by Travis Johnson, Stock Gumshoe | May 7, 2012 12:54 pm
We’ve written about John Doody[1] a few times over the years, largely because the Stansberry folks have been promoting his newsletter and therefore spreading the gospel of this former Econ professor turned gold[2] newsletter guru and mining stock millionaire. The letter is called Gold Stock Analyst[3], though a couple years ago they started to offer a “dumbed down” version called just GSA Top Ten, which gives you his top ten stocks and writeup on a few of them each month without the very detailed backup material that he also generates on dozens of other stocks (that brought the price of entry down to about $500, just FYI, the “pro” version with full data is more like $1,500).
And since Doody does have his results audited, and he has a lot of well-respected fans, I presume he’s still doing well — I don’t know if he’ll repeat the incredible performance his “Top ten” stocks had over the last decade or so, since I have no idea what gold will do and there are a lot more analysts following gold stocks now than there were ten years ago, but he certainly seems to have beaten the index with his methodology so far. (His letter is also the second-favorite mining-focused newsletter among Gumshoe readers[4] right now.)
Of course, that doesn’t mean his ads aren’t irritating — most of them are full of the braggadocio of the worst teaser ads, all the chatter about his hot young wife and his fabulous yacht and his sparkly Ferrari, and part of the selling spiel of the Stansberry copywriters in many past ads has basically been, “this guy’s a jerk, but he can make you rich.”
Still, we’ve seen plenty of profitable picks touted by Doody in the past, like Minefinders (MFN) and Royal Gold (RGLD)[5] and Golden Queen Mining (GQM.TO), so let’s see what he’s picking now, shall we?
“In short, a very small mining outfit is about to start paying dividends[6] in real gold bullion.
“No other mining firm in the history of the stock market has ever agreed to pay a real gold dividend before.
“Almost no one in the investment world is paying attention to this development… Which is why today you have the opportunity to get in, well before this story becomes mainstream news.
“And as you’re about to see, the company’s unprecedented announcement will undoubtedly shake up the gold markets…
“I honestly believe that a stake in this firm could help you make hundreds, if not thousands of percent over the next few years.”
Which might make you say, “hey, that sounds familiar!” And well it should, as you’ll see in a moment. Here’s the rest of our littany of clues:
“They’re sitting on about 1.7 million ounces of gold worth almost $3 billion – much more than TWICE this company’s current market cap. (And they’re still drilling for more gold.) ….
“The average gold mine has about 1.5 grams of gold per ton of ore.The highlighted sample in the picture you just saw has 22.8 grams of gold (and even some silver[7]) per ton of ore. That’s 15 TIMES the average gold mine’s grade.
“And this high grade gold is just the beginning…
“When I returned from my trip I begin to do further in-depth analysis on this gold stock.
“I found that since going public in 2006, this firm has returned an average of more than 83% PER YEAR to shareholders… Turning every $1,000 invested into more than $23,800.
“They also have ZERO debt, and control a highly coveted 34 mile stretch of property that could potentially lead to the development of several more mines.
“It’s no wonder that a well-known South American mining company invested over $60 million into this small stock early on and have seen their money grow to over $350 million.
“And why a highly respected gold mutual fund quietly purchased over 8% of the shares in this company.”
And he describes the physical gold dividend some for us as well, even mentioning that he has held the “beautiful” coins[8] they’re minting in his hands:
“You can get dividends in gold, whose price is likely to continue to rise with inflation….
“So how is this company able to pay out dividends in real gold bullion?
“You see, the truly incredible thing about this company is that they already pay out a HUGE portion of their mining profits in dividends every year – more than 33%.
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just click here...“I have never, ever, heard of a gold company paying out that much money before.
“To put that into perspective, the average gold miner pays no dividend, and of those that do it’s 10% at most. Barrick Gold, the world’s largest gold miner, pays only 6%.
“Even the royalty companies – Franco-Nevada and Royal Gold – which made investors a fortune, pay out just 20% of their profits.
“What’s more, by the year 2014 the amount of money this gold dividend company pays out could more than double based on mine production. (Production was 66,000 ounces in 2011 and is estimated to be over 200,000 ounces by 2014). That means the amount of gold dividends you receive from this company could double in less than two years.”
So what is this mysterious stock in his Top Ten that he thinks will rise by “hundreds of percent” or more?
