Stocks climbing to 10 times their original price are rare breeds. But they’re not impossible to find — especially when you have Fools for friends.
The market’s best stocks include companies that have risen dozens of times in value by taking advantage of the market’s weaknesses. These aren’t penny stocks; they’re viable companies with sound business prospects that are achieving phenomenal returns. Finding just one or two of these monstrously successful firms can help you establish a winning portfolio.
Stalking the monster
To find tomorrow’s winners, we’ve enlisted the help of the monster-trackers at Motley Fool CAPS, the 180,000-member-driven investor community where informed opinion is translated into stock ratings of one to five stars. We’ll be peering in on the picks of those who have successfully chosen stocks that doubled, tripled, or even quadrupled in price, and this week All-Star member Roach75 gives us molybdenum miner Thompson Creek Metals Company Inc (USA) (NYSE:TC) as his next monster pick. He made his mark with Atlas Energy LP (NYSE:ATLS), which rose more than 1,000% after he picked it to outperform the indexes, compared with the S&P 500′s 47% increase.
Of course, you shouldn’t jump into the breach just because an All-Star stock picker did. Just consider this as a starting point for your own research of extreme buying opportunities.
Molybdenum, which is used to strengthen steel, saw prices rocket from $2 a pound in 2002 to $40 a pound in 2005, but they’ve fallen back below $12 a pound today. Considering the operational issues Thompson Creek was experiencing and the low-grade ore it was producing at its Endako mine in British Columbia, the low price no longer made it economical to continue operations there, and Thompson Creek shut down activity at the mine last August. Two months later it suspended stripping activity at its eponymous moly mine in Idaho, which was preparing the mine for the next stage of production. It will continue mining operations there through next year, but if pricing hasn’t improved, it will idle the Thompson Creek mine as well.
That’s a likely outcome, as Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) — the world’s largest molybdenum miner, with more than 3.4 billion pounds in proven and probable reserves — is modeling the metal’s price at $11 per pound for 2013.
Persistent low prices could also be a problem for General Moly, Inc. (NYSEMKT:GMO) , which is trying to get its new Mount Hope molybdenum mine in Nevada operational. It completed its permitting process late last year and has now begun the construction phase at the site, which contains 1.3 billion pounds in proven and probable reserves, 1.1 billion pounds of which is deemed recoverable.
Offsetting the low-price risk is the five-year supply agreement the General entered into with ArcelorMittal (ADR) (NYSE:MT) to purchase 6.5 million pounds of molybdenum annually at prices that are currently above the spot market. It can be extended for another 10 years as well, but the steelmaker will need to own more than 11 million shares of General Moly’s stock. Thompson Creek’s agreements for its Endako mine were typically annual supply contracts that were based on moly prices at the time of the sale.