SCI Penny Stock Tips DC

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    Its no secret that Washington DC is a cauldron of corruption, vice, waste and dishonesty.

    But a small building just 10 blocks from the White House is home to what might be the biggestboondoggle in DC history.

    You see, a secretive group of congressionally appointed officials are busy at work producing

    endless reams of reports.

    Many of these reports, which I refer to as 'Folios' with my fellow analysts, look like any otherexample of pointless Government paperwork with one small exception the information inthese Folios could make small stock investors a handsome amount of money.

    That's because most small stocks - those companies with market caps below $1 billion - are notclosely followed by the broader investment community. Much of the information relevant totheir business, and share price, is simply unknown.

    But not to a small stock analyst who spends most of his time sifting through reports to find thenuggets of information that will lead to multi-bagger returns.

    What's crazy is that these Folios are available for your viewing - it's just that most people don'ttake the time to read them. They are filed by thousands of companies every day with theSecurities and Exchange Commission (SEC). You can find them yourself on the SECs website -they are more commonly known as Form 8-Ks and 6-Ks.

    What do these documents contain, and why are they such catalysts for a publicly traded smallstock?

    From the SEC's website...

    "Form 8-Kis the current report companies must file with the SEC to announce major events

    that shareholders should know about."

    These 'major events' include mergers, financial information, significant press releases; the listgoes on. The Form 6K serves the same purpose, but is used for foreign companies that trade ona U.S. exchange.

    http://www.sec.gov/about/forms/form8-k.pdfhttp://www.sec.gov/about/forms/form8-k.pdfhttp://www.sec.gov/about/forms/form8-k.pdfhttp://www.sec.gov/about/forms/form8-k.pdf
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    The thing is most investors don't spend their time sifting through these forms for severalreasons:

    1) Theyre extremely dry and filled with legal jargon2) There are literally thousands of forms filed daily, which means tons of manual work3) The useful information is often buried amid the legalese

    But here's the thing - if you know which companies you should be watching, and then monitortheir filings for meaningful events, you'll have an edge.

    Digging through these forms for the relevant information is what I do. Its my area of expertise.Its not glamorous or easy. But it can be exciting - especially when you find the kind of realcatalysts that point toward significant growth for a company, and its share price.

    Ive done that work specifically for this report for investors like you who want a real chance tomultiply your wealth with the best potential growth candidates in the small stock sector.

    In this report I detail three companies that, using our 'Folio' strategy to time purchases, give

    investors the chance to seize outsized gains. By anticipating positive catalysts before theyhappen, then taking decisive action at the right time, subscribers are able to enjoy huge gains inthe stock when the rest of the crowd finally catches on.

    I also give you detailed analysis of these companies profitability, growth prospects and thepositive catalysts I anticipate will make the difference in your portfolio. So when thesecompanies file their own 8ks and 6ks, you'll be able to quickly differentiate between the usefulfact and the legalese.

    It bears repeating that I wouldn't hesitate to 'buy and hold' any of these companies. In fact, Icurrently own shares of two of these companies because I believe they are solid growth

    companies - but all three have multi-bagger gain potential over the coming years.

    We've used this strategy inSmall Cap Investor PRO for some time now. Take a small silvermining company in Mexico Id been researching in 2010 called Endeavor Silver (AMEX:EXK). I followed this company for months because I knew they had silver - lots of it. Even ifEndeavor was able to mine a fraction of their known silver reserves, theyd be an easy double.The catalyst I was looking for was increasing silver production.

    In June of 2010, a one page 6-K 'Folio' was filed with the SEC that said, Endeavour Silver DrillProgram Intersects High Grade Silver-Gold Mineralization

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    It took a little longer than I expected, but Endeavor turned into a near triple in less than oneyear.

    Another stock I was watching at the time isAllot Communications (ALLT). It couldnt bemore different from Endeavor. Allot sells network management hardware all around the world.Its headquartered in Israel.

    I recommended this company anticipating that its technology would catch on, and help itbecome a truly profitable company.

    At first, Allot actually went down a few percentage points, but then:

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    Since I first noticed how 6-K and 8-K filings outline small stock catalysts - in particular onesthat take a while to get noticed by the broader investment community - I've begun using them tohelp guide investment decisions.

    My favorite stocks to be on the lookout for future catalysts are currentlyFortuna Silver,Inventure Foods and Banro Corporation. When these companies file relevant 8K and 6K

    forms, the market will begin to realize what I, and my subscribers, already know...that ouranticipated catalysts are having the desired effect.