Well, you’re right, it’s the same stock we looked at back on Thursday of last week in a teaser for a different letter[9]: Gold Resource Corp (GORO)
Though Doody throws in an “X-factor” catalyst that wasn’t mentioned by the Lombardi[10] folks — he said that he thinks they’ll get a listing in Toronto as well in the next year or so, which could have considerable impact. Normally it’s the other way around, stocks that have a Canadian listing and get a listing in the US can experience a boost when exposed to a new crop of investors — but this time the boost would come both from the fact that Toronto has more specific and stringent requirements for listed mining companies, and from the fact that most of the investment analysts who follow mining are Toronto-centric. So that’s a possible boost.
I shared pretty much all the thoughts I have on Gold Resource Corp last week, which you can see in that prior article, and I don’t own the shares myself, but I’d just add that having John Doody put them in his top ten is probably a stronger recommendation than the fact that the Lombardi folks have been flacking the pick for two years — though it’s a little bit of an outlier for him as well, since he tends to pick established companies with solid reserves and Gold Resource Corp has just barely started to invest in building a reserve base (ie, doing more exploratory drilling and filing the required Canadian NI 43-101 forms to provide backup assessments of their reserves). I imagine their history of production and their dividend policy and their new focus on joining their peers in filing resource and reserves reports probably tipped the balance in their favor as far as he’s concerned, but that’s just a guess on my part.
If you don’t know the company at all yet, you can get a quick overview with their latest presentation (from April) here.[11]
I think the physical gold dividend[12] is a little bit silly at this point — if you think they’re a growing company and will be rising by several hundred percent then you’d almost certainly do better by reinvesting dividends into additional shares than you would by getting silver coins[13] (most of us wouldn’t have large enough holdings for our monthly dividend to translate into an ounce of gold, and they don’t seem to have smaller sizes), and really, it’s pretty simple to buy your own gold unless you’re particularly enamored of the coins Gold Resource Corp will be producing (incidentally, if this works to get GORO more attention from investors I bet we’ll see a lot more of it — they’re basically outsourcing the gold coin dividend program to Gold Bullion International, and GORO is their first client that I’ve heard of, but I bet lots of other emerging producers are getting calls about setting up similar programs).
The reason I would invest in gold mining[14] companies instead of in physical gold is that miners can actually generate income, make a profit, compound their returns, and make investors wealthier if they operate efficiently and intelligently (and with a bit of luck, perhaps), even if gold prices don’t go up dramatically. I do hold some physical gold and, through a streaming/royalty company, interests in some mines, but I don’t necessarily want to mix the two up or give up any potential earnings compounding in my gold company (and the company itself, Sandstorm Gold, also doesn’t do this — they don’t take their gold streaming payments from their miners and hold them in gold, they cash them in and use the cash to grow by buying more streams). There’s nothing magical about what kind of dividend you get, but there is something magical about compounding dividends.
So what do you think? Does having a second newsletter get on board with teasing GORO make you want to pick up shares? Anything else you forgot to mention about GORO when we discussed them last week? Let us know with a comment below.
And yes, as usual, we want to hear from subscribers of the many newsletters we write about — if you’ve subscribed to Doody’s Gold Stock Analyst (either the Pro or the Top Ten version), please click here to let us know what you thought[15] with a quick review. Thank you!
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Although GORO is a fine company,imo,for the money,the recent announcement by management of Starcore International Mines Ltd.TSX:SAM to pay a dividend next year after buying back their hedges,seems very cost effective with the stock trading at 40 cents canadian.
We shall see but production is exceeding expectations,along with recent credible board additions may bode well for future sh’s.
One other point,Sprott is involved with SAM.
Since he is still pushing that “verification” report, this is it:
http://temp-share.com/show/KdPf3ag8h
2001-2010, but does not include 1994 (when GSA was started) – 2000. Sort of a verification. John Doody has a BA in economics from Columbia U, and an MBA in Finance & PhD from Boston U. He was a professor at Bentley University until 1994. At that time he started GSA. It would be interesting to know what his returns are for that period as well. He does indeed live in a small 2 bedroom 1.5 bath condo in Ft Lauderdale, purchased 12 Jan 2011, Zillow assessment at $309K. Really has owned several watercraft over time, trading up it would appear. Created several (failed) small businesses before getting into the GSA thing. Does not mean he is bad with GSA, just the Spa business.
Alpha Performance Verification Services is a Virginia corporation which created its trademark on 1-feb-2010, incorporated in 2011, and filed for trademark protection on 19-mar-2011. Annual revenue of $37,000 with a staff of 1, Michael Hultzapple, CPA. Appears to be independent, and not directly linked with Stansberry. Previously worked for various retirement fund management companies.
