Stillwater Mining (SWC – NYSE)

Dear Bottarelli Research Member,

Before getting into this week’s pick, I want to review the major market indicators that Bryan and I carefully monitor on a day to day basis, because we’re at a very important cross-road.

As I’ve mentioned in previous small-cap alerts, the over-sold market conditions sparked a near-term rally – and I think the gains will continue to push the Dow back over the 13,000 level. As crazy as it might sound, this upside move could occur by the end of August.

But be careful, because despite this recovery, my indicators also reveal that we’re still stuck in a bearish trend (which I attribute to continued weakness in the banking and housing markets).

Now, while everyone remains fixated on the financials, my belief is that once housing prices stop going down, you can bank on the fact that stock prices will have then hit their bottom as well. In other words, a housing recovery is more important to the U.S. economy than a banking/financial recovery.

Perhaps it sounds strange, but nobody realizes the true impact that the various segments of the homebuilding sector have on the world economy. Being a homebuilder myself, I can tell you that everyone from food suppliers, to retailers, to bankers, to auto-makers are all directly tied to housing. It’s a major segment of the global economy, and although we’re close to a bottom, it’ll still take a few months to sort everything out.

At the same time, we also have a Fed that’s faced with inflation (which is a huge tax on all of us) and a critical interest rate decision. Now, the only way to fight inflation is to raise rates, but Fed Chief Ben Bernanke knows that he cannot raise rates. After all, that’ll only apply more downward pressure on home prices and stocks. As a result, he will keep rates low. He really has no other choice. In fact, I wouldn’t be surprised to see one more rate cut.

It’s a really tricky situation, which will lead to more volatility ahead. And when you break it all down, the end result (in my view) is a bullish market environment for precious metals. So this week, we’re going to get positioned to profit off this bullishness using a metal that’s twice as valuable as gold. That metal is platinum.

When you dig into platinum investing, you’ll learn that there are not many pure platinum plays available in stable countries. Many platinum miners, for example, are located in South Africa. With power supply problems, strikes, and fighting within labor parties, South Africa is not a country I’m willing to bet on.

Russia is another major platinum producer, but once again, I’m not willing to put my investment dollars in a country prone to hostile takeovers on private businesses.

With every emerging country scrambling to protect their valuable resources, the best bet is to find a platinum investment opportunity that eliminates any political or third-world risk. But I must tell you, finding an investment play that meets these criteria doesn’t leave you with too many choices. That’s why today’s pick is so powerful.

Located in Montana, this company has been involved in mining since 1885. They’re a pure play on the entire “Platinum Group of Metals” (PGMs) which includes palladium, platinum, rhodium, ruthenium, iridium and osmium. But more importantly, they’re the only known significant source of platinum metals in the United States.

This gem is primarily engaged in the development, extraction, and processing of platinum, which is known as the “White Metal.” And unlike gold, platinum is used in a number of important market sectors, including auto catalysts, fuel cells, hydrogen purification, electronics, dentistry, medicine, water treatment, and even coinage.

Platinum’s scarcity, combined with global demand increases, makes today’s small-cap pick very compelling. Add in the seasonal and economic factors driving bullishness in the metals group (mentioned above) and we have an opportunity to catch a ride on another powerful winner.

The company is called Stillwater Mining (SWC – NYSE), and I’d like to once again take advantage of the market weakness and position ourselves in this very rare metals segment. If I’m correct on my due diligence (which I’m confident I am), we’ll be positioning ourselves ahead of a major metal rally in the weeks and months ahead.

Plus, as you’ll see from the chart below, SWC is currently trading around $10.00, down substantially from its highs of $22.00. This is a fantastic entry price.

Not only that, but fall is typically the season that metal stocks move up, but this year, I believe the seasonal upside move is coming sooner than most expect.

Finally, a new four-year labor agreement was just signed on July 9^th (combined with a new round of drilling about to take place), which all adds up to the perfect time to take action. Therefore, let’s add shares of SWC our small-cap ledger now!

UPDATES

Titanium Metals (TIE – NYSE): Here is yet another high-quality stock that has been so beaten up, it’s hard to believe just how cheap it is. In terms of a quick upside trade, adding a small position under the $12.00 level could easily result in a 20% to 30% winner. If this occurs, take your money off the table and lock in your quick profits. For aggressive traders, this is what I’d recommend anywhere under $12.00. Buy TIE under $12.00 and lock in quick profits between 20% and 30% on any price pops.