    Let's dig into the details of these stocks because you need to know what you should be buyingbefore you take action.

    But first, one thing about buying these small companies right now:

    I always recommend you watch any stock, particularly small stocks, and look to add shares inmultiple positions on weakness. This is called 'dollar cost averaging' and allows you to lower

    your overall cost basis if the stock falls.

    Use this strategy when you invest or trade penny stocks - it works.

    Fortuna Silver Mines - A Game Changing Expansion in Mexico

    Fortuna Silver Mines (NYSE: FSM), (TSX: FVI) is without a doubt one of my favorite silvermining companies. The catalyst I've been expecting to move this stock higher is the opening ofthe company's second major mine; the San Jose Mine in the silver rich Sierra Madre Mountainsof Mexico.

    Silver production at the San Jose mine began onSeptember 1st, 2011 and it is now Fortuna'ssecond mine. One of the things I like about

    Fortuna is that while it qualifies as an 'emergingproducer' because of the new San Jose mine,management still has years of experience openingand operating a successful mine.

    The company's first flagship mine, Caylloma, is located in Peru. It purchased Caylloma in 2005,upgraded the plant, and increased production by 150 percent.

    I first recommended Fortuna to subscribers in April of 2011 anticipating San Jose's opening.Since I've covered the stock other favorable catalysts have helped, including a new listing on theNYSE in addition to the company's listings in Frankfurt, Germany and Toronto, Canada.

    Confirmation that San Jose remains a huge catalyst was confirmed in the details of a Form 6Kfiled on October 24th, 2011. This form detailed 3rd quarter silver production. Keep in mind, whileI generally expect our catalysts to have an almost immediate impact, the real exciting part of thestory is the longer term, i.e. 12-month, time frame when I expect shares to deliver the biggestgains. I'll get to the details of this form in a second, but first a little background on Fortuna.

    The company has been growing revenues, profitability, and production for the last two years atCaylloma. In 2010, it generated $74.06 million in revenues and earnings of $0.12 per share.

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    Fortuna has around 20.3 million ounces of silver and 70,900 ounces of gold left at Caylloma -enough to keep production going for at least another decade without any further exploration

    work.

    While Caylloma is atremendously valuable asset,

    the major catalyst for thiscompany's stock is not in Peru.It's in Mexico.

    I already stated that inSeptember 2011, Fortunaopened its new San Jose mine.The future silver productionfrom San Jose is a gamechanger for Fortuna, as theproduction forecast in thischart shows.

    With just one quarter ofproduction left in 2011, management expects San Jose to produce around 780,000 ounces ofsilver equivalent (this includes gold production too). Production will skyrocket to over 2.6million ounces of silver equivalent in 2012 with a full year of mining operations, and grow toover 5 million ounces in 2017.

    That's a lot of silver at just one site for a company with a market cap of only $814 million. Itsthis San Jose Project that makes Fortuna such an attractive silver developer right now.

    Silver companies that are already producing and are rapidly expanding production to takeadvantage of higher silver prices right now are likely to be some of the best performing stocks in

    the market.

    In the Form 6-K 'folio' filed on October 24th, Fortuna stated that San Jose contributed just onemonth of production in the last quarter, and it was a fairly modest 113,178 ounces at that.

    We also learned in the November earnings release that only 21 percent of what was producedfrom San Jose was actually sold in the quarter. So there is a huge amount of room for revenuesand earnings to ramp higher as silver production at San Jose increases to more than 4 millionounces annually. Add in potentially higher silver prices and we have huge leverage to silver withSan Jose.

    Looking at both mines in the third quarter of 2011, silver production was up by 40 percent to660,749 ounces compared to the third quarter of 2010. Most of these, around 560,000 ounces,came from Caylloma. With an average selling price of $35.16 per ounce, Fortuna's revenues rose80 percent over the third quarter of last year.

    Even better, net income was $10.31 million, a huge improvement over a loss of $770,000 lastyear and operating income surged to $14.89 million from $1.03 million. The company now sitson $62.73 million in cash.

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    Simple math shows that production should more than double in the fourth quarter of 2011 withSan Jose adding over 600,000 ounces to Caylloma's 560,000 ounce production. Lookingforward, in 2012, Fortuna plans to produce 2.75 million ounces from the San Jose mine. At this

    year's average silver price, this production is worth around $100 million in revenue.

    Keep in mind Im only talking about revenues generated from the San Jose project - in 2010

    Fortuna generated $74.06million from the Caylloma,Peru mine alone.

