Uber’s losses keep growing… and this tiny company is sucking up all that cash

Uber lost $5.2 billion last quarter — and the CEO says they may NEVER make money.

Uber’s main competitor, Lyft, is also losing money.  In fact, NONE of the major rideshare brands—in Asia, Europe or the Americas—make money.

Still, these companies are booking billions of rides each year… and bringing in billions of revenue.

And the industry is still growing like crazy.

But where are all the profits?

Well, after years of research, digging into tiny companies, I’ve finally found the answer…

There’s a little-known company that is solving one of the biggest problems for Uber and Lyft.

And it’s vacuuming up the profits these companies are losing.

This company has grown 100% in the past year. And it’s poised to start gushing free cash flow (which should send the share price soaring).

Despite how incredible this company is (and how important it is to the ride-sharing industry), its stock is still under $5.

But I don’t think it will stay there for long.

In fact, I think the next corporate update will start this stock on a massive run as the multi-billion rideshare industry rallies around them, cementing them as the leader.

I’ll explain the company to you in detail, and how I found it.   Click here for the full story:

Plus Products  (PLUS-CSE / PLPRF:OTC) already has the #1 cannabis product in all of California, the largest and most competitive market for cannabis in the world – with almost no advertising! They are the leader.

And they are now about to roll out an entirely new line of CBD edibles across the country – in a direct-to-consumer model that is more profitable.  Investors want to see a path towards positive cash flow and profits in marijuana stocks and I see Plus Products poised to deliver.

As they go national, Plus Products will lever the Internet and two high profile marketing partners – singer/songwriter John Legend and national mattress company Casper – with their brand of CBD edibles.

In one sense, that’s all you need to know.  If you have a product good enough to be #1 in California – with no advertising – and you’re about to take that brand national, with higher margins – you’re going to leapfrog your previous success.

PLUS is also using its war chest – over US$30 million in treasury – for two other expansions: start selling their #1 brand of PLUS gummies in Nevada, and increase advertising in California to gain even more market share.

From these three large expansions – going national with their CBD by far the biggest – I expect growth for PLUS to continue in the coming quarters.

PLUS PRODUCTS HITS THE ACCELERATOR

Plus Products is the number one seller of cannabis gummies (the largest edibles segment by a huge margin) in the state of California with a 21% market share.

It isn’t even a close race.

Plus Products two main gummy products are #1 and #2 in California across all categories – that includes vapes, tinctures, flower, etc.. The next closest competing gummy product has only half the sales of Plus Product’s best seller. Leading cannabis market research group–BDS Analytics–confirm this.

This is the most important race in cannabis and Plus Products is holding down both of the top two spots.

PLUS achieved this dominant position on the strength of its product alone – NO MARKETING! Almost all of this growth to date has been word of mouth from satisfied customers.

Nothing reveals of the strength of a consumer brand more than satisfied customers who tell their friends. Plus Products is #1 because it has the best product.

Now the company is hitting the gas pedal on marketing.

But not just in California… instead Plus Products is rolling out marketing NATIONALLY with its CBD product.

Plus Products is taking arguably the strongest brand in cannabis onto the national stage just as the size of the CBD market is expected to explode.

With USD$34 million of cash in the bank, the company has the financial means to hit this hard at exactly the right moment.

John Legend Agrees With Me – Own The Leaders

Driving national awareness for the CBD product will be Grammy, Oscar, Emmy and Tony award winning John Legend (“All of Me”) with his 30 million social media followers and over 2 billion streams on Spotify.

Legend insisted on taking a Plus Products share position rather than just getting paid cash to act as an advocate for the brand.  He knows – Own The Leaders!  That has been my biggest investing lesson ever – own the leaders in the industry.

A social influencer on this scale is going to have an impact – consider that companies value this marketing stream enough to pay big influencers $100k plus for just a single post.

This is the most effective marketing nowadays.  The Kardashians are a multi-billion dollar business because of social media.

John Legend has a long-term equity position in Plus Products.

There’s another leader partnering up with Plus Products – direct-to-consumer mattress company Casper who is now marketing Plus Products’ CBD gummies to consumers directly on their website.

Casper’s involvement is another huge validation of the power of the Plus Products brand. Casper has rocked an entire industry selling more than $400 million last year of mattresses-in-a-box and other sleep products, in a mostly direct-to-consumer channel–on their website!

Look, Casper could partner with any CBD company it wanted to.

They did their due diligence and partnered with Plus Products… which makes sense given that Plus Products is a dominant brand in the biggest cannabis market.

CBD is known as a product that can chill you out.  A mattress company is the PERFECT partner.

And Casper’s online platform immediately gives Plus Products a national presence in front of a massive number of consumers who can right now – as of September 17th – buy Plus Products CBD gummies in 43 states.

The CBD gummies are also being sold directly through the Plus Products website.

Direct To Consumer Is MUCH More Profitable

Rolling out CBD nationally is huge for PLUS Products and its shareholders – not just for the volume of sales growth that it’s expected to bring in – but because direct to consumer is so much more profitable.

So far, Plus Products has only been selling THC and CBD products through third party locations in California.  Going directly to the consumer instead is so significant because it cuts out two layers of middlemen.

When selling in stores instead of direct-to-consumer… Plus Products has to sell to a distributor who then marks the product up 30% and sells it to a retailer, who then marks it up 150% to sell it to the consumer.

The retailer’s selling price to the ultimate consumer is over $20 for PLUS’ brand of THC gummies – but Plus Products only gets $6 when it sells to the distributor.  That’s a lot of lost margin!

Going direct-to-consumer, Plus Products will be receiving the $35 per tin (due to high demand for Hemp CBD) from the end customer, not $6 from a distributor.  That’s an exponential increase!!

