Friday, July 25, 2008

How One Investor Found a Home Run Stock, Part I

On the Alloy Steel International (AYSI.OB) message board on the Investors Hub website, a poster who goes by the nome de Internet "Littlefish" mentioned offhand his successful investment in another company, Mexco Energy (MXC). In May, Mexco Energy shot up from under $5 per share to about $50 per share, before settling back to today's closing price of $29.82. I'm always curious about how investors came up with their successful ideas, so I asked Littlefish how he came to invest in Mexco Energy before its big move. What follows is his response, verbatim and unedited. It's a little rambling, as Littlefish himself self-deprecatingly acknowledges, and has some of the deliberate and accidental misspellings common to these sorts of message board posts, but I found it an interesting read. Hopefully, you will too. Since it's long, I'll post it in three parts.

LOL, sorry Dave. There's nothing at all tircky with MXC. I had an accnt that I manage where there were a few shares of MXC left in it from a long time ago (I think they were bought after Katrina). I had learned and followed the company back then so knew the background story.

I don't exactly remember how I went back to looking at it cuz the amount of shares was insiginificant (wait, I think I recall Bobwins sent me a list of nat gas producers and the name caught my eye and had me dig it back up) but remember spending a weekend with headphones on and no distraction from family.
I eventually was looking for a nat gas producer (thanx to BW for the list that clicked me back onto it) but think I started off by looking into untapped fert angles. I remember looking into a perlite producer since perlite is a bulk agent in home and garden fertilizer (LOL I went out in the garage and thought 'gee, I'll look at the ingredients in the fert mix to see what else beside nitrogen, potassium, and phosphorous are in there' and perlite is a big ingredient). Then I looked for perlite miners (go to the source) and found they're mostly in Greece and not really tradeable as pure plays. there would ahve been a good one somewhere in SW USA liek Arizona or New mexico but they went BK a couple years earlier.
Then I thought heck I'll look for eprlite expanders that make the perlite from the mined product and found a small Canadian company (forget the symbol- I think Gilead might know.. Wait, found it it is PCI.V).

Anyhow (now you know why I didn't touch this MXC question LOL, takes me awhile to ramble and remember and I'm working), when I saw PCI.V I looked into them and saw their expenses were going up because they used lots of nat gas to 'pop' or expand the perlite. So then I thought 'hey these guys are in like Saskatchewan and the big fert companeis are in Saskatchewan and making urea etc... takes lots of nat gas! I need to find a nat gas pipeline company in this area or even better a driller'. Then I think BW let me know there were NO nat gas producers in that area LOL. So it was back to scratching the head but contacting BW helped eventually get me to MXC.

I thought about the Pres candidates and what they all had in common (when it was down to 3). They all had some kind of plan for carbon emissions restrictions tighter than currently enacted. So I started dwelling on nat gas with fert producers consuming more, election probably spurring more nat gas usage than coal or oil if possible, etc. There were other things that turned me toward nat gas.

So I messaged BW (Bobwins) asking for a list or something of nat gas producers and that was when I saw MXC on the list and slapped my forehaed in a "DUH" moment (kinda like today when Gilead pointed out CXPO's ability to just sell the nat gas instead of having to cover hedged positions).

Click here to read Part II.

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