"If You Could Love Only One..."
After beating the S&P 500 index 11 consecutive times the combined portfolio of our proven Favorites of the Famous team missed for the second year in a row with a gain of 3.7% to 10.9% for the index. We still have the best long-term performance of this kind on the planet topping the S&P 500 18 out of the last 23 tries. You don't believe me? Name a better one.
By Robert J. Flaherty and Arnaldo Arroyo
As soon as she graduated from high school at 18 Lauren Templeton was encouraged by her granduncle Sir John Templeton to start a mutual fund. Alas she went to college instead. Her very own mutual fund is still on her to do list. But Sir John did help her to set up at 24 her very own investment firm. So at Lauren Templeton Capital Management, LLC value investing the Templeton way still survives.
Now a veteran at 36 and a mother twice, Lauren and her husband Scott Phillips are our first husband and wife team of contributors. Last year, the couple saw each of their favorite stock picks go in opposite directions.Lauren's pick went south.
Her 2012, choice Chorus Ltd (CHRYY - 14.06, recently 12.07) dropped 14.2%. Chorus is a spinoff from Telecom Corp of New Zealand and delivers ultra-fast broadband to more than 830,000 homes and businesses there.
Her new pick is Fairfax Financial Holdings (OTC: FRFHF - 390.50). This Canadian -based insurance and investment firm is led by founder V. Prem Watsa, who is often liken to a younger Warren Buffett. Considered one of the world's wisest investors, Watsa and his team at Fairfax have compounded book value by over 25%. That's why Fairfax has assets in excess of $30 billion, revenues in excess of $6 billion, equity in excess of $7 billion and a recent stock market value of $13.6 billion.
Fairfax is engaged, through its subsidiaries, in property and casualty insurance and reinsurance and investment management of the reserves. Because it knows how to invest its insurance assets wisely, Fairfax's increasing exposure to demand for insurance in rapidly emerging markets of Asia is appealing at a price to book of 1.0x.
Kudos to Lauren's hubby Scott Phillips who went to the head of last year's class! His 2012 pick Estacio Participacoes
SA - 19.56 Brazilian Reais, recently 43.60) is up 122.5%. This Brazilian for-profit educator offers distance learning and campus programs for graduates and undergraduates. Its network consists of one university, two university centers, 30 colleges and 52 distance learning units recognized by the Ministry of Education. Nationwide coverage is represented by 68 campuses in the leading urban centers of 17 states. The educator also offers post-graduate specialization courses, as well as master's and doctorate degree courses. Scott hopes to have an encore performance with his new pick ArcelorMittal (NYSE ADR: MT - 13.55). Based in
Luxembourg, ArcelorMittal is the world's leading steel and mining company. It supplies steel products to all the major markets including automotive, construction, household appliances and packaging. It operates in 60 countries and employs 245,000 people worldwide. In 2012 on revenues of $84.2 billion ArcelorMittal generated crude steel production of 88.2 million tons, about 6% of world steel output.
"Sir John Templeton warned that investors mistakenly asked where the outlook is best, but instead should focus on where it is worst, if they want to find a bargain," says Scott who worked for Sir John before joining his wife Lauren's firm. "A European steelmaker strikes us as a good starting point. With several of its European markets mired in something closer to a depression than a recession, Arcelor Mittal is suffering severely depressed fundamentals including low demand and capacity utilization. In time business will improve. So will earnings thanks to the heavy operating leverage inherent in a steelmaker. Shares trade at a steep discount to its assets with a stock market price to book of 0.4x."
While their individual stock picks will rise or fall may this husband and wife team continue to achieve the highest return- a return on life!
Celebrating his 30th anniversary of starting the first African-American founded mutual fund, John W. Rogers Jr.'s Chicago-based Ariel Investments keeps adding more mutual funds and now has about $5 billion in assets under management. Thinking back to when Bob F first wrote about John when he was a minority Princeton basketball player who wanted to start a mutual fund, it is amazing how far John has come, one basket at a time. For daring to pick a real estate management company Jones Lang LaSalle (NYSE:JLL) for 2009 during the horrible real estate collapse, John scored a 250% gain.
