George Soros' hedge fund increased its ownership in InterOil to 11.9%, or 5,257,422 shares... 1.2 million shares are represented by call options. In other words, Soros, one of the best investors in history, is all in on InterOil.
Shares are up nearly 4% as I write, close to $79 a share.
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InterOil is probably the most debated stock of the year. Bulls believe it could have one of the largest oil and gas discoveries in history. Dissenters say it's a complete fraud. They believe InterOil is exaggerating its reserves. We knew this stock would either skyrocket or be a zero. So we didn't leave anything to chance...
We sent Matt Badiali to Papua New Guinea to research the company in person. And we sent our friend Cactus Schroeder with him. Cactus is a Texas wildcatter. He knows more about on-the-ground oil and gas research than anyone we know (he just sold his last discovery in Texas' Eagle Ford for $1 billion).
Matt returned to the States with good news... He thought InterOil was a "ten-bagger" (it would make investors 10 times their money). As we started trumpeting the stock as a long, others were talking up the short argument...
The most outspoken short on the stock is our friend and hedge-fund manager Whitney Tilson. Truth be told, we didn't hear about the stock until Tilson discussed it at an invitation-only luncheon. But there's no bad blood. In fact, we invited Whitney to discuss the stock with us on an Off The Record conference call. Whitney couldn't make it, but we did hear from his friend, fellow InterOil bear Barry Minkow. Off the Record subscribers can listen to that call here.
As Whitney said at the recent Value Investing Congress in New York, he loves to meet with investors who have a contrary view to his own. An open, friendly debate over a stock is an excellent way to fortify your beliefs or – given persuasive information – to change your mind.
We still believe the stock is a long. And to date, we've been right... Though it's been a bumpy ride...
The only reason we were able to maintain conviction on InterOil is because of our on-the-ground research... Matt actually walked InterOil's discovery, halfway across the world. He spoke with top management and other analysts. He listened to every opinion out there. Could we still be wrong? Sure... but we've got a lot of big money – and the market – on our side. The stock hit a seven-month high today.
For a more detailed write-up on the InterOil situation (and an incredible picture of the company burning off gas fireballs), read this Digest from last December.
Here's something new... I've written my first movie. It's very short – just a few minutes. And I "filmed" it using simple animation software. But the dialogue isn't simple at all... It's what happens when a city-dwelling, liberal-minded woman encounters a wise investor who is buying gold and guns.
I call the movie "Gold and Guns." I hope you get a kick out of it. (Just to be clear... this is purely for your entertainment and education. It is not a "sales" video. And I think you'll want to forward it to friends.) Watch it here.
New highs: Esperanza Resources (EPZ.V), Fronteer Gold (FRG), Market Vectors Gold (GDX), Imperial Metals (III.TO), MAG Silver (MVG), PowerShares Dynamic Biotech (PBE), ProShares Ultra Technology (ROM), Silver Wheaton (SLW), Silver Standard Resources (SSRI), Silvercorp (SVM), Claymore China Real Estate (TAO), AuEx Ventures (XAU.TO), Forest Labs (FRX), Prestige Brands (PBH), Automatic Data Processing (ADP), CARBO Ceramics (CRR), Barrick Gold (ABX), Coca-Cola (KO), W.R. Berkley (WRB), iShares Silver (SLV), Enterprise Products (EPD), AmeriGas Partners (APU), Procter & Gamble (PG), McDonald's (MCD), Altria (MO), Philip Morris (PM).
We struck a chord with the home-schooling issue. Keep us entertained over the weekend. We read everything you send... feedback@stansberryresearch.com.
"As an ex English teacher, I think today's reactions to the issue of home schooling are pretty much diagnostic. Teaching requires an expertise in the subject being taught, plus an expertise in the art of teaching. If these home schoolers cannot spell or write a grammatically correct sentence and think that their concept of God trumps the fossil record, to cite two obvious problems displayed here, good luck to their children." – Paid-up subscriber Gary Aspenberg
"I'm glad to see a little politic talk. It's good to get to know our investment mentors. Didn't one of you say we should research and get to know the CEOs and the company before we invest. I'm doing my diligence. Oh and I've researched and gotten to know GOD; invested heavily and going long." – Paid-up subscriber Mike Hadden
"A writer in Wednesday's mailbag called creationism 'religious claptrap,' with which Porter more or less agreed. Porter has a remarkable gift for studying financial statements and giving his readers sound investment advice. Taking your advice and that of your associates has made me and others a lot of money, for which I am grateful. But keep in mind that several famous skeptics (C.S. Lewis; General Lew Wallace, etc.) have studied the Bible intending to mock it, and came away believers in God. Porter, your mastery of investing has bestowed tremendous financial rewards upon you and your readers. Is it possible that such a mastery of the Bible might bestow much greater eternal rewards? (Matthew16:26)." – Paid-up subscriber Lee Askew
Porter comment: No, I did not "more or less agree." I speculated about which type of claptrap was worse for children – the "State as God" claptrap of the public school system, which teaches kids that sociopathic politicians like FDR and Woodrow Wilson are heroes to be idolized... or religious claptrap, which leads people to believe in things that are psychotic – like letting their children die rather than allowing them to use modern medicine.
Anyone who is looking to be offended will be offended, but we certainly didn't intend to label all public school teachers as evil puppets of the State or to criticize all religious beliefs.
Good investing,
Sean Goldsmith and Porter Stansberry
Baltimore, Maryland and Miami, Florida
November 5, 2010