If you put just $1,000 into the gold royalty company Royal Gold (Nasdaq: RGLD) in 1992, you’d be sitting on over $2 million in profits. You’d also be collecting dividend payments of over $11,000 a year.
If you put $1,000 into Silver Wheaton (NYSE: SLW) in 2008, you’d be sitting on about $20,000 in gains, and you’d collect a 4.3% dividend this year.
And while many investors will buy RGLD and SLW today with the hopes (and dreams) of seeing similar share appreciation and dividend growth, those days are largely gone. You can’t buy past performance.
RGLD just isn’t going to grow another 2000-fold anytime soon. That would make it an $8 trillion market cap company. It would be bigger than the total market cap of the DOW. It’s just not going to happen.
SLW isn’t likely to grow another 20 fold in the next three years either. That would make it a $290 billion company – bigger than Microsoft (NYSE: MSFT).
So if you want to achieve a similar result in your portfolio, you have to seek out the next RGLD and the next SLW.
Such a company already exists – and if you buy it today, you give yourself fair odds at repeating the performance of its forebears.
This company is only about 2 years old and it is already off to a better start than Royal Gold in its first 2 years as this other company already has 4 Gold Streams producing and will have a 5th coming online early in 2012 yet it has a total market cap under $400 million.
This company also sells for about half the Enterprise Value/Cash Flow valuation multiple that the market is currently paying for companies like Silver Wheaton, Franco-Nevada (NYSE:FNV) and Royal Gold.
That discount to peers gives the company a lot of share price appreciation upside as the market is sure to revalue this company in the future. It could also be an acquisition target for FNV and RGLD down the line.
The company I am talking about is called Sandstorm Gold (SNDXF.PK) and it is headed by a very special and rare CEO, Nolan Watson. How rare of a jockey is Nolan and why is he so special?
Nolan is someone who understands how to create shareholder value better than just about anyone else in the resource industry and yet he is only 32 years old.
Most importantly, Mr. Watson has done it before as the youngest CFO in the history of a billion dollar NYSE publicly traded company at Silver Wheaton.
He took Silver Wheaton from a company of barely a few hundred million market capitalization (market value) and ZERO silver streams when SLW was first formed in 2004 up to a multi-billion dollar company with many silver streams.
He did so in only 6 years before he left to start his own company that does the exact same thing with gold that he did with silver at Silver Wheaton.
So… what’s the immediate upside for Sandstorm?
Sometime in 2012, the company plans to uplist to the TSX and also a major US Exchange. By then, especially if gold prices stay at these levels or go even higher, the company should have enough of their gold stream portfolio cash flowing to be able to add more gold streams (perhaps 2-3 per year) to their growth pipeline.
Investors should consider starting a portfolio position in Sandstorm Gold now if they have not already done so before all 6 of its current Gold stream acquisitions are online, and before the company uplists to the regular TSX and a major US Exchange in 2012.
You should note that Sandstorm currently trades on the pink sheets (.pk) – and these companies tend to be much riskier than any company listed on a bigger exchange. So use caution – do your own due diligence and watch your stop losses.
Going forward through 2012 as Sandstorm Gold becomes more known to the mainstream, I expect Sandstorm Gold to become fairly valued and perhaps also become an overvalued momentum stock. A price target of $4/share by the end of 2012 is very achievable for this company and would be a nice gainer for your portfolio.
Article contributed by Jason Burack.