Get ready to meet one of the best CEOs you never heard of.
In the past six months I've told you about a number of
business leaders, past and present, whose companies benefited --
or stood to benefit -- in a big way from their special knowledge
And for the shareholders who rode the coattails of these captains
ofcommerce , the rewards have been huge.
Remember Lee Iacocca? In the late 1970s the deposed leader of
joined beaten-down Chrysler (apublic company at the time), where
he went on to engineer a package of federally backed loans and
new products that jump-started the auto maker. As I noted in this
article,shares of Chrysler were trading below $2.00 apiece in
1979; eight years later the company declared a 3-for-2stock split
when shares were over $52.00.
In December I wrote about an almost eight-fold rise in shares of
Starbucks (Nasdaq: SBUX)
in less than four years, from single digits in November 2008 to a
high of $62.00 under theguidance ofCEO Howard Schultz. After an
eight-year hiatus, the Starbucks founder took back the corner
office in January 2008 and directed what he later termed "the
company's holistic restoration." In other words, Schultz closed
non-performing stores and re-emphasized quality and customer
Yahoo (Nasdaq: YHOO)
CEO Marissa Mayer is all the rage. And if you've been with
StreetAuthority for a while, you know that we were among the
first to recognize what her hiring could portend for the world's
largest Internet portal. In citing Mayer's potential,
Stock of the Month's
Amy Calistri began accumulating shares of Yahoo last August, just
three weeks after the former Google wunderkind came on board. At
midweek, Amy was up a cool 50.2% on her Yahoo holdings. I
chronicled Amy's recommendation here and here.
Which brings us to Randy Foutch.
He's not as iconic as Iacocca, he's not as "out there" as
Schultz and he's not as flashy as Mayer. He's been interviewed on
CNBC a few times, but outside of gas and oil exploration circles
his name won't ring many bells.
But what Foutch brings to the table is a proven track record at
makingmoney in an industry where the rewards for investors can be
famously handsome. And until recently, the only investors who
could ride Foutch's coattails were the deep-pocketed ones in the
privateequity market .
Foutch is the founder and CEO of
Laredo Petroleum (
, a relative newcomer to the energy industry -- and a company
anyone with a brokerage account can invest in.
The Tulsa, Okla.-based Laredo was formed in 2006 and went
public December 15, 2011, at about $18 a share. Since then share
prices have fluctuated between a high of $26.87 last May and a
low of $16.39 earlier this month.
But while Laredo may be still getting its bearings as a public
company, its leader is well-versed in how toprofit from the oil
A geologist and petroleum engineer by training, Foutch built
three successful oil and gas companies from the ground up prior
to forming Laredo.
And that's the part of the CEO's resume that caught the
attention of Junior ResourceAdvisor 's Nathan Slaughter.
As Nathan reported to his readers, Foutch's firstprivate
company "did a great job of hunting down oil reserves and
churning out risingcash flows. It was eventually sold at a nice
profit. Those proceeds were parlayed into a second company that
did the same thing, resulting in anothersale . That paved the way
for a third oil and gas company, and a third sale."
Debt and equity investors sank a combined total of $547
million into these three businesses, and they cashed out $1.1
"Whenever you'reinvesting in a start-up with a limited track
record, it's important to know who's calling the shots," said
Nathan in the Marchissue of Junior Resource Advisor. "I look for
executives with top-notch credentials and a strong industry
background -- and that's certainly the case with CEO Randy
On March 4, Nathan added 100 shares of Laredo to the
real-money portfolio in Junior Resource Advisor at a price of
$16.55 a share. On Thursday, shares closed at $18.28 -- again of
10.5% in less than a month.
Here's more from Nathan on Laredo...
We've covered the attraction of the CEO. What else drew you to
Look at what Laredo has already accomplished. The company was
founded in 2006 with almost nothing -- today, it has quickly and
efficiently amassed nearly 190 million barrels of oil
But here's what truly excites me. Within Laredo's core
acreage, the company has identified 635 million barrels of
potential oil and gas resources. That's four times the size of
the current reserve base.
The market assigns more value to proved reserves than
potential resources -- so there is huge opportunity as future
drilling activity converts millions of these barrels into the
"booked" category, forcingWall Street to recalibrate the
netpresent value of all that oil.
On that front, management has already budgeted $725 million in
capital expenditures this year -- partly to evaluate and
delineate the true potential of the firm's existing assets,
partly to search for new discoveries to drive tomorrow's growth,
and partly to harness the growing reserve base and bring more
crude to market each day.
How can a company like Laredo, with amarket cap of $2.3 billion,
compete with a company like, say,
, with a market cap of $108.3 billion?
In some industries it couldn't. It's hard to out-muscle a larger
competitor that's 40 to 50 times your size. But in this case,
both companies are selling the same product at roughly the same
price -- and there are plenty of eager buyers.
Plus, when it comes to buying up large blocks ofprime
oil-soakedreal estate , it's first come, first served. And Laredo
was the first to capture 142,000 acres in the Permian basin of
So what makes this particular hunting ground so great? It has
to do with the extremely rare local geology. About 7,000 feet
below the surface of Lubbock, Texas, lies the start of the upper
Wolfcamp Shale, where Laredo is sitting on 240 million barrels of
potential oil and gas resources.
By itself, that's enough to keep the company busy for years to
But if you dig a bit deeper (to 7,300 feet), you encounter an
entirely different play: the middle Wolfcamp. Keep going to 7,900
feet, and there's a third: the lower Wolfcamp. And between 9,000
and 9,500 lies an even older zone called the Cline Shale.
Laredo was the first company to exploit horizontal drilling
opportunities in the Cline Shale. When it sunk the first well
there in 2009, there was only one drilling rig operating in the
entire county -- today, there are forty. So you have four zones
(all with proven success) stacked one on top of the other.
There is similar geography with the Utica Shale undercutting
the Marcellus Shale in Pennsylvania,offering leaseholders two
drilling zones for the price of one. But to my knowledge, this is
the only area where producers can milk four different horizontal
plays from the same place -- meaning that Laredo's 142,000 acre
position is equivalent to 568,000 acres in a single-zone
And here's the best part: while Laredo's oil production is
climbing at a 50%-plus pace (doubling every 18 months on
average), the company has barely scratched the surface -- tapping
only a fraction of its 5,600 identified drilling targets.
Most of our StreetAuthorityInsider readers are probably not
familiar with Junior Resource Advisor. What's your mission with
Most natural resource publications focus almost exclusively on
just two sub-sectors: gold and oil. I certainly have favorites in
those two groups, but I think they're just the beginning.
Confining your portfolio to those two areaswill lead to missed
I look off the beaten path for overlooked companies that are
profiting from a supply/demand imbalance for critical raw
materials. Platinum and palladium miner
Stillwater Mining (
, for example, has rewarded me with a 30.8% gain thus far. And
Taseko Mines (
, which is up 22% from my initial recommendation, supplies
important industrial metals such as molybdenum and niobium.
In recentissues I've covered timber, lithium, cobalt, and most
Aside from a broader universe of potential commodities, I also
break away from the pack by focusing exclusively on small
"junior" miners and energy producers. These companies have
smaller bank accounts than their larger counterparts. But they
are also growing at a much faster rate andoffer betterleverage to
Action to Take -- >
If you're willing to shoulder more volatility in exchange for
wealth-building triple-digit potential, then these smaller
exploration companies are the best way to harness growing global
demand for scarce natural resources.
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