gold markets can be, and how much money gets set on fire by gold miners as they try to build production, that takeover, though at a nice premium that was a greed to in late 2006, was an all-stock deal… and if Bema shareholders had held on to those Kinross (KGC) shares they received in exchange they’d have lost about half of their money over the past 14 years since the deal closed (KGC was in the low teens and got as high as $24 post-deal, and stayed relatively strong through the 2011-2012 gold bull, but collapsed pretty quickly after that and trades around $7 recently. B2Gold, in contrast has just about doubled since listing in Canada back in 2007.
B2Gold has distinguished itself by building several good-sized mines, including their flagship Fekola mine in Mali, and by keeping costs under control — they’ve built a big cash hoard now, of $500 million, and have another $600 million line of credit available if they want to fund faster expansion, but don’t currently carry a meaningful amount of debt, which is pretty impressive for an operator who has built several mines. They say their all-in sustaining cost per ounce remains low at $788, and cash cost substantially lower at $423/oz, so they are very profitable when th