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This Oil Stock Tripled In 7 Months... It Could Happen Here Next

Thursday, July 17, 2014 11:30 AM

Wall Street can be a strange place.

People often imagine "the Street" as a Mecca of stock analysis and investment decisions where the best and brightest economic minds pour over all available data -- zeroing on any high-potential opportunities pitched their way.

Most outsiders assume the money-making drive overwhelms all else -- that these seasoned investors would never let trivial things like anger or jealousy stop them from jumping on a great stock and riding it to a huge gain.

But, in fact, this happens all the time.

Even the most brilliant and professional investors sometimes give great companies the cold shoulder for reasons that have nothing to do with corporate or economic fundamentals.

Let me tell you a story about how it happened to me.

A few years ago I helped found a prospective gold project in South America. My partners and I identified an excellent mining development site -- it eventually became one of the top 3% of projects in the world in terms of gold ounces held.

After securing a purchase agreement on the project, we set to work structuring a corporation to develop it, hiring staff and getting drilling rigs on the property. Then we found a public shell company to take the project onto the markets.

The IPO was well received. In fact, we attracted two of the most famous mining financiers in the business as anchor investors. Having even one of these men involved in a company was a coup. Having them both was nearly unheard of.

With so much firepower behind the company, we had little problem attracting new investors. We raised an initial $5 million worth of funds. Then quickly another $20 million.

The streak of deals culminated in a $50 million financing -- with some of the biggest names in New York. The company was cashed up, the drills were turning, and the gold resource was steadily growing. Life was good.

Then we found something peculiar. Despite all the success we'd had -- both corporately and geologically -- we could barely get any analysts from big brokerage houses to cover our stock.

Analyst coverage is the holy grail of running a public company. In order to increase demand for your stock, you need to get more investor eyeballs on your company. There are lots of ways to do that -- advertising, attending conferences, appearing on business television. But few of these are as effective as getting onto the research watch list of a big bank or brokerage.

If an analyst writes good things about your stock, investors tend to jump on it, which is why we tried and tried to get our story in front of analysts. But time after time, we were turned down.

This was frustrating to say the least.

We watched legions of other companies with inferior assets getting written up in brokerage research while we were passed by.

Then we realized why.

With so much momentum behind our venture, we had gone directly to investors, which is different from how public companies usually finance.

Usually, firms looking to raise funds engage an investment bank or brokerage to act as middleman. The bankers approach their network of client investors to solicit funds. The broker takes a fee on the money raised -- meaning that less cash ends up in company coffers. But it does come with one big advantage: it builds a relationship with the brokers.

This is where a dirty little secret about the investment industry comes in: banks and brokerages usually don't write research about companies unless they've raised money from them (and thus collected a fee).

This is great news if you're a company that uses a broker to finance.

However, if you're a firm that doesn't need a broker, you lose out on research. If the brokers didn't make money from you, they're generally not interested in talking you up to their clients.

It's not pretty. But that's the way it is.

I don't mention all of this to vent my bitterness with the system, but because this system has a peculiar outcome -- one that can make us money.

You see, the best business ventures shouldn't be punished simply because they don't have to ask brokerages for funding. But it happens all the time. And sooner or later, the market wizens up to the game -- and savvy investors can profit by spotting these opportunities early before the crowd catches on.

Setups like these are some of my favorite investing opportunities I feature in my premium newsletter, Junior Resource Advisor.

You see, as a trained geologist, I have been traveling from my home in Vancouver to places like China, Columbia and Madagascar, searching for and vetting out massive resource discoveries for the past 10 years.

During that time, I have found many extremely undervalued opportunities that have earned my readers profits.

Take, for instance, Laredo Petroleum (NYSE: LPI).

When I added the up-and-coming exploration & production company to my Junior Resource Advisor portfolio on March 5, 2013, I explained how CEO Randy Foutch had a proven track record, having already built three successful oil companies from the ground up and doubling investors' money in the process. Share prices were only $16.75 at the time.

The company's focus: the Permian Basin in West Texas, an area Foutch was already familiar with from his previous ventures.

Wall Street wasn't reporting this story. But by October, the price had shot up to $33.52, and readers were enjoying gains of more than 100%.

Or another example -- OZ Minerals (OTC: OZMLF), which joined the portfolio on July 3, 2013. The Australian firm owned some of the richest copper mines in the world along with a proven, dependable income stream -- yet the stock was selling for less than the cumulative value of its assets.

In just three months following my recommendation, the mining company gained 14.48%.

I'm seeing plenty of opportunities like these in the market right now. For the past few months, we've been looking at the gold market, uranium, and offshore oil drilling, to name a few -- and we're doing it well before the mainstream media is reporting on these developments.

Which leads me to my most recent discovery...

It was a tip from one of my contacts in the mining industry that inspired my recent trip to a place that I believe is about to explode into what could be the first $1 trillion boomtown.

One of the stocks I'm recommending is a company that already has a sizeable stake in this boomtown. It's an oil and gas firm that originally identified 290 drilling locations in this region, and they've hit paydirt on 100% of their first 26 active sites.

You won't find opportunities like this one reported in major media outlets -- that is, until projects have taken off and the lion's share of the profits have already been made. That's why I recently compiled a special report detailing my research on what this boomtown's rare mix of resources can do for investors. (You can access this free research by following this link.)

Bottom line, if you wait for the major brokerages to tell you what stocks to buy, chances are, you're not getting the best ideas out there. It takes a keen eye, and a little bit of homework, to find the big winners -- especially when it comes to natural resources.

P.S. And while Forbes, Barron's and almost every other financial media source has failed to discover what could be the world's first $1 trillion boomtown, there's still time to get my picks on how to play this under-the-radar hotspot. Several companies are poised to make billions, including one that's up 1,500% in the past year. To get access to some of the stock names and ticker symbols I am recommending, follow this link.

Dave Forest does not personally hold positions in any securities mentioned in this article.
StreetAuthority LLC does not hold positions in any securities mentioned in this article.