He was still on his game last year when his pick ranked second among our winning picks. John's favorite stock Madison Square Garden (Nasdaq: MSG -33.99, recently 57.03) soared 67.8%. This company owns world-class venues (Madison Square Garden and The Chicago Theatre); iconic sports franchises (New York Knicks and Rangers); and lucrative regional sports networks (MSG and MSG+). Madison Square Garden is currently in the second phase of a three-year, nearly $1 billion transformation that will provide an improved experience for visitors and also generate significant new revenue opportunities from suites, tickets, concessions and sponsorships.
John's new favorite pick for 2013 is another widely popular provider of sports entertainment. International Speedway Corporation (OTC BB: ISCB -31.18) is the premier owner of NASCAR racetracks, including top tracks Daytona and Talladega. With a devoted fan base, NASCAR races attract huge crowds and generate the second-highest ratings in the U.S. among all sports. International Speedway benefits from high barriers to entry because of its established position in its markets.
Because fans watch the programming live rather than on a DVR, sports offer the most attractive content for broadcast and cable networks. Recently introduced sports networks from Fox and NBC have created additional competition - and higher bids - for sports media rights. The latter represent half of International Speedway's revenue.
The company also is finding ways to monetize the thousands of acres it owns surrounding its tracks. It opened the Hollywood Casino at Kansas Superspeedway in a joint venture with Penn National Gaming. Right now, it is exploring opportunities at the Daytona International Speedway. With a unique portfolio of assets and a management team focused on creating long-term value, International Speedway is a speedy vehicle positioned on the race track to deliver attractive returns for shareholders.
In the Soaring Sixties 75-year-old Larry Rader was known as "The Go Go Kid!" After a rollercoaster ride from hero to goat, Larry showed he also possessed great courage and unusual staying power. Larry did the hard work to become one of the steadiest growth stock performers ever. His success as a student of identifying outstanding small-cap, non-technology growth stocks brought him to head small-cap research at Merrill Lynch in the days before long-term investing was replaced by momentum gambling. Larry is the only person Editor Bob Flaherty featured in three different magazine cover stories.
For his 2012 pick, Larry took the third spot on the list of winning picks with his dip into
Pool Corporation (Nasdaq: POOL - 36.51, recently 47.20), up a solid 29.3%. Pool is the largest wholesale distributor of swimming pool and related backyard products with 80,000 wholesale customers. Founded in 1993, the Covington, LA-based company has grown to over 290 sales center locations in North America and Europe. Pool boasts a large and impressive customer base which includes swimming pool remodelers and builders, retail swimming pool stores, swimming pool repair and service businesses, landscape construction and maintenance contractors, and golf courses.
This year, Larry is going green. His favorite pick is eco-friendly Trex Company (NYSE: TREX - 50.83). This recycling leader is the largest manufacturer of wood-alternative decking and railing products, which are marketed under the brand name Trex. It was formed in the buyout of a division of Mobil Corporation and went public in 1999.
A leading manufacturer of eco-friendly outdoor living products and manufacturing processes, Trex annually turns millions of pounds of recycled and reclaimed plastic and waste wood into useable products. Most raw materials come from recovered plastic grocery bags, plastic film and waste wood fiber. Trex purchases 300 million pounds of used polyethylene and an equal amount of hardwood sawdust each year that would normally end up in landfills. Proudly it recycles over 1.3 billion retail grocery bags annually.
For, 2012 Trex posted net sales of $307.4 million, up from $266.8 million in 2011. Net income improved to $2.7 million or $0.16 per share up from a net loss of $11.6 million, or $0.75 per share for 2011.