And investors should understand that while nationwide CBD sales are great by themselves, there’s another huge benefit.  You see, the packaging, the product, everything looks the same as what a customer in California sees today.  As the CBD goes national, it’s seeding the Plus Products brand across the country.

This national CBD roll-out will establish the brand so that when THC is legalized…..the Plus Products THC product is the natural choice in every state, just as it already is in California.

(Did you see last week where the governors of Pennsylvania, New York and Connecticut all said they were going to go full legal on marijuana – that should be a huge tailwind for US pot stocks this fall!)

Before I end this, just a quick note on the other two sales efforts that PLUS is ramping up.

Their THC gummies will soon be sold in Nevada.

Next to California, Nevada is going to be the next most valuable cannabis market. With 40 million tourists every year, analysts see $1.2 billion in cannabis spending in Nevada by 2022.

And important to note… Plus Products management is not expecting a slow revenue ramp up in Nevada.  Their expectations are to have the #1 edibles position in Nevada by the end of Q1 2020.  That would be just six months from now.

I would say that sounds crazy, but that is exactly how long it took them to achieve that feat in the California gummies market following full legalization… with hardly any marketing spending! The brand will already have name recognition in Nevada so it should actually be easier to ramp up revenue there.

Management’s confidence in the ability to grow in Nevada all comes down to the fact that the best product wins – and they believe that they have the best product. The word of mouth momentum that Plus Products created in California shows that.

If Nevada goes as expected, management plans to add another four states by the end of 2020.  This is not a company that has small plans.  The goal here is to be the leading brand in California first, the entire United States next and eventually the world.

And they have the balance sheet – US$30 million PLUS – to do it!

Lastly – a recent report released by Arcview Market Research and BDS Analytics noted that California cannabis sales will hit $3.1 billion in 2019 – and then quickly more than double again to $7.2 billion in 2024.

Already the biggest market by far… California by itself is projected to be 40% larger than the entire country of Canada and 253% larger than the next-largest state (Colorado) by 2024.

One in four dollars spent on legal cannabis in 2024 is expected to be spent in California.  Plus Products will be ramping up their advertising in California in Q4 2019.

Win California, you should win the country.  Win the USA and you win the world.

National CBD roll-out with Tier 1 partners. Expand gummy sales into Nevada.  Beef up advertising in California.  Investors are looking for a clear path to cash flow out of the cannabis sector, and Plus Products is positioned to deliver.

As I wrote last month, solar stocks have been on a tear. (HERE) Since early April project developers like Vivint (VSLR-NYSE) and SunPower (SPWR-NSDQ) are up 50% and 100% respectively.  Producers of solar inverters, such as Enphase (ENPH-NYSE) and SolarEdge (SEDG-NYSE), have performed even better.

The moves in these names really got going in the spring and that momentum carried through into the summer.   But in September the momentum has slowed abruptly. High-flying names like Enphase and SolarEdge have made abrupt corrections.

So what’s going on?

I explained last month how this is a bull run being driven by demand.  Just look at Enphase, which saw revenue increase 77% year over year and 34% sequentially in the second quarter.

Source: Enphase August Investor Presentation

Meanwhile SolarEdge saw 20% sequential and 43% year-over-year revenue growth.

Source: SolarEdge Third Quarter Earnings Presentation

Without a doubt that demand reflects the secular expansion of solar based electricity.  But there is another factor, often overlooked, that needs to be considered.

The run up in solar stocks from April has traversed a similar type move in longer dated bonds.  The slump in September has coincided with a similar correction.

On the surface this would seem to be coincidence.  After all, what does the 10-year bond have to do with a solar panel?

More than you think.

Solar stocks are VERY tied to rates–because of the financing required.

Solar projects are expensive upfront.  They require lots of capital.  You make back that return over years of producing cheap electricity (and collecting government subsidies to do it).

Therefore, developers of solar projects are always looking for investors willing to put up capital to fund their projects.

Most districts subsidize solar projects as a way of promoting green energy.  In the United States, these subsidies take the form of an investment tax credit.

The tax credit came with the Obama administration, which used it as a way of propelling solar demand.

The tax credit right now is 30%.  It is going to be reduced to 26% in 2020, reduced further to 22% in 2021 and then to 10% thereafter.

This is likely the first reason solar stocks have run-up – there has been demand pull forward due to the coming subsidy reductions.  Why wait until next year for a solar project that could be done today with 4% extra subsidy?  My though there goes against the late Guy Sella’s (SolarEdge founder) contention that nobody buys solar for subsidies anymore.

That tax credit also has another effect – it is used to help fund the project.

Here’s how it works.  The developer finds a partner that has a tax liability they’d like to offset. The developer makes a deal, saying they’ll pass on the tax credit to the partner if the partner funds part of the project.

The partner won’t fund the project dollar for dollar.  They need it to be more attractive than just paying the tax.  So they’ll do it at a discount.

Here’s where the bond yield comes in.  If yields are going down the investor requires less of a return to justify making the deal.  Solar projects are more attractive options.  That makes it more likely that the marginal project will get the go ahead.  Demand for solar rises.

It’s a bit more complicated than what I’ve just described; there are middlemen funds that act on behalf of the partners, and the deals often include some form of equity in the solar project.

In addition to the tax credit, the rest of the solar installation is often financed by the long-term contract signed by the homeowner.

Here’s how: the contract locks the homeowner into a fixed payment over a period of 20 to 25 years.  This payment replaces the electricity bill that the consumer would pay, and it’s presented as a cheaper option to that bill.

These payments can be then be pooled and securitized, ie. a bunch of other homeowner payments are put together into a bond and sold off to investors, just like a mortgage bond.

The upshot is that the homeowner pays nothing up front.  The solar installer doesn’t have to put up anything up front.

