My 2 Favorite 'Left-For-Dead' Investments

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My 2 Favorite ‘Left-For-Dead’ Investments

By Dr. Steve Sjuggerud, President, Investment U
Monday, October 27, 2003: Issue #284

Cart Master: Bring out your dead! Bring out your dead!
Dead Person: I’m not dead!
Cart Master: He says he’s not dead!
Dealer: Well, he will be soon. He’s very ill.
Dead Person: I’m getting better!
Dealer: No, you’re not. You’ll be stone dead in a moment.
~From Monty Python’s Holy Grail

I spoke about some of my favorite investment ideas in Detroit last week – investments that were once poised on the edge of the abyss, but that are now seeing miraculous recoveries.

I think these investments still offer a ton of value, and still have plenty of room to run yet this seemed to fall on deaf ears in Detroit. Instead of questions about these, I got questions about tech stocks and China plays. It only makes me like these “hated” investments more, and makes me think tech stocks and China plays may be nearing their peaks because

If you REALLY want to make money investing – we’re talking hundreds-of-percent returns – you’ve got to be bold. You’ve got to buy something of value that, for one reason or other, nobody else wants. Then you’ve got to hold and eventually sell when everybody wants it.

How to Make Millions Buying Straw Hats

“Buy straw hats in the winter,” the old Wall Street saying goes. And it is how you make BIG money with VERY LITTLE RISK.

The two investment opportunities that triggered no reaction in Detroit – my two straw hats – were Argentina and a particular style of gold coins.

Neither investment is sexy, I admit.

But talk about value

The Financial Times lists the price-to-earnings ratio of the Argentina stock market at 2.9. For comparison, the U.S. is 10 times more expensive (said the other way, Argentine stocks are 90% cheaper).

How did this disparity in valuation come to be? During the Argentine financial crisis that started in the year 2000, the MSCI Argentina stock index plummeted from around 2,000 at the start of the year and continued down to around 300 in June of 2002 – an extraordinary 85% fall.

But the crisis has passed And the recent soybean boom in Argentina has “been like Christmas and the lottery wrapped into one,” according to one Argentine farmer (see the Bloomberg story below).

Soybeans on Their Shoulders Mean: It’s Time to Invest

Bloomberg reports: “Argentine farmers now grow soybeans in fields previously used for corn or cattle and even use patches of wasteland. The municipality of Pergamino is making extra money renting out highway shoulders to farmers who want to plant more soybeans.”

One fellow who runs a grain silo says: “There isn’t an inch of land that is not planted.”

The boom has been extraordinary. And soybeans are just one example of the recovery. The stock index has risen from 300 to 800 today – but it’s still 60% below its value from less than four years ago.

There are some amazing values available for us investors, as a result. In my latest issue of True Wealth, I recommend my favorite way to play Argentina, a way for us buy into the big player in this boom.?Also, see the Crib Sheet below for information on a trip I’m organizing to take full advantage of the opportunities now emerging in Argentina.) The stock has already doubled since January, and I expect it will double for those of us buying now. But nobody cares, I guess.

So Nobody Cares About These Plays? Great!

When everybody finally gets interested, it’ll be time to sell.

Same with the particular gold coins I’ve recommended. People who buy most of my investment recommendations and generally love what I have to say have still not bought coins. Meanwhile prices are rising fast…

A friend in Baltimore told me a coin dealer took out a two-full-page ad looking to buy coins… This dealer wasn’t trying to sell you coins… he already knows that you’re not interested. Instead, he’s trying to buy from you because he has no coins left and the market is rising fast – you’re his last source for buying on the cheap!

For most people, gold coins have been a horrible place to be for nearly 20 years. But take a look at the gold coin index I refer to below, in the Crib Sheet… Gold coins bottomed (after losing over 80% of their value) in early 2001 and are now up 50% since then. Wow!

Even with the 50% move, we’re still 75% off the 1989 highs in gold coins. But nobody cares.

If you want to make extremely large returns, you’ve got to find value where others see dead money, and then be willing to buy what nobody wants… like farmland in Argentina… or investment-grade gold coins. Shares of Lucent or Cisco simply aren’t going to make you hundreds of percent.

If everyone has bought your favorite investment, tell me… Who is left to buy, to drive the price higher? Nobody!

And if an investment has been left for dead, tell me… Who is left to drive the price lower? Nobody.

I’ll take the latter investment over the former… so I’m a buyer of Argentine farmland and gold coins and am not touching tech stocks. Where’s your money?

Good investing,

Steve

P.S. To see a chart that gives a great visual of gold’s steady climb, go here – and check out the Generic Gold Coin Index’s 3-year chart. You can also read the entire Bloomberg gold story here.