The investment game can be an interesting one. The unpredictable ups and downs have us all searching for patterns to make sense of it all. Some think they’ve found a magical system, others are still searching.
Some investors swear by stop-losses; others believe charts and historical data hold the magic key. Still others (including me) believe you find a couple of small-cap plays with massive potential and invest (speculate is probably a more appropriate term) heavily and watch that basket of stocks like a hawk.
Regardless of where you’re at in the search for a system, if the Holy Grail still eludes you, there is one rule that can make you an extremely successful investor: be early.
I know it sounds challenging. -- after all, who can see the future? -- but that’s the only way to be a successful investor over the long term. Thinking ahead, asking yourself what’s going to be hot two years from now and what the countries are just starting turn things around… those are the questions you need to be asking yourself.
It’s really a lot simpler than most of you think. For instance, right here in Fear & Greed, we discovered the agricultural boom almost two years ago. Monsanto, Terra Nitrogen, Agrium, Potash One… all the hot stocks that are currently flying high. We looked at them all back in 2006.
After all, the ethanol boom was raging, but there were no fundamentals. Companies that did absolutely nothing, owned no assets and barely managed to throw together a business plan and investor’s presentation. These have managed to grow to multibillion-dollar market caps. These companies were throwing around hundreds of millions of dollars investing in new facilities.
Who was going to be the eventual big winner?
Certainly not the cash-strapped ethanol producers that rely on government subsidies merely to survive. The big winners were going to be the companies that provide the picks and shovels. In the ethanol boom’s case, that meant corn and fertilizer producers.
That’s how those of us at my premium investment newsletter, BreakAway Investor, are sitting on gains of about 150% about three months on a little unknown potash company called Potash One.
There are a lot of legs left in this agriculture boom, and this company is set to be an even bigger winner as a result. Ag is looking like the next bubble candidate, and small companies like these are going to be even bigger winners.
On top of that, a little more than two years ago, we delved into sand. That’s right, the least sexy of any element in the entire commodity boom. Sand isn’t traded on a major exchange like copper and oil, so it’s tough to know whether its price is going up or not.
However, we caught onto the private side of the business and learned that sand producers were getting double or triple the price of what they did around 2001. The reason: silicon.
Silicon is used in all those computer chips, but the solar power boom was going to make those companies that produce sand, more specifically metallurgical grade silicon. Very big winners.
At the time, a virtual unknown called Timminco (TIM:TSX or TIMNF:Pinksheets) was literally sitting on a beach worth of sand that had high enough silica content to be easily turned into silicon.
While all of the solar panel manufacturers were helplessly watching their bubble-inflated stocks drop 90% -- or more, in many cases -- Timminco was providing the picks and shovels. As a result, Timminco’s shares climbed from 35 cents to more than $20 apiece in less than two years.
That’s the power and safety of thinking ahead and getting in early.
On Monday, you’ll no longer be receiving Fear & Greed, but you will be receiving Taipan Daily. Within Taipan Daily, I will be a regular contributor and I hope to bring you the next forward-thinking idea like Timminco, which seems a bit crazy at first, but eventually pays off big.
Good investing,
Andrew