Two Stocks That Are Likely to Double

There are a heck of a lot of "value stocks" right now, especially in the natural resources and precious metals sectors. The recent bloody sell-off (major correction) in those areas has increased the possibilities for 100% gains in some stocks over the coming months.

What causes a stock to double? The answers can be as obvious as a takeover bid or a company whose stock is worth half of the book value of the company and its assets. Other factors that can cause a stock to double are major discoveries, blow-out earnings, insider buying and generous stock buyback programs from the company itself.

Here's an example of a stock likely to double from here, compliments of Chris Mayer, the editor of Capital & Crisis newsletter.

Gulfport Energy (GPOR) recently reported really strong results, and the stock climbed on the news. In my mind, Gulfport was (and still is) a deep value play. The results yesterday blew away Wall Street’s best guess -- earnings rose 56% year over year.

So far, the fundamentals are even better than expected. Our thesis is intact, and I expect we’ll do well owning Gulfport.I listened in on the conference call, and CEO Jim Palm ended his opening remarks with this comment:

“Finally, I would like to close with a comment about the valuation of Gulfport’s assets versus the current valuation of the company by the market. At year-end 2007, pricing $92.50 for oil and $6.80 for natural gas, our engineering report showed a PV-10 of $821 million. Based on the increased price of oil and natural gas to yesterday’s close of $118.58 per barrel of oil and $8.69 per thousand cubic foot, we estimate our proved reserves alone to have a PV-10 of approximately $1.2 billion. Moreover, this number does not even begin to take into account the enormous upside we derived from Grizzly, the Bakken and other investments.”

The market cap of Gulfport at yesterday’s close was only about $600 million, with about $80 million in net debt. That’s far below $1.2 billion -- not including any upside from the Bakken acreage or its investment in Grizzly [one of the prolific areas in which vast resources are derived].

Another possible "double" stock company is Hecla Mining (HL). Recent earnings reports and other assessments have been quite positive, and the potential benefits of their 100% ownership of the Greens Creek Mine Complex doesn't seem to be factored into the recent price of the share.

After last week's 12.5% correction in the price of silver, HL closed the week at $6.60, and touched a new 52-week low of $6.50. This is more than a 50% correction from Hecla's 52-week high. The stock's book value per share is currently around $4.17.

One of our mentors, Byron King, the co-editor of Outstanding Investments, told us last week after visiting Hecla's offices in Coeur d’Alene, Idaho on a fact-finding trip:

I spoke with some senior players about corporate strategy and the mining outlook.

I’ve said before -- and I’m completely convinced now -- Hecla scored a brilliant coup when it bought out the Greens Creek Mine, south of Juneau, Alaska. Its longtime partner Rio Tinto had to sell. And Hecla was well positioned to buy.

Turns out that Hecla was planning for this opportunity for a couple of years. Hecla arranged a line of credit and kept the bank in the loop. And Hecla had contingency plans for many different scenarios. So when Rio (RTP) needed to clean itself up in the face of a hostile play by BHP Billiton (BHP), Hecla was ready to move.

Now that Hecla owns 100% of Greens Creek, it is conducting an extensive program of drilling to prove out additional resources and reserves. The initial results are beyond promising: They are great! Greens Creek will be producing ore for many years to come. The ore body is larger and deeper than even Hecla’s own geologists expected.

And Hecla’s operations in Idaho’s famous old Silver Valley are due for some very great news. Hecla has gone back to over 100 years of mining data from Silver Valley. Hecla digitized the data and has been using visualization software to get a better handle on the geology and mineralization of the area.

The result is that Hecla has uncovered (literally) some new trends, and even entire ore bodies, that the old rock kickers overlooked or just plain mined around. The resource numbers are huge, and the official results will be in the range of HUNDREDS OF MILLIONS of ounces of silver and other metals like lead and zinc.

Hecla’s exploration program has incorporated some of the most modern techniques of numerical processing, overlaid on a century of proprietary company data on one of the largest silver districts in the world. Hecla is rediscovering the Silver Valley of Idaho.

Sure, Hecla is subject to swings in the price of silver. Silver goes up, Hecla goes up. Silver goes down, Hecla goes down.

But Hecla is a SCREAMING BUY right now. There is probably no other large mining company with as much upside over the medium and long term as Hecla.

Thanks Byron! We all know that it is hard to predict how fast and how far a stock might go up. Whether it is 12 months, 36 months or 6 months, we would all like to know we own an equity that has the potential to at least double.

Please leave us some comments on your favorite stock candidates that may double in price over the next 12 months. Give us a few brief reasons why you think this stock is a screaming bargain right here, right now. Many thanks in advance.

P.S. to article: I'm beginning to believe that IAMGOLD (IAG) should be added to the list of companies likely to double. It has plenty of operating cash and levered free cash flow, almost no debt, it has become profitable again, and it is lowering its cost of production. Take a look at this video and judge for yourself...it's a fine interview with the CEO on CNBC.

Stock position: Long.

Comments

[Stez:]

Another highly informative article _ Thanks.

As another investor who has followed LMC what are your thoughts at present?

2008 Aug 14 02:17 PM

[Marc Courtenay:]

LMC certainly would at least rate a "hold". It appears to have a forward PE of around 4, and there are a number of ways it could surprise to the upside, including the possibility that some big fish will acquire them. As long as the Lundin family money is involved in LMC I'm going to have some of my money involved there too. That being said, it has been a big disappointment in my portfolio and should be considered "higher risk". Any stock trading below $5 ought to be viewed as a penny stock, so don't put any money into LMC that you can't afford to loose. Thanks for your comment and I wish you good fortune always.

2008 Aug 14 05:28 PM

[wardco:]

Looks like HL is trying to get into the penny stock category too. How about 30 to 34 million shares at $6.50. The (naked) shorts could not have seen that coming?? no What good is value when paper printers rule?

2008 Sep 03 05:08 PM