This showed up in my inbox Saturday from the good folks at Financial Intelligence.....
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Here''s What the Rest of the Investment World thinks . . .
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As you can see, we’re all on the same page.
According to TheBullionDesk.com analyst Ross Norman, winner of the LBMA 2006 gold price forecasts, the price of gold could hit $850/oz in 2007. That’s a 40% move from today’s mark of $610. “We are predicting an average price of $700/oz with a spike to $850/oz.” “The shortest bull market for commodities lasted 15 years, the longest 23 years, so if history is any guide, they''ve got a long way to go. This is not a bubble."
— Jim Rogers, Author, "Hot Commodities.""Gold is now being accepted as the fourth currency along with the dollar, the euro and the yen. But there is a difference. Gold is also being recognized as the tangible currency and the only safe currency. That gold pays no interest -- but traded not too long ago at a 25-year high in terms of dollars -- is a testament to its value and safety in the eyes of sophisticated investors."
— Richard Russell, Editor, Dow Theory Letters"Gold is in a bull-market trend, and there are a lot of reasons for that, and we will see higher prices. People shouldn''t be surprised to see gold trade in the four digits. Investors should worry less about whether this particular moment is a good or bad entry point and ponder the implications of sailing through uncharted waters without a lifeboat."
— John Hathaway, Portfolio Manager, Tocqueville Gold Fund "Gold prices may reach $2,000 an ounce by 2010 on demand for an alternative to currencies. You have much more money than there is gold, and as people see their currencies falling relative to gold, they''re going to be saying `Maybe I should have some of this''."
— Robert McEwen, CEO U.S. Gold Corp. "The price of bullion may exceed $1,000 (U.S.) an ounce within five to seven years as demand growth driven by Asia outstrips global supply."
— Pierre Lassonde, Pres., Newmont Mining"If our current gold rally truly unfolds into a Great Gold Rally, $1000 gold is merely the first stage. A gold bubble, which will probably ultimately happen as a way to climax the coming gold mania maybe five to seven years out, could easily launch gold above $5000 per ounce. The actual top of a new gold bubble at the final pinnacle of another Great Gold Rally could touch $6000+ per ounce!"
— Adam Hamilton, CPA, Zeal Intelligence
"Gold prices actually started their life at $35 per ounce in the early 1970s. From there, it went to $850-$875 -- a twenty-five-times-over move. Gold began its latest move up at $252, so prices at $6,250 can''t be ruled out either, in terms of magnitude of the move."
— Jon Nadler, Investment Products Analyst, Kitco
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and it really got me to thinking...
According to a recent press release, Azco''s Summit property has a value of $250 million at current metal prices. Using the most conservative estimates Gold may reach $850/oz. this year. That is a 40% increase over today''s prices. That could increase the value of the Summit property to as much as $350 million by the end of 2007. What does this mean to the Azco shareholder? With approximately 60m shares outstanding, we do some quick napkin math - $350m value divided by 60m shares = $5.00 per share value or a 400% gain over today''s share price
We contend that a 400% gain is far superior to a 40% gain. Would you agree? Read on....
Our valuation of Azco Mining shares at $5.00 per share is pretty straight forward. However, there is far more than meets the eye here.
Azco Mining also owns the Ortiz Goldfields with proven in-ground reserves of 2 million ounces.
Azco Mining also owns the Black Canyon Mica Project.
Azco Mining also owns the only MIO deposit in North America.
In our opinion, each of these individual properties represents a potential value of $3-$5 per share.
Is it really possible to buy a stock worth $20 for only $1? Of course it is. Warren Buffet does it all the time!
Did you know that a $10,000 investment in
Berkshire Hathaway in 1965, the year Warren Buffett took control of it, would grow to be worth nearly $30 million by 2005? By comparison, $10,000 in the
S&P 500 would have grown to only about $500,000. Whether you like him or not, Buffett''s investment strategy is arguably the most successful ever. With a sustained
compound return this high for this long, it''s no wonder Buffett''s legend has swelled to mythical proportions. But how the heck did he do it? In this article, we''ll introduce you to some of the most important tenets of Buffett''s investment philosophy.
Buffett''s Philosophy Warren Buffett descends from the
Benjamin Graham school of
value investing. Value investors look for securities with prices that are unjustifiably low based on their
intrinsic worth. When discussing stocks, determining intrinsic value can be a bit tricky as there is no universally accepted way to obtain this figure. Most often intrinsic worth is estimated by analyzing a
company''s fundamentals. Like bargain hunters, value investors seek products that are beneficial and of high quality but underpriced. In other words, the value investor searches for stocks that he or she believes are undervalued by the market. Like the bargain hunter, the value investor tries to find those items that are valuable but not recognized as such by the majority of other buyers.
Warren Buffett takes this
value investing approach to another level. Many value investors aren''t supporters of the
efficient market hypothesis, but they do trust that the market will eventually start to favor those quality stocks that were, for a time, undervalued. Buffett, however, doesn''t think in these terms. He isn''t concerned with the supply and demand intricacies of the
stock market. In fact, he''s not really concerned with the activities of the stock market at all. This is the implication this paraphrase of his famous quote : "In the short term the market is a popularity contest; in the long term it is a weighing machine."
He chooses stocks solely on the basis of their overall potential as a company - he looks at each as a whole. Holding these stocks as a long-term play, Buffett seeks not
capital gain but
ownership in quality companies. Once Buffett determines the intrinsic value of the company as a whole, he compares it to its current
market capitalization - the current total worth (price). If his measurement of intrinsic value is at least 25% higher than the company''s market capitalization, Buffett sees the company as one that has value. Sounds easy, doesn''t it? Well, Buffett''s success, however, depends on his unmatched skill in accurately determining this intrinsic value. While we can outline some of his criteria, we have no way of knowing exactly how he gained such precise mastery of calculating value.
Once Buffett determines the intrinsic value of the company as a whole, he compares it to its current
market capitalization - the current total worth (price). If his measurement of intrinsic value is at least 25% higher than the company''s market capitalization, Buffett sees the company as one that has value. Sounds easy, doesn''t it? Well, Buffett''s success, however, depends on his unmatched skill in accurately determining this intrinsic value. While we can outline some of his criteria, we have no way of knowing exactly how he gained such precise mastery of calculating value.
The Most Undervalued Asset on Planet Earth
Using figures from a recent independent research report on Azco Mining, the intrinsic value is arguably over $1 Billion US.
However, for the sake of simplicity, let''s focus on just the Summit property and the $350 million value discussed above. Using the Buffett methodology, we need to see if the intrinsic value is at least a 25% discount to the current market capitalization. If so, this is the type of investment that Warren has used successfully for 40 years to amass a $40 billion dollar fortune.
AZMN Summit Property Intrinsic Value - $250 million (current metal prices)
AZMN Current Market Cap - $65 million
These figures tell us that AZMN is currently trading at a 74% discount to it''s intrinsic value based on only 1/4th of their portfolio. Warren built his fortune buying at only a 25% discount based on the entire company, not a quarter of their assets as we have done with Azco Mining.
The Bottom Line
Rarely do we find an opportunity to turn every $1 invested into $5. Could $100k become $500k? Could $1 million become $5 million? In our opinion it''s not a matter of if, but when. With geo-political tension increasing in Iran, a weakening US dollar, India and China introducing Gold ETF''s, and demand outstripping supply year over year, we believe that Azco Mining AZMN, represents the most unique, undervalued, investment opportunity that we will encounter in this lifetime.
Pray Hard and Trade Safe
From the Desk of CT
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