June 2014 Issue of Ultimate Value Finder is Released

Investment Opportunity 1 – All about the Life of Mine

“Sentiment [on gold] in 1976 was incredibly bad but not as bad as it is today. This is the worst I’ve ever seen sentiment in gold in my 45 years in the business. And I’ve never seen the gold shares this undervalued either.”

-          James Turk, King World News interview, May 27, 2014

Everybody and their brother knows that mining shares are extremely cheap, but despite that, they will not buy them. They come up with all kinds of excuses – mining is a terrible business, the management is awful, gold is not an investment, or mining companies do not have real businesses. However, no matter what they tell themselves or their clients about why they do not like this sector, it is because they are more interested in building a business than making money. Here is what I mean.

Investment managers have two choices – they can build a business or they can build returns. Most of them choose to build a business so they focus on getting as much assets under management as possible and generate fees off of that money. They have attractive brochures that describe how they use this comprehensive approach or that comprehensive approach to choose their investments. They talk about how rigorous their process is and how their management team has accumulated over 1,000 years in the investment business. But, in reality, all they do is follow what everybody else is doing. And, it works. Clients are comfortable when their investment managers invest in stocks recommended by the talking heads on CNBC or Yahoo Finance. It is a win-win for everybody. Investment managers generate stable fees that allow them to send their kids to private schools, and clients feel warm and fuzzy about being invested in popular names.

On the other hand, instead of building a business, investment managers can build returns and focus on making money instead of generating generous fees. This approach is much harder to follow because in order to generate high returns, they have to be willing to go against the crowd and be willing to go through long periods of underperformance. While you might tell yourself, “I am a contrarian, and this is no problem for me,” it is not about you. You might have the mental stamina to follow this path but your clients don’t. They don’t care that mining stocks are the best investments on the planet. They want results right now and what delivers results immediately is what is hot. Just like when they go through a drive-through, they want their meal immediately, and the same is true in investing.

Consequently, if you want to keep your clients or your job in the investment industry, stay away from the mining stocks, but if want to make a killing, then you know what to do – keep buying the miners with every spare penny that you have. When they go lower, you buy more. When others trash them, you embrace them.

Investment Opportunity 2 – It is not at all about Company 2

The benefit of writing a newsletter like this one is that I frequently get e-mails about various investment opportunities. However, when I received an e-mail about this company, I didn’t know what to make of it. The company had a market cap of $25 million, negative working capital, barely any revenues, and huge losses. I was thinking to myself, “What was this person who sent me this thinking?”

Then, I called him to ask him why he thought this “awful idea” was something that I should spent any time considering. After about 10 minutes of conversation, I began to put the puzzle pieces together. If you like mysteries, then keep on reading.

Investment Opportunity 3 – Investors are Losing Hope

Investment Opportunity 3 is a company that has experienced good times and was once loved by Wall Street. However, right now, I would challenge you to find any love left.

Over the last several years, the major shareholders brought on a proxy fight, ousted the management, and started a restructuring process. Although they are getting some initial results, investors are losing hope, driving the stock down to such levels that even a slight amount of success in the turnaround will yield sizeable positive investment returns.

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