The 2012 results reflect a $21.5 million pre-tax increase to its warranty reserve for decking material manufactured at its Nevada plant prior to 2007, a $1.5 million provision for costs related to a mold class action and $0.7 million of severance charges. The 2011 results reflect a $10 million increase to the company's warranty reserve and a net $2.3 million non-cash benefit recognized in prior quarters.
Before giving effect to these adjustments, net income for 2012 was $26.4 million, or $1.55 per diluted share, compared to a net loss for 2011 of $3.9 million, or $0.25 per share. Larry has identified an overlooked turnaround for us early.
Our old friend Mario Gabelli's GAMCO Investors (NYSE:GBL)
with numerous Gabelli Funds (www.gabelli.com
) now manages over $34 billion in assets. Not bad considering in our first interview way back in Bob F's days as a cub reporter at Forbes
Mario had just passed $3 million.
Mario's pick for 2012 was cloud play Internap Network Services Corp. (Nasdaq: INAP: 7.35, recently 9.16), up an impressive 24.8%. Internap, based in Atlanta, GA, provides co-location, managed hosting and "cloud" services utilizing 38 domestic data centers. The IT infrastructure industry is attractive for two reasons: (a) secular demand for data center capacity is strong, driven by the growing need for computing power and information storage and transmission; and (b) data centers possess a recurring revenue model with high returns on capital and "sticky" customers.This year Mario is off to the races!
Mario's new favorite pick is Churchill Downs Inc. (Nasdaq: CHDN - 69.73). Besides hosting America's horserace, the Kentucky Derby, Churchill Downs is a provider of pari-mutuel horseracing, casino gaming and entertainment. It is the country's source of online account wagering on horseracing events. It also offers gaming products through its casino in Mississippi, its slot and video poker operations in Louisiana and its slot operations in Florida. Operations are managed through four operating segments: racing operations, online business, gaming and other investments.In 2012, Churchill acquired the assets of Bluff Media, a multimedia poker content brand and publishing company. Bluff Media's assets include the poker periodical, BLUFF Magazine with its online counterpart, BluffMagazine.com; ThePokerDB, an online database and resource that tracks and ranks the performance of poker players and tournaments, plus various other news and content forums. It also purchased Riverwalk Casino Hotel.
In 2012 Churchill Downs posted net revenues of $732.4 million, up 5% from 2011. EBITDA amounted to $151.5 million, driven by online business and gaming growth. Net revenues generated by online business increased 11%, or $17.9 million, to $183.3 million in 2012. This reflects an increase in online business handle of 10.9%, which continues to outpace national industry trends.
"Over time you will have online gambling in the United States," predicts Mario. "My stock pick for 2013 has a toehold in that business, plus the added comfort of significant cash flows from the existing combination of the race track that has a casino end and some casinos without race tracks."
Other key factors can potentially increase shareholder value. "The take here is that this year they'll have about $175 million in EBITDA and will earn about $3.50," says Mario. "It's growing nicely and is a good cash generator. You've also got some dark horses. One is its position in online gambling in a variety of ways. Second is the possibility that Kentucky and Illinois at some point will allow their casinos to have gambling on the premises. If both come true, the stock is up 50%."
Douglas Makepeace of Sperry Fund Management was a country sector advisor to our mutual friend the late Sir John Templeton. By staying in 2012 with the same company he had picked in 2011, AK Transneft Pfd (TRNFP.ME-54,900 Rubles, recently 66,349) Doug came in fourth for the second consecutive year with gains of 20.9% and 48.6% respectively. Now that this transporter of oil and gas products is being privatized by the Russian government Doug has to pick a new stock.
His choice for 2013 is in South Korea which North Korea is threatening with thermonuclear attack. "No one is buying my new stock pick now at the high because the stock has drifted down a bit this year," says Doug.