Falling rates mean that these financing schemes are more attractive.  There is more demand for the tax incentive and more demand for the solar securities.  Solar projects are more attractive to investors.   More demand.

Add to that the upcoming reduction in subsidies and you have the makings of significant demand pull-forward.

China Subsidies

The subsidy change I’ve talked about is strictly in the United States.  But changes are happening elsewhere.

For example, China has said they want solar to be self-sustaining by 2021.

China handles solar subsidies by using feed-in-tariffs (FITs).  These are surcharges on consumer bills with the proceeds going to fund solar projects.

In June of last year China said they were going to remove the FIT program.  The result was a collapse in demand because of the uncertainty.

In June China reneged a little – they said that the FIT program was a go for 2019, but… there would be an 18-month transition to subsidy free solar thereafter.

There is disagreement about when China will really pull the plug on subsidies, some think it won’t be until 2023, but there is no doubt that it is going to happen.

What does this mean going forward?

Recognizing the importance of subsidies leads to a couple of questions.

The first one is obvious – can solar demand keep expanding without subsidies?  Honestly, that is a tough one to answer.  It depends on the region.  It depends on the cost of energy alternatives.

It also depends on what take the place of current subsidies.   Even with the loss of federal subsidies in the United States, solar activity will be supported in some states by local laws.

In California laws have been passed to requiring solar panels on new homes.  While residential installation growth might slow, behind the meter growth, fueled by utilities, is expected to pick up the slack.

Source: SunPower 2019 Analyst Day Presentation

Meanwhile in regions such as Europe subsidies are expected to accelerate if anything.

Overall, demand growth might slow, but absent of economic slowdown or tightening of credit, it is unlikely to stop.

Source: First Solar 2019 Analyst Day Presentation

The second question is this – just how tied is solar to the financial system?

I’ve only brushed the surface of how solar projects get funded.  Suffice to say they depend heavily on the availability of credit.  Some of that credit comes from shaky sources.  Take Canadian Solar for instance – they disclose in their risk factors that they finance projects through short-term funding from Chinese banks.

Even where funding is from aligned investors, it remains a risk.  Vivent Solar, for instance, has raised 25 investment funds, to which investors such as banks and other large financial investors have committed to invest approximately $1.9 billion.

All of this is great on the surface.  The availability of capital is fueling a solar build-out.  Homeowners are signing 20-year contracts with attractive electricity rates while not having to foot any of the cost.

The mortgage crisis of 2007-2008 showed that securitization and/or being reliant on outside funding, particularly cheap, outside funding, has a history of not ending well.

Now I happen to believe rates will continue to go lower (and we have a story coming out on that at my sister publication, InvestingWhisperer.com).  BUT–It raises the question of what happens to all that funding if and when the financial system tightens up again.  Or if the current bond bull runs out of steam.

-Keith

African Gold Group (AGG:TSXv AGGFF:OTCQB) is the soon-to-be junior gold producer that will be churning out millions in cash flow, as their Koboda Gold Mine ramps up to 50,000 oz per year, then 100,000 oz per year.

I can’t believe the stock is still trading for pennies – 40 of them buys a share!

Management’s timing here was impeccable. They bought the Koboda asset in 2016 when nobody cared about development projects.  In 2015, Koboda was a large, simple gold deposit, at surface, and ready for production. But no one wanted it – even though it is surrounded by multi-million ounce producing mines!

The base case on the 2015 feasibility study said Koboda would generate excellent returns at $900.

And now it will into production with gold trading at $1,500 per ounce and rising.

Now this project is going to be an absolute home run. And it’s still trading for pennies. Crazy. I think investors here stand to make HUGE gains.  That’s why I’m long.

At $1,500 per ounce Koboda will generate tens of millions in cash flow.  The 2015 feasibility didn’t even have $1500 gold in any of its charts.  Nobody thought Gold would go this high then.

This team has made Big Money before in West Africa.  They bought the Tabakoto mine – which was having real problems – for $20 million. They turned it into a 150,000 oz per year producer and sold it to Endeavour Mining in 2012 for nearly $400 million. Almost 20x their money in two years!

Ka-Ka-Ka——CHING!!!!

That’s Big Money in a short amount of time.

And that’s what I see happening here at Koboda.  There’s 2 million ounces so far – but only a small portion of the property has been explored.  There’s huge upside for millions of more ounces.

An aggressive drill program will be starting ASAP, and those numbers should help get the story a much bigger – and eager – audience.

The asset is permitted – construction could start tomorrow.

They bought it for almost nothing… management acquired this mine in the doldrums of a decade of stagnant gold prices.

It was like buying a house at the bottom of the U.S. Housing Crisis.

Buying at the bottom meant that African Gold Group was able to get this project that is profitable at $900 per ounce gold at a throwaway price.

They had the foresight to identify and buy a highly economic project when nobody else was interested.  But trust me, everybody is going to be interested now.

Here’s an asset that is

1. 2 million ounces and growing
2. Fully permitted
3. At surface, so…
4. Cheap mining – All-In-Sustaining Costs are $788/oz
5. Low capex – this mine will only cost $45 million to get to its initial 50,000 oz per year
6. And in the hands of a team that has built and sold juniors before – for nearly 20x their money in two years!

I’ve met and talked to the team – they can raise the money.  In fact, if Gold is still moving up while they’re building the mine, the plan for the Koboda Gold Mine will be to go straight to 100,000 ounces per year of gold production – gushing even more cash.

I believe the time for investors to be buying African Gold Group is now – before all of the money that is starting to flow back into Gold ETFs discovers it.  That’s why I bought 450,000 shares.

This Is A Historic Buying Opportunity For Junior Gold Miners

Mark my words….

This is the single best time to be buying junior gold miners in years, as central banks, sovereign wealth funds, major pension funds, index funds and retail investors all start buying gold and gold stocks – at the same time!