    So revenues could more thandouble in the next year, just

    based on current productionplans and stable silver prices.

    With the production forecastthat management provided,

    we can forecast a few

    scenarios of future revenuesby 'plugging in' a few averagesilver prices. I've put thisanalysis in a chart to make iteasy to digest.

    The chart shows possible annual revenues for each of the next three years given four averageprices of silver.

    Let's assume silver averages $40 per ounce in the future. Assuming Fortuna hits its productionguidance revenues will rise by 100 percent in 2011.

    In 2012 they will have increased by 300 percent over 2010.

    In 2014, when San Jose is up to full capacity, revenues will have increased by 400 percent over2010. These are pretty attractive numbers. Granted we don't know what the average price ofsilver will be, but all of these numbers show that Fortuna should enjoy robust revenue andearnings growth, even if silver prices stay flat.

    The bottom line is that Fortuna's production growth from the San Jose mine gives investorsexcellent exposure to silver prices, and thats why I like the stock.

    To value the stock we also want to look at the value of the company's assets. Right now,assuming a conservative price of $30 silver, Fortuna's stock is selling at a discount to net present

    value of its silver assets in the ground. Valuing these assets at $30 silver (keep in mind this isbelow the current price of silver) suggests the stock should be trading at closer to $6.75.

    I think this valuation is fair right now, but will soon appear conservative if silver prices staywhere they are, or rise even more. Accordingly, my medium term price target on shares is $7.40.Longer term, I expect this stock has the potential to double, or more, as forecasted productioncomes on line.

    $0

    $100,000,000

    $200,000,000

    $300,000,000

    $400,000,000

    $500,000,000

    $600,000,000

    $700,000,000

    $800,000,000

    2010 2011 2012 2013 2014

    Fortuna's Revenue Sensitivity to Average

    Silver Price

    $20 Silver $40 Silver $60 Silver $100 Silver

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    In fact, I'll be updating my numbers as soon as Fortuna files another production forecast andSan Jose progress update, which I expect in the fourth quarter of 2011.

    It appears were seeing the glory days for silver production in Mexico, and I think we can expectgreat things to come from Fortuna. As with all mining operations, execution to plan andconservative fiscal management is crucial. All evidence to date suggests Fortuna will continue to

    meet my expectations. The stock is a buy at current levels, and bigger positions should be addedon any material weakness.

    Read my in-depth research report on Fortuna Silver atwww.SmallCapInvestorPRO.com .

    Price Target: $7.40

    Full disclosure: Tyler Laundon own shares of Fortuna Silver Mines

    Snack Food Company = Defensive Growth

    Inventure Foods (Nasdaq: SNAK) is a consumer goods company that sells packaged snack

    foods and frozen berry products to club stores, convenience stores and grocery retailers - thinkSafeway (NYSE: SWY) and Costco (Nasdaq: COSTO).

    These types of products are purchased in good times andbad, and these stores are always packed full of hungryshoppers looking for great values. And Inventure Foodshas a smart strategy; it is selling products in both the fastgrowing 'Healthy & Natural' category as well as the oldstandby 'Indulgent' snack food category.

    Inventure Foods is insulated from oil prices, foreign currency fluctuations and sovereign debtexposure. Yet defensive doesn't mean zero growth for this micro cap snack food company. In the

    third quarter results - released in an 8-K on October 26th

    - reported sales grew by 10.1 percentyear-over-year. Buying this stock right now still gives you exposure to the lions share of theupside as more and more investors start taking notice.

    Growing demand for healthier snack foods - as well as regulations to combat obesity - is welldocumented. TheOrganic Trade Association's (OTA)data shows over 2,500 percent growth inorganic food demand over the past 20 years. Additionally, California, a number of cities inMaryland and Connecticut, New York City and Philadelphia have moved to ban unhealthytransfatsin restaurants.

    Inventure Foods is growing its exposure to this market with itsHealthy & Natural products which include frozen berries, smoothiesand snacks. After growing sales in this division by 27 percent in 2010these products now account for 55 percent of sales - a huge jump from4 percent of sales in 2006.

