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An Unusual Kind Of Commodity Stock That Can Return 1,000 Percent

November 4, 2010 by  

An Unusual Kind Of Commodity Stock That Can Return 1,000 Percent

How can you safely make 1,000 percent gains in the commodity market?

Through hoarding.

Back then (in 2005), I was doing my graduate work in geology. A newsletter writer friend of mine called to ask my opinion about the geology involved in projects owned by a tiny gold company called Seabridge Gold. That call resulted in a 995 percent gain.

You see, Seabridge wasn’t operating as a gold mine, and it wasn’t running an exploration program. This company’s managers were bullish on gold, so they were buying gold deposits that weren’t worth much at $400 per ounce gold but would be incredibly valuable if gold shot to $900 or $1,200.

They were "hoarding" cheap gold.

Remember… back then, the gold price was around $400 per ounce. As gold took off (as the managers expected), the value of Seabridge’s properties soared… and my friend’s readers booked a 10-bagger. It’s an incredible story on the value of hoarding cheap assets when nobody wants them.

I’m interested in this story because right now, a commodity’s sitting where gold was years ago: cheap and hated, with lots of upside.

The commodity is natural gas.

The price of natural gas has been crushed in the past few years. New drilling techniques have brought on enormous new supplies of natural gas and have sent prices from $12 to less than $4.

The price of natural gas is so low it’s not economical to drill for it, and natural gas properties are going for peanuts. There’s zero investor interest in the stuff. Everybody thinks natural gas is dead, which is when good contrarians buy with both hands. Here’s why…

China is ravenous for fuels that can fire electrical power plants, which could send coal prices much higher. If China will pay more for coal, our miners will ship it to China. The Energy Information Administration expects coal exports from the U.S. to rise 58 percent this year.

It’s neither difficult nor all that expensive to convert a coal power plant to a gas power plant. If that happens, natural gas prices will rebound. You can see where I’m going with this…

It’s time to hoard natural gas. It’s time to hoard "PUDs."

PUD stands for Proven Undeveloped Reserves. These are deposits of natural gas we know for sure are in the ground. They’re just waiting to be drilled. In a lot of cases, the stock market is offering vast amounts of cheap PUDs.

Take Rex Energy (REXX), for example. Rex is a small-cap oil and gas producer that trades for 14 times current gross profit. That’s about right for oil and gas companies, which means it’s trading just on its current production.

However, Rex also owns a huge swath of the Marcellus shale. The Marcellus is the lowest-cost natural gas field in the U.S. About 70 percent of Rex’s proven reserves remain in the ground, undrilled. The market isn’t taking that into account. That means we get all those PUDs… about 40 billion cubic feet of natural gas reserves… for free.

Should gas rise from $4 to $6 or $8 in the coming years, these assets will skyrocket in value.

Rex is no exception. There are plenty around, in the "left for dead" section of the stock market — exactly where we should be looking for new investments.

If you are patient, like the management and shareholders of Seabridge, you can turn a natural gas investment today into a huge capital gain down the road.

Good investing,

Matt Badiali
Editor, S&A Resource Report

P.S. One way to acquire natural gas assets is to use a unique moneymaking strategy favored by the likes of Bill Clinton… and even Barrack Obama. Whether or not you agree with their politics, you have to admit the strategy is brilliant. It’s a way to make just one investment… and then get paid over and over again. We recently put together a special video report that details this "unorthodox" income-generating secret. Click here to watch it.

Scott B. Williams

has been exploring wild places and seeking adventure on both land and sea for most of his life. He has written about his experiences in several books, including On Island Time: Kayaking the Caribbean, and is the author of the survival books Bug Out: The Complete Plan for Escaping a Catastrophic Disaster Before It's Too Late, and the recently released Getting Out Alive: 13 Deadly Scenarios and How Others Survived. More of his thoughts on survival topics can be found on his blog: Bug Out Survival.

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  • Johnnyrite

    Two problems seem to stand out and both stem from an economy that cannot seem to recover.

    First, the owners of this penny stock will probably have a tough time getting financing.

    Second, natural gas, although cheap, can become a lot cheaper yet.

    People that held energy stocks, even blue chip ones, watched their investments get crushed when crude oil fell below $12 per barrel during the rolling recession of the early 1980s.

    Gold offers protection from deflation, oil and natural gas do not.

    • meteorlady

      Gold has also gone up and down. People that bought it before y2k took a real beating. When people are broke who will be able to buy your gold? I personally have stockpiled liquor, bullets and other small things that I can barter with. There is also the Pickens Plan that is out there and it just could get us off foreign oil buy converting to natural gas in our automobiles. He’s got a lot of money to invest in wind so why wouldn’t he invest in natural gas companies?