I’ve been through these cycles before – in the early 1990s and again in the 2000s – if you take the time to find a truly exceptional junior miner you are going to make a fortune.

Not a double or a triple; I’m talking the next 20 and 30 baggers are going to be the best junior gold miners.

I did my homework.  I spent hours researching assets. They had to be in companies with tight, clean share structures and managed by teams with a track record of success.

African Gold Group is the one that met all my criteria.

There was just no mystery here – if you believe Gold will continue to be strong for a couple years – and I do – picking a stock with its major catalyst two years out means you’re getting the cheapest price and the biggest bang for your buck.

In 24 months this low-cost project will be producing gobs of high margin gold.

By then the stock price is going to reflect that fact… which I expect to be multiples of the current 50-60 cents a share.

But… investors can expect the stock to move up a lot quicker than that… because I believe that there is huge upside to the current resource estimate coming soon.

Koboda already has 2.2 million ounces of gold – with less than 10 percent of the project’s footprint explored.

African Gold Group is now set to drill up more of that land.  And as that happens I’m expecting this resource estimate to grow… and potentially grow in a major way.

There are no less than 10 gold mines in the gold belt that African Gold Group operates in that are already larger than Koboda.

The upside here would explain why management is working on optimizing the existing feasibility study… to double planned production levels from the original plan of 50,000 ounces to 100,000 ounces per day.

Everything about Koboda smells like a major gold mine.

Here Are The Catalysts To Watch For In The Coming Weeks

African Gold Group is indisputably a cheap stock.

But I never buy cheap stocks and hope the market finds them.

There is no sense owning anything if you don’t see a catalyst.

African Gold Group is going to be a catalyst machine in the coming weeks and months.

Here is what I see happening….

Catalyst #1 will be the Gold ETF Fund Flows….

For years cash has been constantly sucked out of this sector.

With gold busting through long-term resistance these ETFs will suddenly become massive buyers of junior gold miners, and as African Gold Group nears production, they will be big buyers.

I want to get in front of that trade. Now is the time to do that.

Catalyst #2 will be African Gold Group’s drilling results….

There aren’t going to be a few holes drilled into unexplored portion of this project in the coming 18 months.

There are going to be wells drilled every week.

Each and every one of those wells has the potential to be a stock moving catalyst.

And you can bet this management group is going to be excited to tell you about them.

Catalyst #3 will be an updated feasibility report….

The most telling signal that there is going to be resource upside for Koboda —- is that management is currently working on a major update to the existing feasibility report.

I don’t know what the size of the resource increase is likely to be.

What I do know is that management is planning to increase the Koboda plans from 50,000 to 100,000 ounces per day.

I would expect to see that before the end of this calendar year.

It will be a stock price moving event.

Catalyst #4 will be first production….

24 months from now this Koboda mine will be producing gold and generating cash flow.

At $900 per ounce gold that cash flow will be strong.

At $1,500 per ounce gold that cash flow will be exceptional.

If we get the $3,000 per ounce gold that many great investors expect then look out above…

I’ve thought this strategy through and picked the best asset, with a strong team, a tight share structure, and major near-term catalysts coming.  That’s why I’m long 450,000 shares.

This article has been sponsored by 2227929 Ontario Inc, and is based on publicly available information on www.sedar.com.  The information in this newsletter does not constitute an offer to sell or a solicitation of an offer to buy any securities of a corporation or entity, including U.S. Traded Securities or U.S. Quoted Securities, in the United States or to U.S. Persons.  Securities may not be offered or sold in the United States except in compliance with the registration requirements of the Securities Act and applicable U.S. state securities laws or pursuant to an exemption therefrom.  Any public offering of securities in the United States may only be made by means of a prospectus containing detailed information about the corporation or entity and its management as well as financial statements.  No securities regulatory authority in the United States has either approved or disapproved of the contents of any newsletter.

Keith Schaefer is not registered with the United States Securities and Exchange Commission (the “SEC”): as a “broker-dealer” under the Exchange Act, as an “investment adviser” under the Investment Advisers Act of 1940, or in any other capacity.  He is also not registered with any state securities commission or authority as a broker-dealer or investment advisor or in any other capacity.

I see Gold as a great place for capital gains for at least the next two years.  I’m positioning me and my subscribers in junior producers that can generate big jumps in cash flow and resource size over that time.

Gold is benefiting from MANY trends right now

1. Negative interest rates around the world (they’re going more negative than you can imagine…)
2. China-US trade war
3. Global investors being massively underweight the sector
4. Central Banks are net buyers of gold
5. Gold’s short, medium and long term charts look GREAT

Because of all this, I see the Gold Price going MUCH higher – in the near to medium term. I see US$2000/oz in the cards. That means cash flows and stock prices are also going much higher – in the short to medium term.

A lot of money will get made in Gold in the coming two years, and I want to make as much as possible.  So I went looking for what new mines are coming into production in the next couple years, and see which ones have the lowest cost of production.

At this early stage in the Gold cycle, this strategy makes the most sense to me.  The Market won’t price in production more than a year out, so I’m still able to buy these stocks at a dirt-cheap valuation.

After weeks of research, I found the one I wanted to buy BIG – and I just bought 450,000 shares of it.  It was a ridiculous cheap price too – just 21 cents a share. TWENTY-ONE CENTS. Crazy – for an asset that will be churning out tens of millions in cash flow within two years.

They already have over 2 million ounces identified, but I expect an aggressive drilling campaign to increase that A LOT in the coming months.

And as their new low cost mine comes into production – and when I say low cost, I mean All-In-Sustaining-

Costs (AISC) under $800/oz, the Market will reward shareholders.  It’s a low cost, open pit mine that will be cheap to build and produce ounces cheaply.

