How to Invest Like Billionaire Gold Gurus Sprott & Embry

TORONTO (TheStreet) -- When savvy investors are looking for clues and evidence for some potentially big bonanza opportunities they often begin by seeing what the super-successful are doing.

There aren't many investors that started with little more than the clothes on their backs and through hard work and outstanding discernment have become billionaires.

Two such legendary investors who I have followed, learned from and want to emulate are Eric Sprott and John Embry.

In 1981, Sprott founded Sprott Securities (now Cormark Securities), an institutional brokerage firm focused on small-to-mid capitalization companies, servicing Canadian corporate and institutional investors.

By 2000, Sprott made the decision to focus solely on the investment management business. Accordingly, the investment management division was spun-off to form a separate entity now known as Sprott Asset Management , or SAM.

SAM was founded with an already established successful historical track record of managing assets through Sprott Managed Accounts since 1981 and the Sprott Canadian Equity Fund since 1997.

Sprott Securities was sold to its employees in 2002, leaving Eric Sprott and the directors and officers of SAM with no remaining interest in the firm.

On May 15, 2008, Sprott Inc. successfully completed its initial public offering by way of a secondary offering of common shares. Pursuant to the offering, certain shareholders of Sprott Inc. sold 20,000,000 common shares at an offering price of $10.00 per share for aggregate proceeds of $200 million.

Sprott Inc.'s common shares are listed on the Toronto Stock Exchange under the symbol SII (SII.TO) In the U.S. Sprott Inc. trades under the symbol SPOXF.

John Embry joined SAM as Chief Investment Strategist in March 2003, with a focus on the Sprott Gold and Precious Minerals Fund. He plays an instrumental role in the corporate and investment policy of the firm, according to the Sprott Web site.

Embry, an industry expert in precious metals, has researched the gold sector for over 30 years and has accumulated industry experience as a portfolio management specialist since 1963. He also has been Vice President, Equities and Portfolio Manager at RBC Global Investment Management, a $33 billion organization where he oversaw $5 billion in assets, including the flagship $2.9 billion Royal Canadian Equity Fund and the $250 million Royal Precious Metals Fund.

There are a number of ways to invest in the same "style" as they do. There's the Sprott Physical Gold Trust ( PHYS) and the Sprott Physical Silver Trust ( PSLV).

Sprott has mentioned in several speeches I've attended that he invests some of his own money in these physical precious metals funds when appropriate.

In March 2012, he mentioned in a conference I attended that he thinks silver has a great deal of upside potential, perhaps even more than gold.

He's also reported to have said that silver producers and miners should stop selling all of their silver for cash and instead invest some of it in the physical metal.

Some producers like Endeavor Silver ( EXK) have allegedly reported to their shareholders through news releases and on their website that they have begun to do just that.

Another way to invest the Eric Sprott and John Embry way is through shares of Sprott Resource (SCPZF). As they state on their website, Sprott Resources invests and operates through their subsidiaries in the natural resource sector:

"We currently have investments and operations in oil and gas, agriculture and agricultural nutrients as well as a large position in physical gold bullion. We take an active involvement in the companies in which we invest.

"We are dedicated to generating consistently superior returns on capital for our shareholders, while focusing on risk management and real wealth preservation."

Sprott Resource declared a 3 cent first-quarter 2012 dividend, which on an annualized basis at the current price of around $3.92 a share yields over 3%.

For the more speculative investor who's willing to take higher risk for a potentially higher reward, take a look at two companies that Sprott or a subsidiary has invested in.

Guide Exploration (GO.TO), a small oil and natural gas exploration and production company, is one of those. In the U.S., the stock trades over the counter with the symbol GLNYF.

One of Sprott's subsidiaries, Global Resource Investments of California owns nearly 32% (either directly or indirectly) of another small energy company, Canadian Phoenix Resources.

Canadian Phoenix, which trades on the Vancouver exchange under the symbol CXP.V, is a junior oil and gas exploration, development and production company.

It has no debt, $79.36 million in total cash (most recent quarter). Click here for Canadian Phoenix's first-quarter results.

Remember, it is highly speculative, but it has the feel of a "ground-floor" opportunity. The symbol for Canadian Phoenix in the U.S. is CANXF.

Both Eric Sprott and John Embry became wealthy by taking calculated risks and investing in themselves and their own businesses.

If nothing else, they are an interesting source of ideas, investment information and commentary on the natural resources sector.

Keep their names on your list of the great investors of the Western world. Their track record isn't perfect, but their personal net worth speaks of outstanding investment prowess.

At the time of publication, Marc Courtenay was long SCPZF, EXK, GLNYF, and CANXF.

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