Samsung Electronics Co. Ltd. (Korea Stock Exchange 005930 - 1,455,000 South Korean Won) is one of the world's leading makers of cellphones, smartphones, semiconductor chips, televisions and LCD panels, including many other consumer electronics equipment. Also Samsung has a substantial market share in the tablet computer market, with the release of the Android -powered Samsung Galaxy Tab. Samsung Galaxy cellphone is gaining wide acceptance in the market. Doug finds that it is user-friendly and provides more features than other major cellphone brands on the market. "I used an iPhone for several years, but recently switched to a Samsung Galaxy Note 2," he says. "The screen is much larger. One can take notes with the included pen. The software also has many more features than the iPhone."
This year, Samsung will also begin shipping smart TVs. "They plan to combine their various gizmos and may beat Apple to the connected-TV market," he adds. "In addition, Samsung now offers a little box that will allow an existing model to upgrade and use features of the new models." Samsung's price-to-earnings multiple is under 10, while earnings growth is expected to top 25%. "A year from now, I expect the multiple to expand to 12, up 20%, and the stock price to gain 50%," says Doug.
Tom Putnam is descended from the Patriot at Bunker Hill who ordered, "Don't fire until you see the whites of their eyes!" For each of the 32 years we have called upon him Tom has always given us a solid steady new pick. His Fennimore Asset Management now has three no loads FAM Value Fund, FAM Equity-Income Fund and now FAM Small Cap Fund. (www.famfunds.com ) For his fund portfolios
Tom seeks not only survivors in a correction, but winners in an economic rally. His team finds quality companies that have good market share positions not only in their industries, but have strong characteristics of generating free cash flow accompanied by low debt balance sheets.
Tom's 2012 pick Rofin-Sinar Technologies Inc. (Nasdaq: RSTI - 26.29, recently 27.18) posted a gain of 3.4%. Rofin-Sinar develops and produces a broad range of laser sources and systems. Their laser technologies include CO2, lamp-and diode, solid-state, fiber, and diode lasers. Major applications for their lasers include cutting, welding, and marking.To capitalize on its broad CO2 and fiber laser product lines, management is focusing on the Asian markets this year with an emphasis on the electronics industry.
His new pick is Fabrinet (NYSE: FN - 14). It is a Thailand-based provider of precision optical, electro-mechanical and electronic manufacturing services to Original Equipment Manufacturers. It has complex products such as optical communication components, modules and sub-systems, industrial lasers and sensors. It focuses mainly on low-volume production of a wide variety of highly complex products. The global leader in providing these services to the optical communication market, Fabrinet is the sole outsourced manufacturing partner used by its customers in many cases.
Fabrinet's facilities are located in China, North America and of course Thailand. A new facility in Fabrinet's Pinehurst campus in Thailand brings Fabrinet's global facilities footprint to over one million square feet. A vertically-integrated manufacturer, Fabrinet sources bulk components and custom glass products from its wholly owned subsidiaries Casix and VitroCom. These products augment and leverage long-established relationships with Asian suppliers to maintain dedicated supply chain resources.
"Fabrinet is such a valuable partner to their customers, that unlike most contract manufacturers, they do not have to purchase the bulk of their own manufacturing equipment," says Tom. "Rather customers purchase and place this equipment with them. This allows for high ROIC's, which have ranged from 20% to 30%. Furthermore, the company has over $2 a share of net cash on the balance sheet."
Why are these shares on the bargain counter? Blame global warming. Fabrinet was been under a cloud for most of last year as the Thai floods of 2011 destroyed one of the company's manufacturing facilities. In spite of a clear path to recovery, impatient Wall Street remained negative as earnings and revenues declined for the fiscal year ended June 30, 2012.
"Today, shares still trade at less than 10x fiscal 2013 earnings, despite the likelihood that Fabrinet will grow revenues and earnings at a double digit rate," Tom points out. "This is a bargain price for a growing company with cash on the balance sheet and 20% to 30% ROIC."