And this asset was designed for $900 Gold.  Prior to Gold’s breakout a few months ago, finance money for Gold was tight – and no new asset would get funded unless it made a pile of money at $900 Gold.

Imagine what the economics are for this asset now – at $1500 Gold – or $2000 Gold.  The payback and profitability are OFF THE CHARTS for these assets.  These assets will be MAJOR CASH COWS in today’s new world of Gold.

And investors can still buy this stock for a bag of pucks.  Nothing.

It’s a great set up for investors.  I’m spending a HUGE amount of my time on this strategy right now.

I had to do some digging to find this gem. When I looked up their 2015 feasibility study, the independent authors didn’t even include $1500 Gold in their projections. Nobody thought Gold would get that high.

At $1200/oz Gold, the IRR of the mine was forecast at 43% and payback was just 2.5 years – very profitable even then. But by the time this mine gets into production in 2021, I expect the Gold price to be high enough it pays back much, much sooner than that.

The feasibility study shows that the Net Present Value (NPV) of the project is 6 times higher at $1,400 per ounce than it is at $900 per ounce; that’s huge leverage for investors.

Can you imagine what it would look like at $1800 per ounce?  How about $3,000 per ounce. You get my point.

If you plan everything for strong profits at $900 per ounce – and what you actually get is $1,500 per ounce – you make a ton of money.

I did the deep digging into the feasibility study, but from the cheap price of the stock, I can tell you that the stock market doesn’t know anything about this… yet.

It’s trading for pennies, and it will churn out tens of millions of cash flow – within two years. I think there is BIG money here.

But I had to sift through a couple other factors to settle on this Gold stock.  It had to have a proven team that can raise money – check.  This team has put two mines into production – one in this same gold camp.

And the company has to have steady news through the mine-building process to keep investors interested – check.

That’s really important – so let me explain.

As I said, it’s already 2 million ounces, but I expect the resource to increase greatly in the near term.

After 25 years investing in gold, I’ve noticed that only 2 things – other than the obvious price of Gold – make gold stocks go up:

1. Discovering more ounces in the ground
2. Increasing Gold production

This company in which I just bought 450,000 shares will be doing a lot of BOTH in the next two years. But the issue is – the Gold production won’t get priced in for another few quarters.

But as a multi-million-dollar drill campaign will soon be underway. I’m expecting the drills to take this resource from 2 million ounces to hopefully 3, 4, 5 million ounces plus in the coming 3-12 months – and it’s in a major Gold camp with many multi-million ounce deposits all around it.

This is the positive new from which I expect the stock to respond very quickly – while the mine is getting built.

Good drill results make stocks go up.  Great drill results, in a Gold bull market, make stocks SOAR.

And let me be clear folks, we are in a Gold Bull Market.

Much smarter people than me believe that we are at a historical gold buying opportunity. Investors need to be long gold now.

Ray Dalio… the head of the most successful hedge fund in history just told investors that they need to be buying gold now.

A year from now everyone is going to see what a no-brainer it was to be getting exposure to gold right now.
The signs are sitting in plain view – and the signs are not subtle.

There are now $17 trillion worth of Government bonds that have negative interest rates.

Yes… this really is trillions of dollars being invested in something that is guaranteed to lose money!!!
Widespread negative interest rates aren’t kind of weird… they are a massive warning sign.

It is also is a screaming buy signal for gold.

Central Bankers across the world are in a race to the bottom.

Sitting on balance sheets with massive amounts of debt they keep pushing interest rates down, down, down….

Every country is simultaneously trying to devalue their currencies, as their government balance sheets are overloaded with debt.

People are finally starting to worry about the value of paper money – and they should!

The Central Bankers themselves know what is coming.

They know what they have created.

Central Banks have been buying gold in record amounts – the most in 50 years.

With gold representing only 3% of its massive holding of foreign reserves China specifically is desperately accumulating gold – as is Russia, Turkey and others.

So far the price of gold has jumped a couple of hundred bucks… this is just the start.

There is no doubt in my mind – now is the time to get exposure to Gold….

The leverage to Gold comes from owning the junior miners.

If Gold goes up 10 percent the junior mining stocks go up 10 times that.

Despite the sharp increase in gold prices that we have just experienced… money hasn’t even started flowing into the junior gold mining sector.

The VanEck Junior Gold Miner ETF currently trades at $42.36.  That is just 25% of where it traded in 2011.

The entire sector could quadruple… the smallest junior miners can go up 10 and 20 times.

When these stocks eventually really pop it is going to be a moonshot.

Do Not Miss My Next E-Mail

Tomorrow I’m going to tell you everything that you need to know.

1 – Full details on the specifics of this low cost open pit mine
2 – The homerun project that this management group developed in this exact same gold belt, plus their other big winners
3 – How much resource upside we can reasonably expect in the coming weeks to months
4 – And of course the name and ticker for this no-brainer stock

This Gold Stock is so cheap – literally, investors can buy it for pennies a share – and in two years it will giving investors tens of millions in cash flow.

When I read the feasibility study that laid out the economics of this project I thought – these numbers will be laughable a year from now.

First – the price of gold isn’t $900 per ounce, it is $1,500 per ounce. Actually, it’s $1500 now and rising still.

What once was a looking like a solidly profitable mine has now become a grand slam homerun.

Second – this study represents the gold resource from less than 10 percent of this property.  I expect the true resource upside is likely to be multiples of this.

After a decade of disappointment investors – across the world – are massively underweight the mining sector.

High quality assets are trading for pennies – and there is no bigger bargain than the symbol I’m going to share with you tomorrow.

BE READY!