Synchronoss Technologies (SNCR – NASDAQ): I’ve been monitoring this situation very closely, and I feel that it’s not quite time to double down just yet. I feel very confident that things will turn around for SNCR next year, especially with all the new iPhone 3Gs hitting the market. For now, shares remain a hold.

National Coal (NCOC – NASDAQ) & International Coal Group (ICO – NYSE): Our two small-cap coal plays have been taken down relentlessly, and I feel that the panic has been way overdone. Investment banks like Merrill Lynch, Lehman Brothers, Citigroup, and Bank of America have been selling their biggest stock gainers to raise cash and sustain their operations, and that’s why many of the market-leading sectors have been experiencing weakness. Use this desperation selling to your advantage. Add to both stocks now, and I feel you’ll have 30% to 50% in quick upside on the next push higher. Coal is going to be a commodity that plays a major role in unwinding our dependence of OPEC. Buy.

ISIS Pharmaceuticals (ISIS – NASDAQ): For those of you who followed our advice and bought the “gift gap” on ISIS, please take profits now. We made a strong return buying into the senseless sell-off, and in the market like this, we simply must do whatever we can to lock in profits. Now don’t get me wrong – ISIS continues to represent one of the most promising small-cap biotech stocks your money can buy. Therefore, let’s go ahead and lock in profits on 75% of our position and hold the remaining 25% for further upside. We can always add more shares on any forthcoming price dips. Sell 75% of your ISIS position, hold the remaining 25%.

Ivanhoe Mines (IVN – NYSE): Here’sa company that has been moving up, which is why we urged you to buy the recent lows. Just last week, Ivanhoe Mines was notified that its subsidiary, Ivanhoe Mines Mongolia, has incurred expenditures of $35 million on exploration of Entree-Ivanhoe Mines. Under the terms of their agreement, once this level of expenditures had been reached, a joint venture is to be formed. Folks this is really great news, as Entree Gold holds three exploration licenses in Mongolia that comprise of 179,590-hectares of promising and un-tapped land. These developments continue to paint a very strong picture for IVN, and shares remain a hold. Hold.

China Natural Gas (CHNG.OB): As the Olympics get underway, our play on vehicles and filling stations running on natural gas is going to get a lot of attention. China’s natural gas industry is still in the primary development period, which means that this is a huge market in the making. CNG saves customers 60% by using their gasoline alternatives, so shares remain a hold. Hold.

Nacel Energy Corporation (NCENE.OB): Please make a note that the ticker symbol has changed to NCENE. Make sure you own this stock, as wind power is primed for an extended bull run. The major advertising campaign financed by T. Boone Pickens will set the path for wind power, and NCENE is leading the push in Texas. Buy.

Gran Tierra Energy (GTE – AMEX): I truly believe you’ll love this company going forward, just like we’ve enjoyed the gains we’ve already taken off the table. If the stock pulls back under $5.50, I’d like you to add to your position. This company is on the move down in South America, and I maintain my $18.00 to $20.00 price target by this time next year.

SIDE NOTE: I mentioned last week that I expect China to play a very big role in the turnaround in the U.S. economy. I will touch more on this in upcoming weeks, but one glance at the iShares FTSE/Xinhua China 25 Index (FXI – AMEX) tells you that a possible recovery is certainly in the works.

Also remember what I said about keeping good old cash on the sidelines. There are some unbelievable bargains available in the small-cap markets right now, and over the next couple of months, we’ll snap up the very best ones.

I firmly believe these buys will make you the easiest money you’ve ever made in your investing career. So keep a close eye on names like Brigham Exploration (BEXP – NASDAQ), Northern Oil & Gas (NOG – AMEX), National Coal (NCOC – NASDAQ), International Coal Group (ICO – NYSE), RAM Energy Resources (RAME – NASDAQ), and Gran Tierra Energy (GTE – AMEX).These could be among the next round of major small-cap winners once we see some level of economic stability (sparked by housing or financials).

On that note, enjoy your weekend, and be sure to give many thanks for the abundance in your life.

Sincerely,

Own The Only Know Significant Source Of Platinum Group Metals In The United States for Under $10.00 Per Share

“Stillwater finds itself in the right place at the right time.”

- Toby Shute, columnist at The Motley Fool

As a basic company description, Stillwater Mining Company (SWC – NYSE) is engaged in the development, extraction, processing, smelting, refining, and marketing of palladium and platinum from their major geological formation in southern Montana.

