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This "Spark" Could Help Fetch a 935% Gain

Editor's Note : Sid's new Small-Cap Rocket Alert is off to a terrific start. His first recommendation is up more than 35% in less than 30 days. And the shares he recommended this week could also climb quickly. Sid's projecting a 935% potential gain over the next 15 months. The move will be driven by a series of "sparks," or catalysts, like the one he's going to show you today... We hear Wall Street's wizards pontificate, on and on, about the true value of a company all the time. They support their claims with a wide range of ratios.

Editor's Note: Sid's new Small-Cap Rocket Alert is off to a terrific start. His first recommendation is up more than 35% in less than 30 days. And the shares he recommended this week could also climb quickly. Sid's projecting a 935% potential gain over the next 15 months. The move will be driven by a series of "sparks," or catalysts, like the one he's going to show you today...

We hear Wall Street's wizards pontificate, on and on, about the true value of a company all the time. They support their claims with a wide range of ratios.

Price-to-earnings, price-to-sales, price-to-book...

They reference operating margins, too. And book value. And return on equity...

The Street spends an enormous amount of energy trying to forecast a company's intrinsic value - and with good reason. We've all been trained, through the success of legendary investors like Warren Buffett and Jim Rogers, to seek out value.

And I don't disagree. I would much rather invest in a company that's on sale rather than overpay for a pipe dream. But I'd prefer not to wait 40 years for my investment thesis to pay off.

That's the major problem with simple "value" investing. Your favorite bargain stock may indeed be undervalued. But it can remain undervalued for a very long time before the market realizes your genius and pushes the price up.

To really leverage the power of value investing, we're much better off aligning ourselves with a sector rotation...

Or something even more powerful...

Here's How Industry Rotation Delivers 1,181% Returns

That doesn't mean just investing in stocks from unloved industries in the hope that someday they will reverse and become darlings.

The trick is to get ahead of a tailwind that will drive an entire industry in the future.

Sometimes this takes a little courage, because it means stepping out ahead of the crowd - but when performed correctly it can lead to incredible gains - very quickly.

Case in point: Solar stocks, over the last 12 months.

Since November 2012, the solar industry, as a whole, has experienced one of the most powerful industry rotations in recent history.

Market Vectors Solar Energy (ETF) (NYSE Arca: KWT) has delivered gains in excess of 180% to astute investors in less than a year.

That's a fantastic return for an ETF - but the gains of select, individual solar stocks have been nothing short of spectacular over the same time period.

Companies such as Canadian Solar Inc. (Nasdaq: CSIQ), SunPower Corporation (Nasdaq: SPWR), Trina Solar Limited (ADR) (NYSE: TSL), JinkoSolar Holding Co. Ltd (NYSE: JKS), and Yingli Green Energy Hold. Co. Ltd. (NYSE: YGE) have seen their shares explode 1,181%, 755%, 637%, 628%, and 420%, respectively, over the same time frame.

Those gains wouldn't have been possible without the power of an entire industry rotation filling their sails.

But what led to the industry's turnaround?

After years of oversupply in the solar market, prices collapsed. Add to that the global recession and fears that key European and Chinese end users might mothball clean energy projects and you have a recipe for an industry-wide bear market.

But all of those conditions were only temporary.

World leaders are embracing alternative energy sources, so the rebound in the solar industry was merely a waiting game for supply to be reduced, technology to improve, and the economies of key countries around the world to pull out of recession (or at least show signs of improvement).

All three of those are in place now. In the last year, investors have put more than $205 billion into clean energy projects, according to Bloomberg.

VoilĂ ! An industry turnaround - and a gigantic industry rotation spark.

I could easily roll out similar examples for Internet stocks in 2002, oil service stocks in March 2009, and housing stocks in the summer of 2011 - but I think it's more important to look ahead to where we might find the next industry rotation spark.

This "Hated" Asset Class Won't Stay That Way for Long

Right now, there is one asset class so hated that even mentioning it causes investors to get queasy.

I'm talking about gold mining stocks - especially junior gold mining stocks.

As I write this, Market Vectors Gold Miners ETF (NYSE Arca: GDX) and Market Vectors Junior Gold Miners ETF (NYSE Arca: GDXJ) are down 62.79% and 78.86%, respectively, from their multi-year highs.

Here's a great litmus test. Would you be embarrassed to tell your friends at a cocktail party that you're accumulating shares of gold miners? If the answer is yes, then you're probably on to a great trade - but only if the long-term fundamentals are still in place.

Central Bankers around the world have become net buyers of gold as a means of diversifying their respective reserves. That means there is literally hundreds of billions of dollars, over a multi-decade timeframe, providing tailwind for gold and gold miners.

And then there's China.

The Red Dragon's demand is approximately double its annual production capacity, which means it has to tap the global market to meet its demand. In fact, in the first eight months of 2013, Shanghai Gold Exchange Physical Delivery was nearly equal to the entire amount delivered in 2012.

Notice I said "physical delivery."

The Chinese, unlike U.S. speculators, are actually taking physical delivery of gold. That means they are taking supply out of the market and tucking it away.

The following chart from our friends at U.S. Global Investors sums it all up.

Gold shares are near a 30-year low when compared to the price of gold itself. This gives gold mining investors a huge statistical edge to pick up shares now, rather than after gold mining stocks have run up 100%... and the financial media are once again falling all over themselves to speculate on how high gold mining stocks can go.

rotation spark

Investors who want to invest in gold miners - and get in on what could be the next industry rotation spark - could just begin accumulating shares of GDX and GDXJ on a monthly basis using a dollar cost averaging strategy.

It's as easy as that.

The truly enormous gains, though, are going to come from individual companies that have a combination of the best fundamentals and the most depressed prices. That, of course, is why I track them so closely.

And next week I'll show you another powerful catalyst we use over at Small-Cap Rocket Alert. You'll be able to use this one, too...

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