One of the strangest junior energy stories listed in Canada may become one of the best in late 2019.
Newport Explorations (NWX-TSXv) holds a 2.5% gross overriding royalty on several oil and gas permits in Australia, that are operated by Beach Energy and Santos Ltd.; both are major Aussie oil and gas producers.

What that means is that Newport receives 2.5% of the revenue from any production on those blocks without having to pay for the cost of developing the assets.  Newport shareholders get all this royalty money for doing NOTHING.

This company does NOTHING except cash cheques.  It’s a great business, and has been for years.  Royalties have been flowing since 2013 (I’m going to outline it all for you below); it’s an incredible cash cow.  I have been a small shareholder for years, just to stay close to this amazing story.

CEO Ian Rozier and CFO Barb Dunfield have done a great job shepherding value for shareholders in what has been a very turbulent time for other junior energy stocks.

With no costs and only revenue, the company even spits out the occasional dividend.  The last dividend was 5 cents per share, or $5,153,194 in the quarter ending October 31 2018. There is no powerpoint on the site to check historical dividends.

But it may become a regular dividend soon, which could give the stock a big boost.

I’m writing this story now because I see that RBC Dominion – Canada’s largest brokerage house – issued a bullish report on Beach Energy on August 19.  And I saw in the last MD&A that Mr. Rozier’s pay package just went up to $42,000 per month, and Ms. Dunfield’s just went to $29,000 per month.

This great team has kept the cash flow going for shareholders – the most recent quarterly shows that net income was $3.9 million for the last nine months, up from $2.7 million a year ago.  Royalty revenue was $6.8 million for the nine months, up from $4.9 million a year ago.

While management deserves all the credit they’re due, the light oil assets have done really well.  And the gas exposure is great as Aussie natgas prices – which were just $4/gigajoule in 2015, before spiking to nearly $20 a couple years ago.  They are now roughly $10.

It’s one of the most profitable natgas markets in the world.  Domestic Aussie prices are so high because all their natgas is now exported to Asia – at lower prices than domestic ones now ($7.50 in Japan vs $10 in Australia)!  Electricity prices in Australia – especially along the east coast – have more than doubled in the last four years.  Production from the wet gas assets is also increasing.

Yes, Newport could continue to be an amazing cash cow as production from these lands – and Aussie gas prices – each go higher.

This is a GREAT story folks – it may be a great investment today, but one day it will be a great movie I’m sure.  Sit back and enjoy the read.

In a very prescient move, way back in 1997, CEO Ian Rozier clearly wanted to transform Newport (then known as CVL) from a mineral exploration to oil and gas.  He acquired interests in oil and gas permits covering over 75,000 km in Queensland, New South Wales and Northern Territory, Australia, as well as an oil exploration lease in New Zealand.

Those aspirations effectively ended in 2002.  On September 4, 2002, Newport issued a press release disclosing it was selling its remaining oil and gas interests in exchange for a petroleum royalty of 2.5% on those properties.

Source: Company website

Here’s what I believe Newport has:

• PEL 91 – 2.5%
• PEL 106 – 2.5%
• PEL 107 – 2.5%
• PEL 632 – 2.5%

Newport’s decision to exit the oil and gas business was made because management was acquiring a 50% interest in the Mantua Copper Project.

The 2.5% royalty interest did not get much attention in Newport’s public disclosures subsequent to 2002 as the focus of the company was elsewhere.

Then there was this press release in 2005:

You can see that by 2005 the Mantua copper project was already forgotten about and Newport had moved onto a Western Australian Nickel Project (subsequently dropped).

It wasn’t until February 2014 that another update was provided on the Australian Oil and Gas interests.

Suddenly this forgotten 2.5% royalty interest on nothing had become a share of 13,000 barrels per day of oil production.

Newport’s share price which was trading at $0.08 per share then had a lift-off.  At $0.08 per share Newport had a market capitalization of only $2 million.  Meanwhile, the company by early 2014 had already been earning almost $1 million per month from the 2.5% royalty interest.

February 2014 was the first press release.  But when I looked into the previous company financial statements the royalty revenue per quarter looked like this:

• Quarter end Jan 31, 2013 – $186,000
• Quarter end Apr 30, 2013 – $570,071
• Quarter end Jul 31, 2013 – $2,719,242

So this production royalty stream was ramping up through 2013 and the first press release relating to it came out in February 2014.

There WAS disclosure however – I picked those quarterly revenue numbers out of the middle of the MD&A – the Management Discussion and Analysis.  I repeat, the revenue was disclosed in the financial statements of Newport.  They were there for anyone to read.

By mid-2013 Newport was earning 50% of its market cap in just one quarter! And it was all right there in the MD&A.

Well, at least CEO Ian Rozier read it, and he obviously liked what he read. In August of 2013 – months before the first press release – he purchased over 300,000 shares between $0.04 and $0.045 per share.

And being as the vastly increased royalty revenue was in the public domain – via the MD&A which all shareholders read – on December 19, 2013 Newport granted to its executives 6 million options to buy shares at a price of $0.05.

Then after the press release, on March 10, 2014 Newport announced a private placement of 20 million shares at $0.11 per share as well as a full warrant to buy shares at $0.14 expiring now, in 2019.

Management bought a big block of that financing.

Tracking CEO Rozier’s ownership interest in the company around that time looks like this:

• August 2013 – owns 3 million shares
• August 2013 – purchases 300,000 shares at 4 cents
• December 2013 – Receives 1.8 million options at $0.05
• March 2014 – Acquires 2 million shares at $0.11 and 2 million options at $.14

Here is how CFO Barbara Dunfield’s ownership interest developed:

• August 2013 – owns 348,000 shares
• December 2013 – Receives 1.6 million options at 5 cents
• March 2014 – Acquires 2 million shares in the private placement at $0.11 and 2 million warrants at $0.14.

