Tuesday, February 20, 2007

The Last Undiscovered OTCBB GOLD Stock

With GOLD prices hitting record highs, precious metal mining stocks have recently enjoyed unprecedented success. Mining industry giants Barrick Gold (NYSE: ABX), Rio Tinto (NYSE: RTP), Newmont Mining (NYSE: NEM), and AngloGold Ashanti (NYSE: AU) have been hitting all-time highs while smaller upstarts such as Rangold Resources (NASDAQ: GOLD) Iamgold Corp. (NYSE IAG), and Gold Fields LTC (NYSE: GFI) have been providing incredible returns as well. Not to be outdone by their big board brethren, OTCBB mining stocks have been churning out returns that make actual gold look like chump change. Silver Dragon Resources (OTCBB: SDRG) for example, has risen more than 2600% over the past few years!

During my many years of investing, I have found a very simple yet effective trading strategy to be "mimicry trading". I discuss this trading strategy and nearly a dozen others in my best-selling text The Little Black Book of Microcap Investing. Mimicry trading is not rocket science. Simply put, this strategy requires that you identify a successful sector and look for stocks within this sector that have yet to take off. One of my biggest successes with mimicry trading occurred with voice recognition stocks. There was a time when voice recognition stocks were the talk of the town. I watched from the sidelines as a number of OTCBB voice recognition stocks enjoyed tremendous success. I did an extensive search for voice recognition stocks and to my surprise, I found one that had yet to be discovered. The stock was named Fonix (OTCBB: FONX) and it was trading at lows near $0.25. I bought as many shares of FONX as possible and hoped that the stock would follow the path blazed by other successful voice recognition stocks. Shortly after purchasing FONX, others began to take note of this stock and it soon rose to over $3! I am telling you this story about mimicry trading because I have identified a GOLD STOCK that has yet to be discovered by the masses.

US PRECIOUS METALS (OTCBB: USPR) engages in the acquisition, exploration, and development of mineral properties. The company focuses on gold and base mineral resource properties primarily located in the southern portion of the states of Michoacan and Sonora, Mexico. Specifically, USPR owns exploration concessions to multiple Solidaridad properties located in Michoacan, Mexico. On March 13, 2003, the Company acquired Solidaridad I (175 hectares), also received on March 27, 2003, the exploration concession from the Mexican government for Solidaridad II (2,164 hectares). On July 22, 2003, the Company acquired the exploration concession for Solidaridad III, (294 hectares) and Solidaridad IV, (149 hectares). May 25, 2004, the company received the exploration concession from the Mexican government for Solidaridad V, (La Ceiba 921 hectares), (1 hectare = 2.47 acres).

Please take a moment to look at the map of Precious Metal Mining in Mexico. You will notice that most Mexican gold mining takes place in the mid-central portion of the country. To date, very little mining activity has occurred in the Mexican state of Michoacan. If this is the case, why should we be excited that USPR is focusing their efforts here? First of all, there is a reason why Michoacan has had little mining activity. In 1985, Michoacan was devastated by an extremely powerful earthquake that damaged much of the region's infrastructure. Many of the roads to the Solidaridad mining properties were damaged by this event and subsequent years of neglect made access to these areas nearly impossible. For USPR, this was a blessing in disguise. The damaged roads hindering access to the Solidaridad mining properties have kept the area in pristine condition. While other areas of Mexico have been heavily mined, the minerals of the Michoacan Solidaridad region have been left alone.

(Damage from 1985 Michoacan Earthquake)

When USPR acquired the rights to the Solidaridad mining properties, they realized that in order to mine precious metals, roads and infrastructure to the sites would need to be repaired. In a February 15, 2007 press release, USPR noted "Existing roads on the concession have been repaired by a heavy equipment contractor from Morelia. There were an estimated 10 km of existing roads that needed repair. The rainy seasons in past years had washed out sections of the roads preventing vehicle access. Our intent is to access areas that are considered drilling targets and begin sampling vein structures for continued metallurgical testing." Additionally, in their most recent SEC 10QSB filing from 1/16/2007, USPR indicates that they are planning to spend $505,000 to repair/construct roads to Solidaridad I and improve the site's infrastructure to help facilitate future mining operations.

