One idea, three stocks and a 183% average gain
By Andrew Mickey, Fear and Greed
When is it going to happen? It’s been a whole year and almost nothing has happened. Last year, the United States seemed like it was setting course for complete energy independence.
But I want to take you back to the Fourth of July last year. I remember waking up and having one of those eureka moments. I woke up thinking to myself, ethanol is going to be big, but there aren’t really any ethanol stocks worth owning.
After watching them soar early in 2006 when a barrel of oil surged to $60 for the first time and alternative energy stocks were all the rage, there wasn’t much value in them. However, no one could deny how strongly the federal government was willing to support the ethanol boom whether it made sense or not.
But then it came to me -- ethanol in the U.S. is produced from corn. Not too genius stuff, huh? However, I knew corn production was not growing fast enough to support the ethanol boom. At the time, corn was trading for around $2.50 a bushel and wasn’t generating many headlines.
But I knew from my days as a youth toiling away on a farm in Pennsylvania, there was only one way to grow more corn -- fertilizer. That was the ah-hah moment. On the morning of July 4, 2006, I pulled up a few quotes of the fertilizer producers in the agricultural chemical sector and realized no one caught onto this off-the-wall way to play ethanol. Here’s my original article from last year, Fertilizer’s Fate.
At the end of the article I wrote, “Not all fertilizer companies will be big benefactors though. Only those fertilizer companies with significant revenues generated from nitrate and phosphate-based fertilizers will become farmers’ best friends and profit machines.
“That’s why Mosaic Company (MOS:NYSE) and Bunge Ltd. (BG:NYSE), two leading corn fertilizer producers, are going to be delivering market-beating returns to investors over the next couple of years. Granted, there is very little product differentiation in the fertilizer market, but these two tried and true market leaders will utilize their economies of scale to prosper from the pressing ethanol trend.”
Now, here we are a year later and the United States is still far from achieving the energy independence we’re looking for, but the ethanol boom continues to rage and these fertilizer companies have been far and away the best way to play it.
Shares of Bunge are up about 80% in the past year and Mosaic shares have soared more than 150%.
In addition to that, at BreakAway Investor, where I publish my top investment ideas each month, we got into the ethanol boom too. My top pick in the fertilizer industry was Terra Nitrogen (TNH:NYSE), which we got into around $33 per share. Even though we hedged our bets on this play a bit prematurely, it was still a solid winner. Now, about eight months after the initial recommendation, the stock traded as high as $140 today.
That’s an average of 183% gains for all three stocks in just one call. That’s just an example of the kind of small cap- and penny-stock opportunities we’re trying to uncover here. But we’re also trying to avoid some seriously bad opportunities too.
By now, you may have seen a free Report floating around talking up a small $1 stock that has found the solution to global warming.
Again, we were all over this one long before the rest of the world caught on too. The company is known as Planktos (PLKT:OTCBB). Planktos is being touted as the solution to global warming. You can view my original article on the company that used to own Planktos here.
Essentially, Planktos is going to solve global warming by dumping a bunch of iron into the ocean. This will help spur the growth of plankton, which like other plant life, turns carbon dioxide into oxygen.
Right now we should be asking questions like, how will it make money off this? Or how will Planktos be able to track the amount of carbon dioxide it is responsible for offsetting? No one really seems to know for sure. But Planktos is willing to pay for some press and create some buzz for its stock.
However, this stock is nothing worth investing in. It doesn’t do anything except print new shares and hand them off to insiders. All I can say is buyer beware when it comes to this terrible company with a good story behind it.
Planktos is the type of company that gives the OTC such a bad reputation. Next week we’ll be taking a look at a couple of OTC stocks that will help give the exchange that is too often the stomping ground of companies (using the term “company” loosely) like Planktos.
Good Investing,
Andrew
Editor, Fear and Greed
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