Poonkulali Thangavelu has written both in India for a local stock market magazine and also for Bob F here on Indian as well as U.S. companies. Last year Poonka liked
TTK Prestige Ltd. (Bombay Stock Exchange: TTKPres-3,081 Rupees, recently 3,147), up 2.1%. Prestige continues to benefit from the growth in the Indian consumer goods market and the increasing affluence and spectacular growth of the middle class in India. Once you have a new house or improved lodgings, women want nicer products to use in their new nest.For over five decades Prestige has been offering them its wares, which include pressure cookers, non-stick cookware and gas stoves, to become a leader in the Indian kitchenware market. As disposable incomes have gone up and more women have entered the workforce, Prestige has modernized and upgraded its products to suit the changing market.
With the enormous boom in retail consumption by India's urban population of about 300 million, Poonka's new 2013 pick is Trent Limited (National Stock Exchange of India: Trent - 999.70). It is focused on catering to retail through its Westside stores, selling apparel; Star Bazaar, a hypermarket with mainly grocery offerings; and Landmark stores, a retailer of books, music and games. Although Star Bazaar is still a drain, Trent expects that this segment's performance will improve as it opens more stores under the Star Bazaar brand.
The Indian government is opening up the retail segment to foreign investment. This means more opportunity! Trent is a retailer set up by the eminent Tata industrialist group of India in 1998. It's an ideal partner for foreign firms that need assistance in negotiating the unfamiliar Indian landscape. Trent already has partnerships with British grocer TESCO and Inditex of Spain.
"Hope springs eternal!" explains Russell Cleveland, chairman and founder of RENN Global Entrepreneurs Fund, Inc. (NYSE AMEX RCG). That's why venture-oriented Russ is stubbornly sticking with the same company he chose a year earlier, BovieMedical Inc. (NYSEAmex: BVX - 2.76, recently 2.45) down 11.2%. Since receiving FDA approval for its J-Plasma technology Bovie has continued to progress with the marketing of its technology. In addition, this turnaround team has recently put together an independent sales team to cover half of the U.S. Several years ago versus a 52-week low of $2.06 Bovie stock hit a high of $9. Happiness would be seeing Bovie up there again."I am an owner of Bovie Medical for a number of years," Russ continues. "Our time may have come. Bovie has launched J-Plasma, a revolutionary new tool for surgery. Early results have been impressive. New medical technology usually takes time to develop. Once in place the results can be very rewarding. I see this at Bovie. It has two major patents on J-Plasma. Large medical companies could be taking notes. Meanwhile, Bovie reported revenues up 8.9% to $27.7 million and net income of $617,000.The company also has a strong balance sheet. So if patience is a virtue, shareholders of this stock could be rewarded."
In 2010 LarryAuriana, co-founder of three FederatedKaufmann Funds, picked Dynavax Technologies Corp. (Nasdaq: DVAX) which soared 96% for the second spot. In 2011 Larry again pick Dynavax, which went up another 74% for first place. But the third time was not a charm. Last year he picked Dynavax (Nasdaq:DVAX- 4.64, recently 2.20), down 52.6 %.) and it plunged 52%. Instead of passing an FDA approval with flying colors, FDA raised the need for more study about safety questions of its flagship developmental product. More time means more money and down went the stock.
But Larry is no quitter. Remaining confident about the long run, Larry's favorite pick for 2013 is Dynavax again.
Led by President Dr. Dino Dina, Dynvax is progressing with Phase III Heplisav (liver-saver) trials for its hepatitis B vaccine which promises faster more effective life-saving protection with fewer doses and injections. This disease can cause deadly cirrhosis of the liver and cancer. If the FDA can be satisfied, the drug could be a blockbuster in the U.S. In China alone 120 million people, about 10% of the entire population, already are infected with Hepatitis B and there is a desperate need for an improved vaccination in Europe too. Heplisav could be a company maker.
In February 2013, Dynavax received a complete response letter from the FDA regarding its Biologic License Application for Heplisav B vaccine. Earlier in November , 2012, the agency's vaccines and related biological products advisory committee voted 8 to 5 with 1 abstention that there was insufficient data to adequately support the safety of Heplisav, although the committee voted 13 to 1 that Heplisav data adequately demonstrated immunogenicity. That means it works.