To further explain this “gold dividend,” recommend you visit this blog which explains in depth what this scheme is all about and what the real bottom line is:
http://seekingalpha.com/article/566661-a-golden-future-for-dividends?source=feed
For me, can’t afford 33,000 shs to get a 1 oz gold/month.
Just my thoughts.
Yes, though the (arguable) gimmick of dividends in gold is clearly appealing to many investors at first blush. And, to be fair, Gold Resource Corp produces a lot more silver than gold and also has silver coins as a dividend option — an average investor could easily get a silver coin a month by buying something like 500 shares. Which will cost you about $13,000 — so if it’s just the coins you really want, you could buy about 400 silver eagles for the same price.
I have two problems with the waaay gimicky GORO: Not really a gold miner and yet wants to value all production in gold equivalence. Might as well value Peabody Coal as a gold miner (slight exaggeration, I know). Also, resource is totally undefined at this point so no direct comparison is possible with “real” gold miners. I like production but without knowing the total resource it is impossible to value. The issue of the “dividend” is nothing but a gimmick to attract unsophisticated investors. Doody? – I’m not sure what he’s up to.
Hi All –
There doesn’t appear to be any checking of what people write here, so allow me to correct George’s errors.
1) The condo I bot in Jan-11 is our 1,500 sq ft office, which we had been renting. George missed the other condo I own in the same building as a residence, and also the 150′ waterfront double lot off Las Olas Blvd that I bot in Feb-12 for just under $2 mil cash. When the house is built, my 50′ boat will move there from the condo’s dock.
2) George also missed the condo I’ve owned since 1999 on Saint Barthelemy in the French West Indies. If you don’t know of this exclusive island, google it.
3) I’ve never had a failed business… spa, or otherwise. As a sideline activity to teaching, I was a founder of SwimEx.com, sold it in mid-80s, and continue to receive income from them today. For the 20 years prior to 1994 when I started the letter, I was Asst Prof of Economics at Bentley Univ in Waltham, MA. We didn’t audit back to the the start as there was no point. Barron’s wrote 2 articles on me in the 1990’s and as part of their fact checking did their own results verification.
4) Our auditor is just getting started and building his biz. Mike’s not only a CPA, he’s a CFA. This is one the hardest professional designations to get as it also includes a personal ethics audit. We only make a few trades a year and they are listed in every issue, so our audit is pretty easy and costs just $5,000/yr. Gold Stock Analyst is the ONLY newsletter in the world with audited results… just as the SEC requires of Mutual Funds.
Yes, I’ve been very successful. I should be. Our audit shows a 10 year gain of 1,033%… far better that the S&P500, Gold bullion, all Gold Indexes and all Gold mutual funds . So, rather than carping on what I own, why doesn’t George ask the other newsletters reviewed herein why they aren’t audited? IMO, given its low cost, a letter’s results not being audited should speak volumes to investors..
HI Travis
seems to me that if one accepted bullion instead of cash when one wanted to sell it one would get hit by the IRS for sale of a collectable
best wishes
john
That’s probably true.
I have playing these gold stocks for the last year and they have been bleeding and they seem to have high P/E ratios if that matters. I do realize that when the SHTF though they will be doing well, so we have to have some shares in them. In this last week I have picked up physical shares of metals in the form of USLV and UGLD which are triple ups and I think there will be a move upward in the metals soon. Thanks for the info. Also NUGT is really cheap right now if you believe in the miners vs. the physical.
ITS A FRAUD WILL NEVER GET A TO LISTING WITH PRODUCTION AT 60,000 OZ AND MOSTLY SILVER ITS NOT WORTH ANY WHERE NEAR $24.00 PER SHARE MORE LIKE 24C IT WILL ALL END IN TEARS
Does anyone have a commend regarding the following?
The Palm Beach Letter is suggesting MUX (see link) http://www.palmbeachletter.com/Home/GetHtml/1338
In this article its says it costs the company $700 is produce each ounce. The statement below predicts the price of gold will drop to less than $750 ounce.
But Boom & Bust is saying to stay away from gold as the price of gold will drop soon. See comment here – •
Also, we’re not surprised to read a headline this morning that said: “Gold Falls as Crisis Boosts Dollar.” Gold has fallen to a three-week low after a rise in the dollar prompted enough selling to push bullion prices through a key level of support. This despite continued worries about the sovereign debt crises in the Eurozone. Spot gold dropped to $1,676.29 an ounce this morning. Is this the start of the downturn in gold, as we predicted in our October issue ofBoom & Bust? Maybe. But as you know, no move up or down is ever in a straight line. Ultimately, we believe gold will fall below $750 in the next three years. With the PowerShares DB Gold Short (NYSEArca: DGZ) in our portfolio, we’ll grab as much as 140% gains on the way down.
