OK, this is probably a dumb idea. I’m going to tell you about a stock that I shouldn’t be publicizing — and I’m only going to let you read further if you pinky-swear that you won’t rush out and buy the stock just because I mentioned it.
It’s not that the stock is dumb, necessarily — though odds are not so great for such a wee minnow — what’s dumb is the very notion that I’m going to share the name of the stock with you, or that Bob Czeschin would use it as a lure to tempt subscribers.
Now, in some partial justification (for him, not me) I should mention that Czeschin isn’t promoting this as a pick of his newsletter, or maybe even widely teasing it to get new subscribers — from the text of the ad I saw, he’s offering this as the subject of a “special report” that he’s giving to subscribers who renew to his Oil Options Hotline service ($2,950 a year). I’ve gotten questions about this from a handful of readers, but I don’t know how many folks he has actually sent it to.
Of course, he’s not exactly trying to “cool the jets” — he does reiterate a couple times that this investment has the potential to turn $1,000 into $110,000… which is about enough to make any of us do something stupid.
I’m always conflicted about these kinds of ads — the stock is so tiny that I really shouldn’t write about it, not to the relatively large Stock Gumshoe audience where thousands of folks might read the article. Even the smaller group of Irregulars is far, far too large for a stock like this — a stock that really can’t handle more than a handful of new investors a month (and they’d better be small investors — a $100,000 position would make you the owner of 5% of the company). So anyone who writes about these kinds of stocks has to know that their attention can send the shares soaring (or crashing when they sell) … even if only a dozen people trade the shares because of this attention.
So while I probably shouldn’t be writing about this one, I’m going to anyway — we’ve had several questions from readers, the Thinkolator has a good, near-certain answer (there’s one “not quite” match for the clues), and, well, we’re all adults here and my mission is to reveal and discuss these “secret” stocks and let you think for yourselves. So let’s do it.
And I’m even going to share it with the whole Gumshoe readership, since it’s not Friday (Fridays are when I write just for the Irregulars), and since, well, this one’s so tiny it doesn’t really matter whether it’s 20,000 people reading about it or 1,000 — this stock is too small for any group that won’t fit in your bathroom. Maybe we can kill this temptation with openness, and talk each other out of doing something silly.
Here’s the beginning of Czeschin’s pitch:
“I don’t usually write to you about gold, but recently I’ve come across an opportunity so extraordinary that I would be totally remiss if I didn’t break with tradition.
“I’m buying 30,000 shares in a US gold mining company for about $1,000. It’s a $2 million company with up to $2.2 billion of gold.
“It has already found 1.15 million ounces of gold on its Idaho properties. It’s chomping at the bit to begin producing the gold, but the stiff-necked, bureaucratic US Forest Service has been holding them up.”
I hope your eye fell first to that one critical number — not $2.2 billion, or 1.15 million, but $2 million.
That’s why I keep harping on the fact that it’s probably a bad idea for me to mention the name, and definitely a bad idea for Czeschin to tease it. We get so used to thinking in an abstract way about stocks that we think of even small caps as large, impersonal corporations and small stocks as just trading chips that will always have buyers and sellers — but this is not a small cap, it’s a nanocap, a teensy-weensycap. There are probably fast food restaurants within a few miles of your home that are worth more than this mining company… and if you live in a town of more than 10,000 people, probably the smallest new car dealer in your town could get a line of credit large enough to buy out this company with one phone call to their bank.
So why is it a small, independent, publicly traded company? Why isn’t it a little project owned by a larger miner? Or just a private company? Is it because their mining projects aren’t nearly as good as they think they are? Just because the market is so weak for miners that they’ve been beaten down with the group? Or is it that contrarian gem that is hiding from the “blood in the streets” buyers because it’s just so damn small they haven’t seen it yet? I have no idea, but let me get into the details.
(And yes, real private companies seem somewhat rare in the junior exploration space, where “other peoples’ money” fuels everything — probably because it’s generally such a terrible business. People can only run through their life savings prospecting for gold once, after you’ve blown it all you’ve got to get other people to fund your continued exploration… and, he says somewhat snarkily, that’s what the venture exchange in Canada is for.)
Here are the other clues…
“To do the drilling, this company has to bring in heavy equipment. And to bring in heavy equipment, they have to build a road. Even though the road is a puny 3/4 of a mile, and isn’t exactly going to be a super highway, the US Forest Service has been saying no, no, no, no. Well, they finally said yes.
“So, the company’s racing to build the access road and start drilling on 16 high-probability sites.”
OK, so they’ve got a permit to build a road so they can do more exploratory drilling. And they have 16 targets. What else?
“Tiny exploration companies on the verge of starting production are usually valued at approximately 1/10th the value of the gold in the ground.
“That would give this $2 million company a $220 million market value. Every $100 you invest could turn into $11,000.
“This reminds me of the gold market back in the `70s. That was 40 years ago, so my memory gets a little hazy. But as I recall, Coeur d’Alene was then an unknown selling for a few pennies. A few years later it went to $21. Work it out: a $200 investment could have risen to $210,000.”Are you getting our free Daily Update
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I don’t know what Czeschin means by “on the verge,” but presumably