The company’s mining operations consist of the following projects:

• Stillwater Mine, located on the J-M Reef in Nye, Montana.
• East Boulder Mine, located in Sweet Grass County, Montana.
• And a smelter and base metal refinery located in Columbus, Montana.

Not only is SWC’s J-M Reef formation the only know significant source of platinum metals in the United States, but it’s also one of the most significant PGM resources in the world (outside of Russia and South Africa). That means SWC has a domestic monopoly on the rapidly growing palladium and platinum markets.

Yes, you read that correctly.

Stillwater Mining Company is the only primary palladium producer in the United States, and they currently operate the richest known palladium deposit currently being exploited anywhere in the world.

As of late 2007, SWC had proven and probable ore reserves of 40.0 million tons of PGMs, which totaled 21.2 million ounces of palladium and platinum. They also recycle spent catalyst material at their base metal refinery, which further adds to their PGM production.

From an investment aspect, it’s clear that SWC’s world-class deposit could offer investors like us a powerful return if platinum and palladium increase in value. So in this spirit, let’s explore why platinum and palladium could each experience major bullish trends over the next 12-18 months.

It’ll probably come as a surprise to you, but one in four goods manufactured today either contain PGMs or had PGMs play a key role during their manufacturing process. More than 50% of palladium and platinum goes into catalytic converters, which convert up to 90% of harmful gases from auto exhaust (including hydrocarbons, carbon monoxide, and nitrogen oxide) into less harmful substances, like nitrogen, carbon dioxide, and water vapor.

Palladium is a lustrous, silver-white precious metal used as a catalyst in electrical contacts and alloys. It’s found in computers, mobile phones, multi-layer ceramic capacitors, component plating, low voltage electrical contacts, and televisions. It’s unique in that it has the lowest melting point and is the least dense of these precious metals. Incredibly, when palladium is at room temperature and atmospheric pressure, it can absorb up to 900 times its own volume of hydrogen, which makes palladium an efficient and safe storage medium for hydrogen and hydrogen isotopes.

Palladium is also used in dentistry, medicine, hydrogen purification, chemical applications, and groundwater treatment. It also plays a key role in the technology used for fuel cells, which combines hydrogen and oxygen to produce electricity, heat, and water.

Not only that, but since palladium is also tarnish resistant, it’s starting to receive major attention from the high-end jewelry market. Since palladium shines white forever with no need for plating, it has been used in jewelry since the 1940s. But lately, it has been gaining some major attention from today’s top jewelry manufacturers, which is why experts call it the “Now Metal” and say that it’s on the verge of a historic turning point.

For example, on June 17^th 2008, the luxurious Couture 2008 jewelry trade show was held in Las Vegas, and palladium absolutely took the conference by storm. A crowd of more than 1,200 executives from fine jewelry’s elite (like Bailey Banks & Biddle, Tivol Jewelers, Cartier, Bvlgari, Ulysse Nardin, Chopard, Parmigiani, Armani, and Louis Vuitton) embraced palladium in their jewelry, creating a surge in consumer awareness and demand stretching across the globe.

In short, palladium is now the chic, must-have metal in the world of fine jewelry – which is why the world’s biggest producers have now embarked on a major marketing effort to promote palladium jewelry worldwide. As a result, you can expect the popularity of palladium jewelry to grow exponentially in 2008 and 2009. This could be the one trigger that sparks an upside run in shares of SWC.

After all, compared to other precious metal investment plays, there are hundreds of gold and silver stocks that you can play. But there’s only one U.S.-based pure play on palladium and platinum: SWC. This disequilibrium could cause a large amount of investment dollars all flowing into SWC, resulting in aggressively higher prices over the next few months.

Plus, when you compare the 5-year price increases of gold, silver, platinum, and palladium, you’ll see that all four metals have enjoyed strong upside returns. See for yourself…

Metal Prices from Q1 2003 to Q2 2008

But when you add into the equation the fact that only one pure investment play is available for platinum and palladium (combined with the new surge in demand sparked by the jewelry industry), it all paints a very clear picture for adding shares of Stillwater Mining (SWC – NYSE) to our small-cap portfolio.

With a forward P/E ratio of 9.50, buying the stock anywhere under the $12.00 looks like an extremely attractive buy. So on that note, let’s add shares of SWC to our small-cap ledger now!

PLAY: Buy shares of Stillwater Mining (SWC – NYSE) at or under $12.00, good for the week.

Sincerely,