One Exciting Opportunity

What do the following numbers have in common: +197%, +19%, -17%, +43%, and +27%? These are the returns from our Motley Fool Global Gains research trips, to Mexico, India, Greece, China, and China, respectively, since I took over as a Global Gains advisor in 2008.

I don't cite these numbers to gloat (especially not with regard to Greece), but rather as evidence that traveling around the world in search of great stock ideas is one of the most rewarding parts of my job. Those returns are also further evidence of the case for visiting companies, something we're set to do again at Global Gains over the next few weeks as we take off for Australia.

As always, you're invited to come along, and get all of our notes from the field in real time for free. But before I tell you how to sign up to do that, I want to explain why we're going to Australia, and what we hope to find.

Why Australia?
If you're a regular reader of these columns, it should come as no surprise that despite my expectations for near-term volatility, I'm a long-term believer in the Asian economic miracle. I expect India and China to grow into global economic superpowers over the next few decades. In the course of this development, both of these countries will consume a massive amount of natural resources, including food, petroleum, coal, iron ore, copper, and more.

If you agree, then Australia is a natural destination for your investment dollars. As the world's largest exporter of coal, and its second-largest producer of iron ore, a lot of what Asia needs comes from Down Under. Australia is so important, in fact, that steelmakers throughout Asia remain panicked by the recent floods in the state of Queensland, which are expected to reduce coking coal exports by some 15 million tons. All told, Australia is at the heart of a multidecade commodity boom, providing investors with an attractive long-term investment opportunity and currency exposure.

One opportunity we're looking at
Although we're still finalizing our meeting schedule, I wanted to preview here the type of opportunity we'll be looking for while on the ground in Australia.

Eastern Star Gas (OTC: ESGLY.PK) is a small-cap energy firm focused on finding and producing coal seam gas in Australia. Although the company is currently almost revenue-less, this is a potentially high-reward play. You see, while it's expensive and difficult to extract coal seam gas, given how deep it is in the ground, it's becoming more and more in demand as conventional gas reserves around the world run low.

In a validation of the technology and opportunity, Chinese energy giant and Global Gains recommendation CNOOC (NYSE: CEO  ) recently invested $50 million in a competing Australian coal seam gas company -- a relatively small but still important deal following CNOOC's decision to invest $1.1 billion in Chesapeake Energy (NYSE: CHK  ) , a somewhat more conventional natural gas play.

But CNOOC is not the only energy giant interested in coal seam gas. ConocoPhillips (NYSE: COP  ) , PetroChina (NYSE: PTR  ) , Royal Dutch Shell (NYSE: RDS  ) , and BG Group are among the other energy giants betting big on coal seam gas. While unconventional projects like coal seam gas carry higher risk, they're becoming increasingly important in a world of rising energy demand and stagnant energy supply.

I'm excited to meet with the team at Eastern Star Gas, because it's still relatively unclear just how efficiently coal seam gas can be extracted from the ground. Although Eastern Star and others have made some gaudy estimates about how much coal seam gas exists in Australia, I would like to further examine their extraction expectations before I value the company. For its part, though, Eastern Star Gas is charging forward, announcing last week that it had made a down payment on a site to build a $1 billion coal seam gas plant.

Is that something you're interested in?
Eastern Star Gas is not the only company or commodities play my team and I will be meeting with while we're in Australia. Our roster also includes more conventional miners, mining services firms, agricultural names, and others that stand to benefit from rising Asian consumption.

As always we'll be releasing a special report with our top picks from the trip upon our return home. But if you'd like to follow along with us in real-time, simply enter your email in the box below. That way, we'll be sure to send you all of our notes from the field as we take them.

Tim Hanson is advisor of Motley Fool Global Gains. He does not own shares of any company mentioned. Chesapeake Energy is a Motley Fool Inside Value recommendation. CNOOC is a Motley Fool Global Gains choice. Motley Fool Alpha owns shares of Chesapeake Energy. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (10) | Recommend This Article (38)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 27, 2011, at 9:27 PM, embuddy wrote:

    After following your advice I made a 50% return at this point. Thanks for your help.

  • Report this Comment On January 27, 2011, at 11:08 PM, Merton123 wrote:

    I just invested my 2010 and 2011 Roth IRA money in FOOLX and this article makes me very happy since Motley Fool is directly turning over more stones then the other investors. I will be very interested on hearing how your trip to Australia went and any insights you have gained through the trip.

  • Report this Comment On January 28, 2011, at 7:46 AM, TMFMmbop wrote:

    Thanks for the kind words. Turning over stones is the best part of our jobs!

    Tim

  • Report this Comment On January 28, 2011, at 11:25 AM, mikenpdx wrote:

    any chance you'll be looking into LYNAS Corportation (LYSCF.PK)?

    They are headquartered in Sydney.

    michael

  • Report this Comment On January 29, 2011, at 11:01 AM, fysfil wrote:

    any chanced you'll be looking into edenenergy: see http://www.edenenergy.com.au/pdfs/Eden%20Energy%20%20LBC%20R..., a company headquartered in Perth. I don't have a financial interest in the company, but a filial interest, in that one of the major movers is a cousin of mine.

    Phil

  • Report this Comment On February 03, 2011, at 3:49 PM, TMFMmbop wrote:

    Thanks for the tips; we're still finalizing our schedule.

    Tim Hanson

  • Report this Comment On February 04, 2011, at 3:02 PM, mike2153 wrote:

    I've been quite pleased with my recent purchase of SDCJF.PK . It's the first time I ever bought something based on Fools that I follow on My CAPS.

  • Report this Comment On February 04, 2011, at 5:16 PM, sabourins wrote:

    Educate me.

    What is FOOLX

  • Report this Comment On February 05, 2011, at 2:24 AM, stevec5792 wrote:

    FOOLX is a "go anywhere" Mutual Fund the Fools started in 2009. Done very well so far. Hope it keeps up! (+27.75% since June 4, 2010 and still holding!)

    Looking forward to the Australia visit as it's interested me a long time but not enough information on anything except the likes of Fox News... well, and Foster's. :)

  • Report this Comment On March 04, 2011, at 11:13 AM, deadaphids wrote:

    So...why when I research/consider purchasing Eastern Star Gas (ESGLY.PK), discussed in this article, do i see that the stock (its ADR, actually) is usually not traded at all, or traded in 2-300 share lots that actually move the price? Is it THAT thin -- hard to believe for this decent-sized, discussed small-cap -- or is the ADR not the way to buy into this company? If Tim or anyone can guide me on this, that would be great. Thanks.

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