These Two Stocks Could Soar by Triple-Digits in 12 Months

In the latest issue of True Wealth, I essentially told readers to “back up the truck” and buy shares of commodity-producing companies…

On October 20, I strongly believed commodity producers had bottomed. So I made a handful of recommendations in that issue of True Wealth, which went out on October 21.

Since then, the simplest two buy recommendations are both up about 17% in the less-than-three weeks.

These two buys were Vale and Rio Tinto.

You might not have heard of Vale or Rio before… But they are actually two of the world’s biggest companies… with stock market values of over $100 billion each.

These two companies are “Masters of the Universe” in iron ore – the key raw material in steelmaking.

China needs iron ore… You can be certain over the next decade (and beyond), the Chinese will be buying apartments, refrigerators, and cars. Those aren’t going to be built with bamboo… and Vale and Rio Tinto will provide China (and the rest of the world) with the iron ore it needs.

Even though Vale and Rio have run up dramatically since I recommended them to my paid subscribers, I still think they’re “dirt cheap” at roughly six times earnings.

If you don’t know what six times earnings means, think of it this way: If you were buying a private business at six times earnings, and earnings stayed flat, you’d get ALL your money back in six years… and you’d get the lifetime of earnings beyond those six years for “free.”

And there’s not much risk of these businesses going under, either. These two Masters of the Universe don’t have much debt relative to their size… with net debt roughly 10% of the stock market value.

Everyone’s worried about Europe’s problems these days… But for these companies, over 80% of sales come from outside Europe. In both cases, China is the biggest buyer… in the 30% range for both.

I recommended buying in my latest issue because commodities were hated at that very moment… more hated than they’ve been at any time since late 2008. Vale and Rio Tinto each soared threefold from their late 2008 lows.

I’m not promising a 200% gain this time around, but I did write, “If things just get ‘less bad’ in the world, these two stocks could soar by triple-digits in 12 months.”

We’re using a tighter stop loss on these two companies than we usually do in True Wealth. I figure if these stocks drop below their recent lows, I got it wrong. But even if that happens, it’s fine. We’re risking a little to make a whole lot.

While the stocks are already up 17% since October 20, my recommendation stands… The shares are still cheap, and investors are still scared of Europe and China.

The time is still right… Trade accordingly.

Good investing,

– Steve SjuggerudSource: Daily Wealth

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