The gains in precious metals have been slow and solid. There are bouts of euphoric urgency and small corrections all along an upward trend. Those are the signs of a true bull market.

But I'm not here to regale you with the virtues of owning gold and silver and why you must have some gold and silver stocks in your portfolio. We've been over it before. Today you'll learn how to turn this bull market into an absolute fortune.

You see, there will be a very great divide between the winners and the big winners. When it comes to true wealth, you've got to find the big winners. And there's no better place to do it than in a genuine bull market.

Because when the bubble does come, you'll be in place for quadruple-digit gains. I'm talking about the kind of gains that can turn a few small, well-diversified investments into true financial freedom. There's nothing like it.

Normally, to make the big scores, you have to take big risks. Some traders take big swings on volatile options where they're going to lose 100% or walk away with 300% or more. That's ok, but there's a lot more to be made here. This is a bull market and eventual bubble where true fortunes will be made. There will be winners and legendary winners. The best part is, the stocks where you'll make the most money in this run are actually some of the safest to own.

Premium Valuations and Premium Returns

Not all gold stocks are created equal. There are three main groups. You have the majors, the mid-tiers, and the juniors.

The difference in profit-potential of each group comes from one of the oldest gold company valuation strategies Wall Street simply doesn't use, but pays off very well in markets like this.

First are the majors. The major gold producers are the gold companies like Barrick Gold (NYSE:ABX), Goldcorp (NYSE:GG), and Kinross (NYSE:KGC). These companies have mines all over the world. They're all primarily gold mining companies and they mine millions of ounces of gold every year. They also produce a lot of silver, copper, and other metals.

They are also the ones which own and operate the largest gold mines in the world. Some of these mines take billions of dollars to start up and the only gold companies with that kind of cash are the majors.
They are also perceived as the safest gold stocks to own. They produce billions of dollars in free cash flow and always have one or two big mines in development.

The Truth About Safety

The thing is, the perception of safety actually makes them a bit riskier. Just take a look at what happened last year. Many of these "safe" gold stocks were hammered. Some fell 60% or 70% as gold slid 30% from its highs. Meanwhile, smaller and more speculative gold stocks were hit hard too. Many of them fell 80% or 90%.

Granted, the losses were greater in smaller stocks. But as Prosperity Dispatch readers are well aware, true safety comes from the right mix of risk and reward.

The reason the majors aren't really nearly as "safe" as they're perceived to be is because they fetch far greater premiums for the gold they do own. For instance, Goldcorp currently has reserves and resources (there's a technical difference between the two terms, but it doesn't matter too much in the big picture) of 67 million ounces of gold. Goldcorp has a market cap of $29 billion. That puts a valuation on the company of about $430 per ounce of gold it owns.

That's very high. And when it comes to high valuations, the risk is greater and the reward smaller. That's why it's best to look for the stocks with greater values to capitalize on gold bull.

Less Downside, More Upside

You'll find those values in the other two groups of gold stocks - mid-tier and juniors. They offer far better potential upside than their larger counterparts.

While putting together my research for the next Prudent Investing recommendation, I found that some of the mid-tier gold stocks are trading at truly exceptional values.

There are dozens of examples. For example, Northern Dynasty Minerals (NYSEAmex:NAK) has made one of the largest gold discoveries in decades. The company has a market cap of about $680 million and almost 50 million ounces of gold reserves and resources. It works out to about $14 per ounce of gold in the ground.