Based on its pure potential, USPR is an outstanding gold play. When you consider the fact that USPR is just about the last remaining gold stock that has yet to explode, your mouth should begin to water! Do you remember what I said about mimicry trading? Let's take a look at few other OTCBB Gold stocks and see how USPR measures up:

Capital Gold Corp. (OTCBB: CGLD) has $0 reported revenues according to their most recent SEC 10QSB filing and has a market capitalization of $59.9 million

Global Gold Corp. (OTCBB: GBGD) reported $5,600 in revenue according to their most recent SEC 10QSB filing and has a market capitalization of $30.2 million

Gold Resource Corp. (OTCBB: GORO) reported $0 revenue from operations (they did report $841 in interest income) according to their most recent SEC 10QSB filing and has a market capitalization of $61.3 million

Raven Gold Corp. (OTCBB: RVNG) reported $0 in revenue according to their most recent SEC 10QSB filing and has a market capitalization of $58.7 million.

Silver Dragon Resources (OTCBB: SDRG) reported $0 in revenue according to their most recent SEC 10QSB filing and has a market capitalization of $112 million.

The average market capitalization for these OTCBB Gold Mining companies is $64.4 million. If we apply this market capitalization to USPR, the company would have an amazing share price of $2.05! Far fetched you say? Why? None of these other OTCBB gold mining companies have reported any revenue for this year. What makes them different than USPR? The driving force behind each of these companies is potential. While CGLD, GBGD, GORO, RVGC, and SDRG have already risen based on their potential, USPR has yet to be discovered by the masses. When USPR is discovered by the masses, this stock could very easily mimic the rest of the OTCBB Gold Mining stocks.

The fact that USPR has already taken steps to build and/or repair access roads to their mining sites is encouraging. On top of this, on February 6, 2006, USPR appointed a new Chief Operating Geologist. Combine this with the fact that a survey contractor from Morelia has completed the first phase of surveying for the Solidaridad properties and you should be very excited. This portion of the survey provides an accurate base map of an area along the main access road and extends easterly to the edge of the mountains. The second phase of survey is planned to include the "main zone" of mineralization which lies within the mountains directly east of the main road and extends north-south.

According to USPR, a drilling campaign is currently being planned. The drilling consists of shallow drill holes, less than 100 meters, to better define the mineralized zones and provide mine planning data. A second strategy, drill holes less than 700 meters, is intended to explore for deeper targets. All drilling will consist of core.

Can you say potential? I knew that you could! USPR is one gold stock that is truly a diamond in the rough!

This was written with a disclaimer.  However, the disclaimer page has been allowed to expire, no information provided.

Sunday, February 11, 2007

The Way Penny Stocks REALLY Work...

Dan Holtzclaw here, author of the Best Selling books The Little Black Book of Microcap Investing and Penny Stocks: The Next American Gold Rush. Let me tell you a little bit about today's penny stocks. Simply put, today's penny stocks are crazy. You find a great looking stock, you perform your due diligence, and what do you get? With a large cap stock, you would have a decent shot at achieving a positive gain. With a penny stock, however, there is no telling what you are going to get. What is going on here?

Let me tell you how most penny stocks really work. I have been trading penny stocks for nearly 15 years and things are constantly changing. Back in the late 1990's you could literally throw a dart at a random penny stock and it seemed that it would eventually go up. In the early 2000's, the MOMO play and pump and dumps were fairly commonplace. What worked for penny stock trading 5 years ago doesn't really work today. So, what is the way of today's penny stocks?

