How to Invest Like Multimillionaire Investor Jim Rogers

For those of you unfamiliar with investor Jim Rogers, he has a life story a little different than most Wall Street money managers.

After growing up in Demopolis, Alabama, and getting a history degree from Yale and a second BA in philosophy, politics and economics from Oxford, Rogers started his career working for Dominick & Dominick in 1964. In 1973, he and fellow billionaire George Soros founded the Quantum Fund. A decade later, the fund had returned 4,200% compared to the S&P 500’s return of just 47%.

A rich man, Rogers decided to retire in the early 1980s. He spent his time lecturing, appearing on television shows, and traveling the world. Between 1990 and 1992 he travelled more than 160,000 kilometers around the world on a motorcycle, setting a world record in the process. Not content with one such trip, Rogers did it again, this time covering more than 245,000 kilometers in a tricked out, bright yellow Mercedes Benz from 1999 to 2002.

Rogers has a few simple investing rules that have stayed with him during his entire investing career. Here are a summary of some of his most important, along with Canadian stocks that fit his criteria.

1. Be contrarian

Rogers is famously contrarian, and has stated “as an investor, nearly always if you buy panic and you know what you are doing, and then hold on for a number of years, you are going to make a lot of money.”

Rogers has practiced what he preaches, famously shorting U.S. housing insurers Fannie Mae and Freddie Mac in 2006. He also bought commodities back in the late 1990s, enjoying stellar returns since. Rogers continues to be bullish on commodities, especially gold, during this period of the U.S. Federal Reserve’s balance sheet expansion.

Looking to the TSX, Rogers might be interested in Canadian gold miner Goldcorp (TSX: G)(NYSE: GG). It’s trading at about half of its 2011 highs, continues to pay a dividend, has a rock solid balance sheet, and it boasts some of the lowest operating cost mines in the industry. Goldcorp also is one of the strongest miners in the business, as evidenced by its $2.8 billion takeover offer of Osisko Gold. There aren’t many gold companies that can make that kind of offer these days.

2. Invest in agriculture

One of Rogers’ investment themes over the past few years has been a play on farming. As the world’s population grows, more food is needed to feed everybody. In 2012, Rogers told Forbes magazine, “there’s going to be a huge shift in American society, American culture, in the places where one is going to get rich. The stock brokers are going to be driving taxis. The smart ones will learn to drive tractors so they can work for the smart farmers. The farmers are going to be driving Lamborghinis.”

In keeping with the first theme, one way to play Canadian farming is through beleaguered Rocky Mountain Dealerships (TSX: RME), western Canada’s largest network of farm machinery dealers. The stock is trading at a 52-week low after disappointing earnings, pays a 3.5% dividend, and trades at less than 10 times 2014’s projected earnings of $1.26 per share. It also has very little debt on the balance sheet and trades at barely above book value.

3. Find underexposed markets

During his trips around the world, Rogers was buying stocks in countries such as China, Iran, and Ghana, countries that, at the time, were depressed. The combination of finding a country with a depressed market and depressed stocks helped Rogers get some nice returns in those markets. Currently, Rogers is buying up gold coins issued by North Korea, which has to be the ultimate contrarian play.

It really isn’t that hard for Canadian investors to find stocks exposed to countries with bleak prospects, thanks to all the mining and resource stocks with operations outside of Canada. Pacific Rubiales (TSX: PRE) is an oil and natural gas producer with operations in Columbia, Peru, and Guatemala. It trades at just 12 times trailing earnings and 9 times expected 2014 earnings. Pacific Rubiales is a consistently profitable company, and pays investors a growing 3.9% dividend.

Foolish bottom line

Jim Rogers is one of the most interesting investors out there. His rules have served him well over the years, and he continues to come up with interesting places to put his money. Investors can learn a lot from this master.