Does anyone have any thoughts they would like to share?
Ms. Burge,
First of all you should learn to read more closely.
The full boom&bust article has the title, ‘Sell DZG at Market’ and goes on to explain,
“Long-term fundamentals will send gold back to $750/oz. eventually.
Before that happens, though, QE3 will give the yellow metal its last, dying breath. Gold bugs could push prices back up to $1,900 as they curse fiat currencies. It is even possible their enthusiasm could send gold as high as $2,000 to $2,200/oz., overshooting the highs of last September.”
With any luck, we should all have a chance to exit our bullish-gold positions before taking refuge in DZG
michael
good post sounds like a reasonable projectiojn for metals
qe 3 will waste more taxpayers dollars
Folks. It’s time to get on board with Brigus Gold Corp., (BRD)
They are severely over sold and are putting up solid gold production. Big gains possible, take a look.
One thing that I didn’t see in your article, about what Dood said. He said that the coins were Double Eagle Gold Coins. Those are the ones minted by the US Treasury, right? If they are sending out their own, GORO, coins, are they certified? You can’t just walk into a gold dealer and tell they you have an ounce of 0.999% gold and have him take you at your word. If it isn’t government issue or certified, you lose a bit of gold each time it is assayed.
Based on the geochemistry of the resource announce on July 23, the El Aguila system is a classic silver-dominant, metaluminous alkali-calcic epithermal system (Ag:Au >40, highly anomalous As, Sb, Hg, and (Pb+Zn)/Cu>2). Overall Ag:Au ratio is 99.4 at a cut-off grade 1gm/t Au (305 koz Au and 30.3 Moz Ag in indicated + inferred resources) and while the AuEq grade may be So, although GORO touts itself as gold company, it is in fact, a silver company. The touted grade of 22.4 gm/t Au is a more than bit misleading since the actual Au grade for the indicated resource is 3.2 gm/t and the AuEq grade for Au+Ag is 8.29 gm/t at a 1 gm/t cut-off. AuEq gradefor the indicated+inferred resource is 5.94 gm/t. Reading the fine print, one has to remember inferred resources shouldn’t be valued in the same way as measured and indicated reserves since their continuity is not demonstrated but only inferred geologically and have no demonstrated minability. The indicated AuEq resource totals 269,762 oz AuEq. So dividing the minable resource into the market cap of US$1.043B, means the indicated resource is being valued at $3868/AuEq ounce. Clearly GORO is overvalued. As it begins mining outside the bonanza zone of the El Aguila orebody, it will have to expand processing capacity greatly to maintain the current level of production and earnings will consequently decline signicantly unless it rapidly delineates new, high grade ore shoots. GORO should be compared to other silver mining companies to get a better handle on an appropriate valuation. Fortuna Silver Mines (FSM) which is also in Oaxaca, Mexico is probably a good comparison.
Have made a few dollars on GORO in years past, but I agree with other comments, may be more “hype than substance” and when I can buy PRETIUM Resources PVG-V with its very high grade Brucejack project led by Bob Quartermain with PROVEN results at Silver Standard for only a little over half the stock price then the GORO coins do seem mostly a gimmick.
The Brucejack project had a Feb/2012 PEA showing an NPV of U.S. 2.262 Billion with an IRR of 29.8% based on 131.5 M oz. silver, 5M oz. Gold measured and indicated and an additional 3M oz. inferred and this a HUGE resource of over 90,000 Hectares still largely unexplored so offers considerable upside resource potential.
I might also add that it might be instructive to compare an undervalued gold producer like Lakeshore Gold I just bought at $1.05 comparing production and reserves and see whether you think GORO is worth 20 X more?
You guys should check out https://miningstockvaluator.com
It’s a more affordable service that seems to pick great winners.
Considering GORO was around $24 when this was published, and has pretty much gone straight down since then, now $4.75, an 80% decline. Not real impressive.
And the MSV Index on Mining Stock Valuator is down 58.7% in 2 years.
You’re not gonna have any portfolio in this sector that hasn’t gotten slammed over the past years. Seems like Mining Stock Valuator has realeased a whole new site. Looks pretty neat I must say.
Anyone hear of minco corp have such a good feeling about this one any comments
Updating Mike’s analysis, GORO has TANKED about 90% as of March 2016. A couple of drawdowns like that can sink a portfolio.