Dynavax is cooperating with the FDA to identify the most expeditious path to approval for Heplisav, particularly in adults who may receive the greatest benefit from vaccine. In addition, the company's Marketing Authorization Application, still under review in Europe, could be approved and open up marketing Europe ahead of the U.S.
Longer term Dynavax is developing other blockbuster products already allied with partners to help commercialize them. For example, Dynavax and mighty GlaxoSmithKline (NYSE:GSK) have a worldwide strategic alliance to conduct research and early clinical development in up to four programs and Dynavax is eligible to receive sizable milestone payments for each program.
Beyond the Heplisav vaccine, Dynavax has technology that could lead to a development to treat Lupus and there are really no effective treatments for Lupus. It is also developing a Universal Flu vaccine, a Phase 1b clinical trial vaccine for influenza prevention; SD-101, a Phase 1b clinical trial hepatitis C therapy; DV-601 , a Phase 1b clinical trial for hepatitis B therapy; AZD 1419, a preclinical asthma therapy; and DV1179, a Phase 1 trial autoimmune and inflammatory disease therapy.
Everyone is so short term these days it is hard to incubate a biotech. Raging bulls and critical shorts all seeking short term gains have made the shares extemely volatile. The stock has fallen back to where it was a few years ago. Overlooked is Dynavax's progress in between in building up its internal value. It is good to see Larry soldier on trying to get a product which can help millions closer to the commercial finish line. That is where the service to mankind and the really big money are.
Last year, Greenwich Village gadfly Ray Dirks' favorite pick was green energy play
Lithium Exploration Group (OTC BB: LEXG - 0.71, recently 0.21), down 70%. For a comeback, Dirks has returned to his greatest strength -insurance. His new favorite pick is software developer Cover-All Technologies Inc. (NYSE: COVR - 1.28). Cover-All is a leading player in the development of sophisticated software solutions for the property and casualty insurance industry - the first to deliver PC-based commercial insurance rating and policy issuance software. In business since 1981, the company's technology solutions have played a key role in revolutionizing the way major property and casualty insurance companies conduct business. Currently, Cover-All is building on its reputation for quality insurance solutions by creating new and innovative insurance solutions that leverage the latest technologies and bring its customers cost-savings capabilities and value. "They've developed sophisticated software over a period of time and have been able to put it together in such a fashion that major insurance companies will be able to do a lot of their work at a much lower cost," says Dirks. "I think it's going to $4.00 to $5.00 a share probably within a year because it appears that they're going to be breaking into the black and start making somewhere in the order of $0.25 to $0.30 a share in the next six months."
Like Count Dracula we always need new blood. So welcome to one of the most successful and youthful entrepreneurs on the globe. Meet 35-year-old
Arun Pudur who has created the fabulous Malaysian -based, $4 -billion- in revenues
Celframe Technology Group of Companies. From an Orthodox Hindu Brahmin family which has linage to Jews of Indian descent, Arun at 13 began fixing bikes, breeding champion dogs before he started his own tech business. He made his first million at 21, his first billion at 26 and his net worth is currently $3.9 billion and rising. While born in India, Arun made booming technology incubator Malaysia his base. Now Arun is ranked as the sixth richest person in Malaysia and the 15th richest in South East Asia. His plan is to follow in the footsteps of Facebook's Mark Zuckerberg and in a few years bring his Celframe public on the Nasdaq Stock Market.
When we asked Arun for a Favorites of the Famous pick, naturally he came up with a technology stock. "Mobile will be the dominant theme for 2013, which is why Qualcomm Inc. (Nasdaq:QCOM) is my choice," responds Arun. "The company, which was big in the late 90s, is a leading maker of chipsets for all gadgets especially mobile devices. That's not all. Qualcomm was one of only seven S&P 500 stocks that popped up when I looked for companies that have very low debt to assets ratios, pay dividends, have a reasonable price-to-earnings ratio and have estimates for double digit growth for both earnings and revenues in 2013-2014."