    This segment's brands include Rader Farms, Jamba Juice smoothies(in partnership with Jamba (Nasdaq: JMBA)), Boulder Canyonand a host of private labels. Frozen foods, including Jamba, grew by20.3 percent in the third quarter.

    http://www.smallcapinvestorpro.com/http://www.smallcapinvestorpro.com/http://www.smallcapinvestorpro.com/http://www.ota.com/organic/mt/business.htmlhttp://www.ota.com/organic/mt/business.htmlhttp://www.ota.com/organic/mt/business.htmlhttp://en.wikipedia.org/wiki/Trans_fathttp://en.wikipedia.org/wiki/Trans_fathttp://en.wikipedia.org/wiki/Trans_fathttp://en.wikipedia.org/wiki/Trans_fathttp://en.wikipedia.org/wiki/Trans_fathttp://en.wikipedia.org/wiki/Trans_fathttp://www.ota.com/organic/mt/business.htmlhttp://www.smallcapinvestorpro.com/
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    But while I'm a fan of healthy product offerings, I also know that consumers dont always wantto go the healthy route when snacking. Inventure is going after the less than healthy market too,

    which it calls 'Indulgent Specialty'. Here it sells under national licenses, regional brands andprivate labels, and you'll see their products, primarily chips, onion rings, and pretzels, soldunder the TGI Friday's, Nathan's, Burger King, Poore Brothers, Tato Skins and Texas Style

    brands. Indulgent Specialty makes up the remaining 45 percent of sales, and grew by 7 percent

    in 2010.

    Inventure Foods seems to be firing on all cylinders right now. The company is growing its shelf-space in convenience stores, vending machines, and internationally. Healthy & Natural revenuesare up with the popularity of both Jamba At Home Smoothies and Rader Farms berries helped

    by national advertising efforts at NASCAR events, with cooking guru Rachel Ray and on theFood Network.

    Earlier in the year, afterInventure Foods reportedsecond quarter revenuethat came in 9.3 percent

    above expectations,analysts bumped up theirrevenue forecasts.

    Expectations are now forthe company to deliver 10percent plus revenuegrowth and nearly 100percent earnings growth in2012. This chart showsrevenue trends - notesteady growth even

    through the latest recession in 2008 - 2009 and the nice uptick in revenues over the last twelvemonths (LTM). So far, with revenue growth of over 10 percent in the last quarter, Inventure ison track.

    You'll notice in the chart above that optimism on top line growth is somewhat tempered onearnings, which will be essentially flat in 2011. This is because significant investments to expanddistribution and marketing of Jamba and Boulder Canyon brands, including shelf-stocking,advertising and coupons, and frozen berry inventory is cutting into the company's profit margin.

    Management is extremely transparent in explaining these investments however, and I'mpointing them out not to call a strike against the company but more to give a little insight into itsgrowth strategy.

    A consumer goods company can't gain shelf-space and 'clout' without getting the word out andexpanding distribution - and that is what Inventure Foods is doing through these investments. Ithas to pay in advance for the shelf-space, which it is doing now. This in effect 'front-loads' thecosts of future revenues - I'll spare you the boring accounting analysis and simply state that it isa more conservative, and therefore better, way of doing business.

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    If management is successful, which I expect it will be, we should see these investments hit thebottom line in 2012 with earnings of around $0.30 per share - that would be more than 100percent higher than what we expect in 2011, which is EPS between $0.12 and $0.14. This will be

    worth the investment.

    Shares of Inventure Foods are currently trading just 13-times 2012 estimated earnings of $0.30

    per share. Shares could trade up to 18.5-times 2012 EPS if earnings growth hits 100 percent,which equates to a share price target of $5.55.I believe Inventure Foods is exactly what a long-term small cap investor is looking for right now. A defensive growth company that is somewhatinsulated from economic woes, that sells a product consumers want in good times and bad, hasshown an ability to tap into growth trends on its own and through strategic partnerships likeJamba.

    Be sure to average in to Inventure because the stock trades an average of only 40,000 shares perday - so bide your time and be patient when purchasing your first tranche.

    Read my in-depth research report on Inventure Foods atwww.SmallCapInvestorPRO.com

    Price Target: $5.55

    Banro Corporation - First Mover Advantage in The DRC

    In some areas of the world there are ample supplies of precious metals that have not beenaccessible for decades. Either they are far too remote, short seasons make mining operationsimpractical, stable governments have yet to be formed or technology just isn't yet available tomake mining these reserves economical.

    Yet as the price of gold rises, so too does the motivation to goafter these reserves. Banro Corporation (AMEX: BAA)is one of the first companies to enter a true emerging

    country; the Democratic Republic of Congo (DRC), Africa.

    Its head start over other gold exploration anddevelopment companies means that it has some of the bestproperty in the country. Banro is an excellent example of alow cost gold producer that has moved quickly fromexploration to development to production.