(Records show that Ms. Dunfield just disposed of 1 million shares on August 13, or 16.8% of her holdings, on August 13 2019).

At the time back in 2013, these shares were issued for less than the value of the cash that the company had on its balance sheet.

All this action by management brought a class action lawsuit – surprisingly – from people who sold shares at low prices and feel they should have been made more aware of the level of Australian royalty income:

The class action lawsuit was dismissed by the courts.

I think it was rather ungrateful of these shareholders – I mean, since that time in 2014, dividends have been sporadic but steady.  The company has $8.1 million in cash as of June 2019.

And I was very happy to see that management is watching out for shareholders – see this paragraph from the March 3 2019 press release:

“The company is aware of rumours of a possible bid for the GOR and/or a possible hostile takeover attempt of the company as a way of acquiring the GOR. No offer for the GOR would be considered until the company has had an independent valuation done on the GOR assets and any such offer would be subject to a fairness opinion as well as shareholder approval.

In the event of any hostile takeover attempt, the company is confident that the majority of shareholders would support the board in order to safeguard the company’s treasury, its future cash flows, shareholder dividends and assets.”

This team has a lot on their plate running Newport, but even if they take their eye off the ball for a second, they have a big share position, and could not realistically be ousted.  Fortunately for us shareholders, in fact, I would say it’s impossible.  Good thing for us they bought all that stock back in 2013 after the MD&A disclosed that greatly increased royalty revenue. Phew!

It’s a great story – and with Beach Energy increasing production and high Aussie gas prices, a regular dividend could develop.

Disclosure: I am long 10,000 shares of Newport Energy.

I know that everybody hates coal.

But…

Consol Coal Resources LP (CCR) currently sports a massive dividend yield of 15.4%… and analysts think it’s sustainable.

I know what you’re thinking—they get paid good money to say things like that. But I’ve taken a look into the numbers and I agree.  Even though spot met coal prices dropped 30% recently, CCR has contracted prices through the end of next year that make this yield very sustainable.

And savers and investors are absolutely starved for options that provide income – especially as sovereign rates around the world go negative.

Record Low Yields from All Income Sources

The safest long-term investment on the planet is meant to be the 30 Year U.S. Treasury – but it’s only yielding 2% – an all time low.

Treasuries hardly provide any income – today they are a place to park money for institutions that have no other option.

They aren’t for investing or for income.

If you think that bonds are the answer for income a person could always look to corporate or even junk bonds.

But I wouldn’t….

Yields on investment grade companies are miniscule.

Junk bond yields do not nearly compensate for the risk involved.

I just saw a small-cap homebuilder offer 7 year unsecured bonds that have a yield of 4%.  That is where we are… a small-cap company in a heavily cyclical business can borrow at 4% on an unsecured basis.

I’d rather stick my money in a tin can and bury it in the backyard.

Perhaps we can travel outside of North America and buy some safe Government bonds with a decent yield.
Perhaps not!

More than a third of bonds that trade globally now have NEGATIVE INTEREST RATES.

There are now almost $20 trillion European Government bonds with negative yields. All bonds issued by the Government’s of Germany, Denmark, Finland and The Netherlands sport negative yields.

I saw an article where a bank in Denmark is even offering a negative rate mortgage – sign me up for that one please….

This is a bizarro world where the borrower has to pay the lender for the privilege of lending him money.

Outside the world of bonds… blue chip dividend paying stocks are no better.

The stock prices on the best businesses on the planet have been bid up so much that the dividend yield on the S&P 500 is now just 1.88%.

That isn’t an income stream… that is a dribble.

Coal Is Dirty – But the Money from That 15.4% Yield Isn’t

This week I read a note from Goldman Sachs that confirmed what I already believed.

Cyclical companies with abnormally high dividends are out of favor (just look at the MLP space in the US!).

According to Goldman the valuation gap between high and low dividend stocks is the widest it has been in 40 years.

Goldman’s obvious conclusion is to buy high dividend paying stocks.

Well… they don’t come with a much higher dividend than Consol Coal LP’s 15.4% current yield.

With a yield that high the market clearly is pricing in a dividend cut.

The analysts that follow the company don’t agree – they think it is sustainable for at least the next three years.

So does Greenlight Capital’s David Einhorn.  Consol Coal is currently the fifth largest position in Greenlight’s portfolio.

Einhorn is pretty savvy.

He publicly predicted the collapse of Lehman Brothers months in advance of its happening by documenting holes in the bank’s accounting.

He has also compounded money for two full decades at a rate of almost 15% annualized.

When I did some digging I found that Consol’s distribution looks pretty secure too.

Consol Coal LP owns a 25% interest in the Pennsylvania Mining Complex (PMC). The other 75% of PMC is owned by Consol Energy (CEIX) which also serves as operator (and owns 60% of CCR’s shares).

PMC is estimated to contain roughly 770MM tons of high-Btu coal reserves.

There is absolutely no disputing that the PMC is a world class coal asset.

These are three low-cost, modern and non-unionized mines that operate in close proximity to the East Coast utilities that purchase from them.

The coal itself is also highly desirable with high heat and low sulphur content.

Higher heat means more energy, and lower sulphur reduces the costs to burn the coal, making it more attractive to utilities. The mines have the capacity to produce up to 28 million tons a year for a long time without needing to spend much cash to keep production going.

Consol has aggressively pushed costs down in recent years with the implementation of zero-based budgeting (where every expenditure has to be justified rather than starting with a baseline budget).

Northern Appalachia coal currently trades for just under $50 per ton.

For CCR’s distribution that coal price works just fine.  The coverage ratio in Q2 was 1.2 times. Net leverage is only 1.6x.  And by the way, with only 16 million shares out, any increase in natgas prices would see this stock go WAY up. (Coal prices compete against natgas.)

