Editor's note: The best time to buy a commodity is when it's hated... If no one wants to own a resource, its value drops. When it's needed again, it takes time for supply to ramp up. Meanwhile, the sudden demand causes prices to skyrocket. In today's Masters Series, our friend Nick Hodge shares how his friend and investing legend Rick Rule made 1,000 times his money by preparing for market demand of one hated metal... and reveals that we're facing a similar situation today...
The Last Time We Saw This, Rick Rule Made 1,000x His MoneyBy Nick Hodge, co-founder, Digest Publishing My good friend and natural resource expert Rick Rule made 1,000 times his money on a single stock... enough to turn $10,000 into $10 million. And the way he found it is one of my favorite investing stories, because it has nothing to do with charts, screens, or spreadsheets. As I'll explain in today's essay, the lessons Rick learned that day apply again right now, in the very same metal that made him a fortune. So stick with me, because by the end you'll understand one of the rarest, most lucrative setups in all of investing – and how to spot it before the crowd does... Back in the early 2000s, Rick was at a mining conference in Kalgoorlie, a rough little town in Western Australia. The whole business of the town was mining, mining, mining... and selling beer to miners. At the conference, he met a guy named John Borshoff who owned a tiny uranium company. At the time, uranium was about the most hated thing on earth. This was after the Chernobyl and Three Mile Island disasters. Nobody wanted anything to do with nuclear, and uranium prices had been crushed for years. Rick asked John a simple question: "How are you going to find uranium?" John gave a strange answer: "I don't have to find it." See, John used to run exploration for a big German company. When he got laid off, he asked for one thing as his severance – its worldwide uranium database. It was built back in the 1970s, when the West Germans spent billions mapping uranium deposits all over the planet. John didn't need to find the uranium... He already knew where it was. He just had to go stake his claim.
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Convinced, Rick wrote a check at $0.10 a share. The company was called Paladin Energy (PALAF). And when the uranium market finally turned, Paladin went from $0.01... to $0.50... to $1... to $5... to $10. In the end, Rick made 1,000 times his money. Now, here's the part most people miss... Rick didn't buy Paladin because uranium was popular. In fact, he bought it because uranium was hated. Hate is what creates these moves. When everyone gives up on a commodity, mines shut down and companies stop exploring. The pipeline of future supply dries up... until demand comes back. Because when demand returns to a market that hasn't built new supply in a decade, prices explode higher. That's exactly what happened with uranium in the 2000s as the price ran from single digits to more than $140 a pound. And miners like Paladin went vertical...
I've been a uranium bull for a long time, and I've never seen the demand side look like it does today. The numbers are almost hard to believe... Right now there are about 440 nuclear reactors operating worldwide. And the world's nuclear capacity is projected to grow nearly 90% by 2040 – with demand for uranium set to nearly double. And here's the kicker. We can't even supply what we use today. The U.S. produces about 2 million pounds of uranium a year but burns more than 40 million pounds of it. We import the rest. The big producers can't fix it fast, either. Kazakhstan – the Saudi Arabia of uranium – already cut its production targets, and Canada's biggest miner has had its own troubles. The supply just isn't there. Then, there's the new buyer nobody saw coming: AI. AI data centers going up everywhere need staggering amounts of power. And the tech giants have figured out that nuclear is the only clean, reliable way to get it. Meta Platforms (META) signed a 20-year nuclear deal. Microsoft (MSFT) is firing up the old Three Mile Island plant. Alphabet (GOOGL) and Amazon (AMZN) are funding reactors, too. Demand is doubling, giant new buyers are showing up, and the supply pipeline has been starved for a decade. My friend Doug Casey, a longtime friend of Stansberry Research, has a line about what happens when the crowd finally piles in. He says, "The rush into them will be like trying to push the contents of Hoover Dam through a garden hose." The uranium market is tiny, and a lot of money is about to try to squeeze through it. Here's what I want you to take from the Paladin story... The best time to buy a commodity is usually when it has been hated for so long that new supply has stopped getting built. The ideal setup is a market everyone has given up on, where the mines are closing and nobody is exploring... but where the reason for demand hasn't actually gone away. Hate kills supply, and starved supply is what turns a recovering commodity into a generational bull market. You don't need a database from 1970s Germany to use this idea. You just need to notice when everyone has quit on something the world still can't live without. Rick spotted it in a bar 20 years ago. We're staring at the same setup right now. Regards, Nick Hodge
Editor's note: With China threatening to cut off America's supply of critical minerals, the U.S. government is scrambling to fill in the void. By using an "unprecedented approach," it aims to create a stockpile of the resources the country needs to keep it safe and running. This is setting up certain smaller companies to soar as the White House invests in them to help fill the mineral supply. But there's not much time left to get in. If you want to see where our leaders are pouring money, you need to hear this message. |
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