    This is key - miners on the cusp of revenues are in myopinion the best value in the market.

    It entered a resource rich country in central Africa soonafter relative political stability came to the region. Atransitional government and constitution was adopted in2003.

    In 2006 the DRC held its first multi-party election, whichwas supported and considered credible internationally, in40 years. Currently, companies such as Freeport McMoran (NYSE: FCX), Lundin Mining(LUN.TO) andAnvil Mining (AVM.TO), along with Banro, are succeeding in the DRC.

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    The DRC has been growing at about 7 percent in recent years on the back of natural resourceexports like precious metals and timber. It is the 11th largest country in the world, and the secondlargest in Africa. It's a hot spot for mining because over time shifting tectonic plates in the GreatRift Valley have exposed huge amounts of gold, copper, silver, diamonds and numerous otherminerals. This is why Banro is here.

    Since it entered the DRC, Banro has reconstructed roads and bridges, purchased and installed agold processing plant, developed a mine, built schools and housing for local workers andsecured financing to put its mine into production.

    In a 6-K filed on October 11th, Banro stated that its Twangiza gold mine poured its first gold - amajor milestone that management has been working on for two years. The big picture atTwangiza is around 6 million ounces of gold. Banro acquired theTwangiza project in 1996.

    The decision to bring the property into production was made in 2009 and in order to fast trackthe project the company focused on what it's calling 'Phase One'. Phase One will focus on theeasily accessible gold deposit and production of 120,000 ounces annually.

    The economics of the project are as follows; total gold production of around 1 million ouncesover 7 years. At this rate the cost per ounce will be just under $400 and the initial capital coast is$87 million. The first stage of the project has a net present value over $1 billion using a 5percent discount rate and gold's current price.

    Costs of only $400 per ounce meansBanro's Twangiza project should be acash cow. Even if gold were to averageonly $1200 per ounce over the life ofthe mine (unlikely in my opinion)Banro would generate $850 inpositive EBITDA for each ounce it

    brings to market.

    That's a very healthy margin that willprovide tremendous growth capital toincrease production to a proposed300,000 ounces annually, and bringadditional mines on other propertiesinto development.

    Second in Banro's developmentpipeline is the Namoya project,followed by Kamituga and Lugushwa

    which are currently exploration stage properties. Namoya has around 1.7 million ounces ofestimated gold, and development plans call for annual production of around 124,000 ounces ofgold annually for seven years, at a cost of $350 per ounce. Estimated capital costs to build themine are $118 million. This project would in effect double Banro's gold output and revenuesover the period of the project.

    Given the size of its reserves and gold at over $1,700 the stock is superbly undervalued. Withpotential for nearly a billion dollars a year in revenues and a low cost per ounce Banro should be

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    either extremely profitable or extremely well financed to expand further - or both. Any goldprice above $1,200 makes Banro a good buy for under $4.50 per share.

    I've added up all the ounces of gold Banro has on its four properties, based on the most recentestimates, and put the totals in the table below.

    Right now the market is giving Banro about $100.00 in enterprise value per ounce of gold (I callthis EVPO) in the measured and indicated categories. Given that these ounces are at the moreadvanced Twangiza and Namoya projects this appears a pretty significant discount.

    I've seen other companies valued at many times this level for similar resources. Add in theinferred resources and take a total average, and Banro is getting just over $60.00 in EVPO.Senior gold producers enjoy similarly categorized ounces valued at hundreds of dollars perounce on an EVPO basis. With Banro ramping up production, in coming years it should enjoy asimilar valuation.

    Banro should be able to trade at and EVPO of $250 for gold in the measured and indicatedcategory. That makes the stock a potential double, so we'll put a price target on shares of $8.40.

    The bottom line is that Banro will rapidly be increasing production at its first mine, and has awell defined and very reasonable expansion plan that it should be able to largely fund withoperating revenues. The company has an additional $30 million in cash on the balance sheet to

    help expand production.

    It is also drawing investment dollars from institutional owners (institutional ownership isaround 60 percent) like Oppenheimer (NYSE: OPY), JP Morgan Chase (NYSE: JPM)and Deutsche Bank (NYSE: DB).

    We'll enter this position with institutional investors and ride the wave through the start-up ofthe mine and into full scale gold production.

    Read my in-depth research report on Banro Corporation atwww.SmallCapInvestorPRO.com

    Price Target: $8.40

    Full disclosure: Tyler Laundon own shares of Banro Corporation

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    Disclaimer

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