Editor's note: We're doing something a little different in The Digest this week... We're going to teach you how to be a junior resource trader. Investing in the junior resource industry can be the single most profitable experience of your life – just ask our friends (and legendary resource traders) Doug Casey and Rick Rule. But it can also be one of the most painful – again, ask Doug and Rick.
The industry is wrought with fraud and corruption... You must know the insiders in the business to succeed... You must know when to buy and sell... And you need to know the commodity cycle to trade these stocks. That's why we've asked our resource specialist Matt Badiali, one of the best-connected analysts in the resource world, to be your guide. He will soon publish a new advisory service called the S&A Junior Resource Trader. And every day this week in The Digest, he will explain one important facet of investing in the junior resource sector.
For the past year, I've been working to develop the world's most powerful system for trading the only stock sector producing gains so large you can not only buy a new boat with the winnings... but also the lake it floats in.
I'm talking about payoffs like Aurelian Resources... a tiny company that gained 16,150% from 2003 to 2008. That kind of gain turns every $10,000 invested into more than $1.63 million.
Or how about the payoff in Canplats Resources? The small company skyrocketed 12,650% in seven years.
Or the payoff registered by Diamond Fields Ltd. Shares of this tiny company sold for just 5¢ each in 1993... and then for $42.97 per share three years later. That's an astonishing 85,840% return... which netted legendary speculator Doug Casey $15 million on a single trade.
These gains are possible when finding and tapping the world's gold, copper, oil, diamond, and uranium deposits – the "junior resource" business.
It's a business where just one big strike can change your life forever.
And while most investors who deal in this sector are constant losers, I'm going to show you the two secrets to making a fortune in junior resource stocks... and how the S&A Junior Resource Trader will set you up for not hundreds, but thousands of percent gains in the coming years...
Junior resource companies hold more explosive potential than any other asset because they are the "bloodhounds" of the mining and energy industries.
"Juniors" tend to be small companies (typically less than $250 million market cap) that scour the world with little more than rock hammers and collection bags. Some use special tools like satellite imagery or geophysics to guide their work. But in the end, it comes down to slogging through bush and picking up rocks.
When the right rock is found... and it's part of a monster gold deposit, the company can rise 30-fold.
The junior mining industry exists because major mining companies do little of their own exploration. Big mining companies prefer to swoop in when a smaller company finds a huge deposit.
That way, the big miners can focus on all the things that go into building mines... financing the project, employing thousands of people, building infrastructure, and buying lots of equipment.
Exploring for things like gold deposits is also a risky business. It doesn't generate cash flow like a producing mine does... and exploration teams can go years without success.
Also consider... about one in 3,000 mineralized anomalies (that's a rock with higher-than-normal levels of some commodity like gold or uranium) become mines. Those are poor odds... and the majors would rather let thousands of small companies look for deposits. Then the big miner can step in on Wall Street (or Toronto's equivalent, Bay Street) and buy up the proven deposits.
These junior miners are often called "burning matches" because they have no revenue or cash flow coming in the door. They just burn through money while looking for deposits.
However, with the right strategy in place, you can avoid the bad matches and stick with the good ones... and eventually strike it rich with a stock that can shoot up thousands of percent.
That's what the S&A Junior Resource Trader is all about.
Fortunately, to succeed in this extraordinary sector, you need to master just two vital things...
No. 1: You must know the resource business is the biggest boom-and-bust industry in the world. Stay in the booms and out of the busts, and the world is your oyster.
No. 2:You must not only have the "know how" to trade in junior resources, but also the "know who." You have to know which stocks are legitimate candidates to rise thousands of percent... and which ones are junk. If you don't know how to get in the booms and out of the busts... and if you don't know "who," don't worry...
That's exactly what I'm going to explain this week in the Digest. I hope by the end of this week you will be comfortable enough with the junior resource sector to "test the waters" with my new service, the S&A Junior Resource Trader. I believe you will experience the biggest gains of your career following the trading system I've developed over the past few years.
(P.S. In tomorrow's Digest, I'll discuss the "know who" part of our system...)
New highs: Coca-Cola (KO).
Questions about natural resource investing? Send them to feedback@stansberryresearch.com.
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Goldsmith comment: If you're a Stansberry subscriber living in Japan, please contact Karl at karl.bergerson@gmail.com. He's planning to move to Sapporo, Japan in a year.
Regards,
Matt Badiali and Sean Goldsmith
Zurich, Switzerland
November 15, 2010