The current quarterly distribution of $0.51 has been in place since the beginning of 2016.  The price of Northern Appalachia has been between $40 and $50 per ton for much of that time – never lower.

For all of 2017 coal prices were similar to where they are today and CCR’s dividend held.

What has the market concerned is that the current trend for the price of coal is down.  But given that the price hasn’t been sub $40 in more than a decade those concerns for the next couple of years seem probably overblown.

Especially since coal inventory levels are actually on the low side.  As of the end of May U.S. electric power sector coal inventories were lower than they have been since 2014.

Further securing the near term distribution is the fact that 95% of 2019 and 80% of 2020 Consol’s coal sales are already contracted with customers… more than half of which locks in better pricing than the spot rate today.

For the very long-term however the crystal ball is cloudy.  And the risks are clearly higher.

Shale gas has taken a huge chunk of coal’s market share.  In 1997 53% of electricity in the United States came from coal – last year the number was 28%.  Coal and natgas pricing are competitive – so if natgas prices keep going lower, coal could too.

However, I would point to two factors:  One is that coal producers are much smarter at shutting in production than natgas producers.  Two is – as I said, CCR has contracted prices for the next couple years.

With its low cost production Consol is going to be one of the last men standing – but if the natural gas producers keep pushing prices down everyone is vulnerable.

Perhaps even worse, if a Bernie Sanders or Elizabeth Warren type nominee comes out of the Democratic Party and wins… then some radical measures targeting coal could arrive very quickly.

Which creates uncertainty – which of course the market hates.

Economically, that 15.4% yield that appears quite sustainable for the near term.  Politics could undo that next November. (Love him or hate him, I’ll bet a steak dinner Trump gets re-elected though.)

So there are definitely risks involved in owning CCR – but IMHO nowhere near the risk that a 15% yield is pricing in.

EDITORS NOTE:  I’m about to alert subscibers to an arcane oil trade that gives investors the best of both worlds – yield and capital gains.  All the volatility has played right into this trade – get it as the same time as subscribers for just $5 for the first month CLICK HERE

Solar stocks are flying – especially those that make & sell inverters, like Enphase (ENPH-NASD) and SolarEdge (SEDG-NASD).

Quick refresher: inverters  are devices that try convert power from DC (solar panels) to AC (what your home uses).  There are lots of inverters out there, with slightly different technologies, but all are meant to maximize the AC power out of your DC photovoltaic panels.

This market has just gone CRAZY this year – out of the blue. It’s a grassroots demand scenario that has COMPLETELY taken the Market by surprise. 

How do I know this?

Look at the gaps in the stock charts of both ENPH and SEDG – the Market had not priced anywhere close to the kind of growth these two inverter market leaders are going through right now.

This is happening despite trade wars, despite Chinese tariffs (SEDG is opening a 2^nd plant in Vietnam now; ENPH is opening one in Mexico).

Sell side research I’m reading says component parts pricing has come down A LOT… making solar much more economic.  There does appear to be areas where solar can compete against greenfield coal baseload power or against natgas peaker plants (expensive back-up facilities that are only used during peak power times during the day).

SEDG CEO Guy Sella said on the Q2 conf call that nobody buys solar for subsidies anymore.  I would argue that’s not quite true, as analysts are suggesting the end of subsidies is now actually pulling forward demand.

But the volume of units sold and the stock charts say he is mostly right.

SEDG is a big story on both sides of the Atlantic, in both Europe and the USA – Europe was 48% of business and the USA was 41%.  The ROW – Rest of World – was 11%.

The Market is right to love this story – SEDG – as the growth is phenomenal, it’s organic, it’s not just about the USA, it’s both residential and commercial… and the balance sheet is pristine.

AND… the Market is excited about new products for utility sized solar and energy storage…

AND… management keeps showing innovations not only in new products (mgmt. has made several M&A moves recently, vertically integrating their business and using various technologies together in new ways) but also reducing costs on existing products

AND… there appears to be room for everyone.  Competitor Enphase announced 100% increase in YoY revenues, and it had the same kind of jump recently.

Here are some of the quick financial highlights from SEDG Q2:

• Record revenues of $325.0 million
• Record revenues from solar products of $306.7 million
• GAAP gross margin of 34.1%
• GAAP gross margin from sale of solar products of 36.4%
• Non-GAAP gross margin from sale of solar products of 36.9%
• GAAP net income of $33.1 million
• Record Non-GAAP net income of $49.3 million
• GAAP net diluted earnings per share (“EPS”) of $0.66
• Record Non-GAAP net diluted EPS of $0.94
• 1.3 Gigawatts (AC) of inverters shipped

I think the Market is ready to start pricing in some great revenue growth as both ENPH and SEDG move from inverter sales to full solar package sales, which is the difference between a $2000 sale and a $10,000 sale.

Who knows what that will mean for margins.  Again, the financial Market is saying there is room for both these companies and it will likely be a decade before the customer base is so saturated that each new sale is a zero sum game between the two.

I’ve owned SEDG in the OGIB portfolio a couple times, most recently when it gapped up to $53 – it was a clear breakout and the stock did not fall back into that gap once.  The stock is up more than 50% in just a couple months!  (I still own it.) Sadly, I convinced myself it had a better product and was more global than ENPH, so I didn’t buy ENPH.  But the Market is saying there is lots of room for both.

To that end, buying the solar ETF – TAN-NYSE – is not a bad idea. This market appears to have a very long runway as guidance is continuing to increase.

Solar has been one of – if not THE best trade in energy this year, but it sure took the Market by surprise.

EDITORS NOTE:  I’m about to alert subscibers to an arcane oil trade that gives investors the best of both worlds – yield and capital gains.  All the volatility has played right into this trade – get it as the same time as subscribers for just $5 for the first month CLICK HERE.