With the passing at 95 of my dear friend Max Bowser, just so we senior citizens don't feel under represented, we also welcome newcomer 94-year-old Robert Libauer, a dean of value investing. His pick is Fortuna Silver Mines Inc. (NYSE:FSM-3.74). As the price of silver has plunged so has the stock price of Fortuna, down 47% from over $7 in 2012.They are making money and they have good management," says Libauer. "When you buy Fortuna shares what you are doing is really buying silver at a tremendous discount off the present price. It is a way to buy silver very cheaply because Fortuna actually is producing (in Peru and Mexico.) It's not something that is going to happen; it's all there. And their production is growing every quarter. And they have a lot of reserves and they are expanding their holdings. Everything is going for them. You'll see. Over a period of time Fortuna is really going to ramp up. The stock has been as high as $7. I think it will be back up there again."
Editor Bob Flaherty prefers to put his own new pick last because his guest panelists get top billing. But this year Bob is last because he deserves to be. A year ago he wrote "Bob enjoys working with New Enterprises and he believes that PuraMed has a shot to be a big winner. Tune in next year and see if we hit a homerun or struck out." Bob struck out.
PuraMed BioScience's (PMBS.OB-0.28, recently 0.06) dropped 78.6%. PuraMed is pioneering LipiGesicŪM delivered under the tongue for quicker, safer relief of migraine headaches. On the positive side, PuraMed has achieved nationwide distribution in Walgreens and CVS. Current prescription alternatives are much more expensive, less effective and have some serious side effects. Alas management has lacked sufficient marketing funds to make the product fly off the shelves. LipiGesicŪM still remains a relatively unknown over-the-counter herbal remedy. In a Feb. press release PuraMed indicated that it has engaged investment banking firm Focus LLC to explore strategic alternative options for the therapy that have the potential to accelerate the growth of LipiGesicŪM. We do not know how the next chapter will turn out but we wish PuraMed well in trying to help 50 million Americans who suffer from migraines.
Bob has been first other years and this time he has come in last. Now he understands what the last of the Red Hot Mamas Sophie Tucker meant when she said, "I've been up and I've been down. Up is better."
Bob's initial reaction was to select a very conservative stock for his new 2013 pick and he had one already to go. But then Bob studied all the other 13 new picks. Institutional stocks have thrived in this four year bull market while capital starved micro caps have taken a beating. On the 2013 New Picks table there was not a single stock under $1.
So the heck with being cautious. "Let's swing for the fences again," says Bob. "My recent April 2 FlahertySpecial Situation featured Graphite One Resources (GPH.V and GPHOF.QX) in a sponsored newsletter. The stock has been under down side pressure. It was a big holding of Canadian resource fund which is winding down and unloaded its shares.Down 56% from its high of C$0.41, the shares don't give much credit to what intrigues Bob. Graphite One has the largest graphite resource in America. It is located in the Seward Peninsula in Alaska. It is also the largest in North America and could possibly become the largest flake graphite resource in the world.
Why is this important? Dominant supplier China, which accounts for 77% of global output, has started restricting exports because China discovered that it needs most of its own graphite internally. If the U.S. is to create all those promised domestic green energy technologies jobs from lithium ion batteries, electric vehicles, fuel cells, pebble bed nuclear reactors and solar power new graphite supplies are a must. The U.S. imports 100% of its graphite and many of the new high tech green energy products cannot be made without graphite.
The rest of the world's end users are scrambling to find alternative sources outside of China. When the economy picks up and graphite prices recover and soar again, Graphite One's Graphite Creek property in Alaska should be in demand. Graphite One stock which was over C$0.40 the last two times graphite prices sizzled should soar again when the upcoming shortage heats up graphite prices. All that glitters is not gold. If we are lucky it might be graphite.-RJF