From the Editor

Market Outlook 2013
We have been pleasantly surprised by the recent U.S. economic numbers and in recent months a number of things have reduced the probability of recession including the Federal Reserves new Quantitative Easing Program. Although the election is over, uncertainty over the outlook for federal taxes and spending remains a drag on consumers and businesses. Corporations now sit on over $1.5 trillion in cash while investors remain largely on the sidelines. We expect that the Obama Administration and Congress will reach an agreement on the “fiscal cliff” with a deal over the next few weeks that postpone most of the tax increases and spending cuts. We feel that the economy should then pick back up as the gradually improving job market along with moderate income growth will support consumer spending gains. The housing market will continue to gain support from the Federal Reserves highly expansionary monetary policy as mortgage rates remain near record lows. Furthermore, we believe inflation should remain tame as U.S. energy production will continue to expand and; in turn lower gasoline prices will boost after-inflation incomes, at least in the near term, supporting real consumer outlays. In addition, as credit standards slowly ease, the consumer; accounting for two-thirds of the economy, will continue to be the driving force behind the U.S. economy. This improved economic growth and the steadily improving labor market will provide a solid base for equity gains longer term.

We believe emerging markets will also re-accelerate in 2013.The Chinese economy should grow at around 8.0% as investment picks up through increased infrastructure spending and as we see continued signs of stabilization in the export sector. More broadly, Brazilian growth is expected to more than double to around 3-4%, while India is expected to grow 6.5% next year from 5.5% in 2012. Russia should maintain its current growth of around 3.5% into next year. The broader European economic and debt crisis is certainly not cured, but it appears to be entering another period of remission.

These benign macro drivers, coupled with attractive valuations, provide support for the global equity market in 2013. The potential for economic improvement is not the only reason for retaining or broadening exposure to riskier assets. The prices of smaller companies equities’ also respond more aggressively to underlying economic trends than the larger-cap companies.

Looking ahead we think investors will continue to rotate out of bonds and into equities pushing the S&P 500 to a record 1600 by year end. We believe that easy monetary policies will continue and gold should climb to over $2000.00 an ounce by the end of 2013 and continue to move higher. We feel that average oil prices will ease in 2013 on greater supply and trade in a range between $80 and $95 per barrel in the US.

So what now?
We have been in an era of anxiety because of the fear of a second Global Financial Crisis and there are companies developing world-class assets trading at pennies on the dollar. Currently there is a huge amount of cash on the sidelines and even more in U.S. Treasuries generating a negative return after inflation. We expect some of this money to flow back into the small-cap market and riskier assets. We are taking advantage of this opportunity and investing in select high-impact special situation investments. Our advice tο οur subscribers іѕ tο ignore thе nervousness οf thе times, remain patient, аnd hаνе a long term outlook. Frοm οur experience, thе road tο successful investing іѕ іn finding grеаt businesses: thе ones thаt саn mаkе hugе profits аnd grow dramatically even іn today’s economic environment. As always it is important to keep some cash in reserves for extraordinary opportunities.

My name is Kevin McKnight, and I am the President and editor of Undiscovered Equities, Inc. Since the early ‘90’s I have had an intense thirst for knowledge about the equity and financial markets. In the ensuing two decades I have assembled a worldwide network of experts and have developed a method to identify companies that are about to become among the market’s top performers. I now draw upon my extensive experience and contacts to carefully recommend selected growth stocks which are poised for Wall Street’s recognition.

The real question is how do we identify exceptional stock investments; ones that have the greatest chance of rising a magic five to ten times or more? From my years of experience, the road to success in this business is finding great businesses: the ones that can make huge profits and grow dramatically even in today’s economic environment.

The fact is: This is not an easy task., as many times these investments have been passed up or overlooked. Sometimes these companies have complex issues that take time to understand. That is why it takes an experienced team like Undiscovered Equities with a proven track record of success to diligently pursue tomorrow’s technologies, tomorrow’s energy finds and the next milestones in medicine. We look to invest in businesses that boast solid and passionate entrepreneurial leadership and offer a high potential return on capital.

Our research is rigorous and intensive and involves site and country fact-finding visits, while we also utilize our industry experience and affiliations to uncover information about companies that we believe offer exceptional investment opportunities.

Undiscovered Equities’ goal is to provide individual investors, money managers, family offices, and institutions with secure information about how to capitalize on stock market trends, invest their money wisely and build wealth. We are very selective, only recommending three or four new companies a year. We look for companies with huge potential resource discoveries or game changing technologies. Exceptional management is essential as we deeply value the necessary commitment it requires to build true, enduring companies.

Our featured companies have been carefully chosen as we have not only met with management, but we have also discussed near-term growth plans in detail, analyzed assets, and clearly identified success milestones with which to track progress.

We have consistently found that it is the irrational under-pricing of world class assets that creates the best investment opportunities. As a result of identifying significant anomalies and taking contrarian stances over long periods of time, Undiscovered Equities has enjoyed an exceptional track record.

What really motivates our team is knowing that the information, due diligence and research we have provided to our family, friends, business associates and subscribers has made them very, very wealthy.

Throughout the year, we host world-class investment conferences that feature cutting-edge small-cap companies giving them the opportunity to present their businesses and meet face-to face with our network.
Please enjoy this publication with our compliments.

Sincerely,
Kevin McKnight