International Investing

From Rick Rule, quoted in the Daily Reckoning:

First, you have to be contrarian. You have to buy them when others don’t want them.

Second, you have to buy the good ones. Most resource companies are run by incompetents, he says, or worse - “people who would normally wear a mask when they go to the 7-11.” The 80-20 rule applies here as elsewhere. Only 20% of the companies will make 80% of the profits. And the 80-20 rule applies to the 20% too. So only 20% of the 20% of companies will make 80% of 80% of the profits. You have to do some serious research and analysis to figure out which those companies are.

“I look for serial and sequential winners,” says Rick. “I look for the people who have proven that they can produce profits.
Finally, Rick says you need to look for projects in places where most people don’t want to go. Political risk is always a problem for resource companies. But the political risk is not what most people think. Most investors judge the risk high in the Congo, or in Mayanmar, and low in California. “Actually, the opposite is true,” Rick explains. “California is so rich that it can afford to treat mining projects badly. But these poor, basket-case countries need them. They are much more respectful to miners.