Most investors never get one 10-bagger … Eric has 12 … Today, we analyze one
The rare stock that appreciates 10-fold in value … turning every $10,000 invested into $100,000 … and producing a cool $90,000 in profit.
What would you do with an extra $90,000 in cash this year?
Buy a new car?
Go on some incredible vacations using the “house’s money”?
The investor who hits a 10-bagger must answer those wonderful questions.
Most investors go their whole lives without hitting a 10-bagger. I’m not talking about just individual investors, but longtime professionals as well.
That’s what makes the following list of investment returns so amazing. They are the returns produced by the stock picks of one legendary investor. I assure you, these numbers are not made up … they are not from some hypothetical back test.
If you count them up, that’s a dozen investments that gained more than 1,000% … including a stunning 4,114% gain … and a jaw-dropping 5,997% gain.
To give you an idea of what a 5,997% gain can do for you, realize that it turns every $10,000 invested into $609,700.
The list of gains is why the name “Eric Fry” carries enormous weight in financial circles. In an industry where you’re fortunate to have just one 1,000% gain to your credit, Eric has a dozen — the gains listed above.
***Over the last few days, we’ve been featuring Eric in the Digest
That’s because, frankly, his track record is astonishing. It’s the investment equivalent of Major League baseball’s .400 season. Very few people have ever hit .400 in a season. But one guy has hit .400 in a dozen seasons.
Having a dozen recommendations that have gained more than 1,000% in his career is why Eric is regarded by many people as one of the world’s best stock pickers. At this point in his career, his track record has taken on legendary status. Like many legendary performances, Eric’s numbers are so incredible they almost seem made up.
But I assure you, they are not. In fact, see for yourself …
1. Inner Mongolia Erdos — 1,062%
2. Antofagasta Holdings — 4,114%
3. Royal Garden Resorts — 2,888%
4. Freeport McMoran — 1,058%
5. First Russia Frontiers Trust — 1,390%
6. First Russia Frontiers Fund — 1,102%
7. Christian Dior — 1,658%
8. Adidas — 1,269%
9. Charoen Pokphanda Foods — 2,518%
10. GFPT — 5,997%
11. Gazprom — 1,360%
12. Vostok Nafta — 1,712%
Now, it’s one thing to list winners such as these. It’s another to actually dive into the details of one of these spectacular trades — and that’s what I want to do today.
In this past Friday’s Digest, we featured Eric’s essay on the foundation of his global macro approach.
Saturday’s Digest included his essay on the three-point system he uses to implement his strategy. Today, it’s a real-world case study of what can happen when you combine the strategy and the implementation to get a 10-bagger.
Let’s jump in!
***How a small Latin American mining company returned more than 4,000%
This story begins thousands of miles to our south, with the Chilean copper mining company, Antofagasta Holdings.
The name Antofagasta ties to the company’s roots — Antofagasta is a Chilean town on the Pacific coast about 150 miles southwest of Chuquicamata. If you’ve heard of it, it’s likely because the site was one of the more famous mines worked by the Incas.
In 1999, Antofagasta was in bad shape. That’s because the broader macro environment was challenging, to say the least. Chile’s economy was in the tank, and copper was a hated commodity. The result? Investors had largely left Antofagasta for dead.
At the time, its stock had a market price equivalent of 50% of its book value. But that was where “Mr. Market” would have priced a South American commodity producer back in that time.
As a macro investor, Eric already had Antofagasta on his radar … but that’s not to say he wasn’t aware of all the challenges facing it.
Here’s how Eric described the broader macro condition in which Antofagasta found itself in 1999 in an interview with Grant’s Interest Rate Observer:
ANTO is caught in a vicious vortex: lousy commodity markets like copper, lousy Latin markets, contracting global liquidity. These adverse trends not only exist presently, but are expected to continue for the foreseeable future by most market participants. It can’t get any worse … Can it?”
At that time, copper was trading in the mid-60-cent range (a low price). According to Morgan Stanley’s Commodities Management Group, copper had traded in the 60- or 70-cent range on just four occasions, including the one in 1999, when Eric was beginning to sense a trade.
Morgan Stanley’s research also showed that in each of the three situations when copper’s price fell that low, the price went on to double, “although the time spent languishing at the lower prices varied in each instance.”
But the bull case for copper was hard to make. There weren’t any apparent catalysts to push copper’s price higher. The Asian boom that had floated copper to greater than a $1 was gone. It was anyone’s guess as to when similar demand would resurface.
***But Eric’s research found some things the market was missing …
Antofagasta stood to receive a huge windfall of cash from a massive, new mine under construction in Los Pelambres, Chile. The hope was that Los Pelambres would redefine Antofagasta, giving it new life through a major earnings boost.
Eric suspected this mine would be a game-changer — transforming the company from a low-volume, high-cost producer, to a high-volume, low-cost producer overnight.
Also, on a more macro level, the situation with both Chile and copper was so bad that it begged the question (which Eric had asked) — how much worse can it really get?
Given this, Eric was actually betting on several things — an economic rebound in Latin America, a turnaround in the price of copper, and the rebirth of Antofagasta with its new mine.
But those odds were rather long. What gave Eric the conviction to go in? Well, for one thing, there was a margin of safety.
At the time, using back-of-the-envelope calculations, the intrinsic value of ANTO’s share price was calculated at $7.49. And what was its actual market price?
Meanwhile, the company was yielding 4.24%. Not bad income while you waited for the macro situation to improve.
Now, making a call like this is never easy. As a professional fund manager, these types of recommendations often go by another name — “career risk.” Yet, Eric made the call.
***What was the result?
First, as you can see in the below chart of Chile’s GDP growth rate, its economy rebounded.
Second, the price of copper rebounded as well. But in the chart below, notice how it wasn’t a smooth, continuous climb. Copper pulled back in late 2001, re-testing its 1999 lows.
But after that, the price exploded. And since 75% of Antofagasta’s revenues came from copper, its share price exploded as well …
So, what was the end result for those who followed Eric’s recommendation?
They walked away with a gain of 4,114%.
Being a macro investor isn’t easy. You often have to be a contrarian, putting your money into countries and sectors that are hated and have been left for dead.
But you can see what the payoff is for making such bets when things go right.
Congrats to Eric on an amazing call which led to an extraordinary outcome.
If you’d like to learn more about Eric’s macro approach, he’s put together a free presentation with all the details. Click here to learn more.
Have a good evening,