Many think that newsletters still have the ability to manipulate stocks. This was true 5-7 years ago, but I don't think that it is happening much today. Today's investors are too savvy to fall for newsletter hype. In fact, most of today's penny stock emails are now filtered out in our SPAM folders.

Many think that messageboards still have the ability to manipulate stocks. Again, this may have been true 5-7 years ago, but not today. First of all, most messageboards now employ technology based on IP addresses to eliminate multiple alias posting. Second, most messageboards now employ strict spamming TOS policies and they quickly boot those that violate them. Finally, as I mentioned before, today's investors are too savvy to fall for messageboard hype.

The romantic notion of boiler rooms and mafia manipulation may appeal to some, but it is mostly fantasy. The SEC has put a stop to most of these practices.

So, how are today's penny stocks being worked? The trend that I am currently seeing goes like this: A company hires a "PR/IR firm" and pays them with cash and/or stock. The principle PR/IR contacts their "big money" contacts and tells them of the impending "promotion." The big money contacts begin to slowly buy the stock at dirt cheap prices. This is done subtly so as to not drastically cause a price spike. After the big money contacts and the principle PR/IR firm have loaded up on cheap stock, the principle firm then farms out work to smaller firms to pump the stock. This is when the fun begins. The smaller firms will now begin to load up on stock. With so many firms buying up stock for the impending pump, the price of the stock inevitably begins to rise. This price escalation is often discovered by many independent investors and they jump on the bandwagon. How do these independent investors notice this price movement? Many investors utilize computer programs that scan for abnormal price/volume activity. When these alarms are triggered, they jump on the stock. As these individual investors jump on the stock, they alert the messageboards and the masses begin to take note. They see that this stock is starting to move and they want a piece of the action too. By this point, the stock has become a hot topic on the boards. Without anyone doing any pumping, the stock has now risen substantially. To light the final fuse on the powder keg, the principle firm will now utilize the cash that it was paid for the promotion to push the stock past the last resistance levels. When this happens, the stock makes a big move and everyone rushes in. As the stock makes it final ascent, the principle firm begins to dump its free and acquired shares to the lemmings that are now rushing into the stock. Typically, the principle firm will not tell its hired firms when it is going to sell. The principle firm will let the smaller hired firms fend for themselves. When the principle firm dumps its shares, the price will eventually begin to fall. On top of this, the MM's will typically begin to short the stock now that it has achieved significant gains. This selling and shorting begins to crush the stock and it quickly tumbles. In most cases, the little guys that were late to the party are left holding the bag while the MM's and the principle firms get rich. In all reality, the principle firm didn't do anything illegal. They did not pump or tout the stock. They did not spam the masses. In fact, they typically remain completely behind the scenes. Call it the "pumpless pump" if you will.

The thing about penny stocks is that there is alot going on behind the scenes that most people don't know about. On one hand you have MM's shorting stocks. On another you have shady investment firms utilizing convertible debentures and death spiral financing to milk companies dry and leave regular Joe investors holding the bag. In all honesty, even with today's new standards, it is very difficult to make an honest penny stock investment.

In the past, I once had nearly all of my investments tied up in penny stocks. Today, this is not the case. Simply put, the cards are stacked against you if you limit yourself to penny stocks and eventually you are going to lose. This is why I now focus on MICROCAP stocks. By focusing on microcaps, I can still pick up some good penny and subpenny stocks, but I factor in a measure of safety. There are ways to win at the game of penny stocks. In the Little Black Book of Microcap Investing, I show nearly half a dozen ways to make money with microcaps. To date, 3 of the predictions in my book have already come true! I predicted that Bio-Lok would be acquired and it was! I predicted that the AMEX stock FFI would significantly appreciate in value (it recently rose nearly 100%!). I predicted that TBSI would rise (it has recently risen nearly 100% in value!). If you have not purchased this book, you are missing out! While these predictions were great, I feel that my best predictions are still waiting to come true! You can get the book at a significant discount by clicking here!

As always, please see my disclaimer