      • Joe

        Very good ideas. Never thought of stockpiling liquor but I will now. About 20 years ago I read a book by Mel Tappan. ” Tappan on Survival” and I was in the survivalist mode for several years. I’m back into it again as I can see what Mr. Tappan was talking about is about to happen in our country. I really cant afford gold but have stockpiled some kennedy 1/2 dollars that are 40% silver content and are still affordable. Thanks, Joe

  • s c

    Investing in natural gas is probably not a bad idea. All it takes is some money to ‘invest,’ and
    a steel will to leave the investment alone. Of course, it also assumes that the dark forces determined to destroy America from within [Uncle Scam and his lemming hordes] won’t find ways to make all investments risky or so highly-taxed that investors will look elsewhere.
    I’d say try natural gas or invest in things that are not denominated in dollars. Good luck, folks. By the way hoarding is not a sin. Uncle Scam’s media whores will always insist that hoarding is ‘not right.’ Consider the source of that idea.
    Anyone who thinks Uncle Scam would never HOARD anything forgets that FDR acted like a dictator when he CONFISCATED America’s gold not too long ago. In other words, once a precedent is set, there will be sufficient temptation to do it again.

  • BigBadJohn

    My gift

    LNG – has been on a tear and is the first company to start exporting US natural gas.

    Buy any oil stock, look at the charts, as Bush started to destroy the dollar, the price of oil stocks went through the roof. Based on the current value of the dollar, oil stocks are a bargain.

    • BigBadJohn

      If you bought this after I recommended it – congratulations you are 6.5% richer in one day!

  • Laurance

    Rex doesn’t own that Shale area anymore and hasn’t since August.

    “The deal with Sumitomo’s wholly owned subsidiary Summit Discovery Resources II requires Rex to sell and transfer interest in its Marcellus Shale assets located in Pennsylvania, including 12,900 acres, certain producing Marcellus Shale wells and associated mid-stream assets, totaling about $140.4 million.”

    • http://www.philippinetreasure.com everett

      oh crap! i though i was getting a free one from Matt Badiali !

      but, r u sure, Rex no longer has that natural gas properties?

  • refuse2lose

    Funny that George Soros has been pushing these things for the last few months. Almost like he has been purposely manipulating the dollar and will now make billions off commodities.

  • Daniel

    T Boone Pickens has been harping on natural gas for a couple of years! It’s so cheap right now that it costs more to deliver it to the customer than they’re charging for it. This means that the big boys are squeezing the little ones out of the business, and buying their bankrupt companies up for pennies on the dollar. This has been happening ever since natural gas dropped below $5.50 (currently $3.76). So if you’ve got just a little more time to wait out the small company squeeze, the big boys WILL NOT sell natural gas for less than it costs them – period. As a technical trader, I have a monthly chart target of $18.90 and there’s a 70% chance that we will hit that target. Regardless if we hit it – there is no doubt that at some point, natural gas will lift off higher than it is now. So profits are (in my humble opinion) a sure thing, if you can wait out the squeeze. I think that we could see our technical target within 2 years, maybe just a little longer. Of course, we’d be happy if it came sooner. Those are my thoughts. I love Natural Gas and have been buying it for the last 6 months for the long term play.

  • http://com i41

    Metorlady, we jave more oil in the interior of the United Sates that could havbe the USA with oil wealth greater than the middle east, if the jackwagon marxist democrats and the slug green energy pipedreamers. There is lots of oil setting in storage tanks that have no refinery to go to. The simple minded a$$es who want electric power rear wipers and putt putt cars on batteries are just plain stupid dumbazzes. It took ethonenal 3 decadesalmost 4 to get where we are today, andit is still being worked on. The National Marxist Communist Democrat Union Party followers are getting more stupid every month, with the idea we can get off of oil, we have planty of our own and we need to use it , not be shipping it to us, with the high cost of freight and handling. The socialist beltway agency bastards stopped a pipe line going from Baker Mt to the gulf and going past a refinery in Okla. Why because Onumnutts and his radical lap pooches are trained yto obey his marxist whistle. If it scheduled to start when original planned it could be in in a year, with all the unemployee operators and welders sitting around wanting to work. Something the book trained over educated dumb beltway bastards cann’t get their nano brains around. I realize most desk polishers and pavement pounder have ever did dirtwork or worked in the wild open. It is the dumbocrats idea to put everyone on a bike and stay indebted to China as well as become a 3rd world country with totalitaran dictatorship.

    • ToastedFrog

      @i41
      Bud, it is worse than that. Over the weekend, I was given information that the Obama crowd you speak of has formed up companies of late, last two years, to make a few millions as primary contractors to the government. Problem is that they have no track record, knowledge of the field, nor clue as what to do. They sub out all the work to legitmate contractors and get the stimulus while the real workers get the neddle jab. I could not believe some of the outlandish escapades that we going on in bidding and awarding of the contracts. Some of the long term contractors have been making a few million a year themselves. However, they say some of the Obama camp followers are making tens of millions in their first year of operation.

      One situation was as odd as a polar bear selling beach balls in the dessert. It was so ridiculus that I cannot give the details as they would identify the project. Also, some of these people are so fat that they cannot do site walk throughs. Amazing corruption from a bunch that whined incessantly about Cheny and Haliburton etc.

  • http://colloidalcopper.net MCM2000

    this is some straight bullsh!t – just a sales scam for some get rich quick scheme

  • jopa

    The Haliburton saga continues to this day.Their numbers are $41 BILLLION in profit, not far from a billion a week.Now I wonder if they did any work in Iraq and Afganistan or did they just ship our tax doolars to an offshore bank.

  • jopa

    OOOPS MEANT DOLLARS.

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