"Finding the right natural resource at the right time can be spectacularly rewarding," notes Ivan Martchev. One such opportunity according to the resources advisor may be palladium.

Here, the in his Vital Resource Investor he looks at the overall market for the metals and a pair of mining plays in this specialized sector – Stillwater Mining (NYSE: SWC) and North American Palladium (ASE: PAL)

Martchev explains, "Palladium is the only one of the precious metals that still trades nearly 70% below its 2000 high. While that in and of itself doesn't suggest that palladium is undervalued, I think it has great potential."

He points out that the platinum group metals (PGMs) -- platinum, palladium, osmium, ruthenium, iridium and rhodium -- have unique characteristics as industrial metals. The most well known, he observes, is their use in catalytic converters for automobiles.

Indeed, he notes, the catalytic converter market drives platinum and palladium. He explains, "The recent bid under palladium is very much an expression of environmental concerns and tightening legislation worldwide on emission standards, which is likely to get tougher and tougher.

Meanwhile, he points out, "Only platinum and palladium have dedicated miners, while the rest of the PGMs are byproducts of platinum and palladium mining." And, he adds, the majority of PGMs are found in South Africa and Russia.

How do you play it as a US-based investor? He suggests that there are two primary North American miners that deal in PGMs, one in Canada, one in the US. The only US-based producer, he says, is Stillwater Mining (NYSE: SWC).

Stillwater, he says, did a number on investors in the last quarter by reporting a small loss in a period of booming PGM prices. As a result, the stock went from a high of $16.47 at the end of April to a low of $10.67.

The reason, he explains, is that Stillwater has long-term contracts that have price caps, and it sold some of its production forward at a very inopportune time.

The only Canadian producer, he notes, is North American Palladium (AMEX: PAL), which produces about 5% of the world's palladium and doesn't have the long-term contract issues besetting Stillwater.

He says, "The company is about half the size of Stillwater but is expanding its existing mines and in Finland, where there are some undeveloped reserves."

In his view, the stock is likely to be much more momentum driven than Stillwater in a palladium price move, given the operational leverage. He concludes, "Look at Stillwater as a value play and North American Palladium as the high-octane play."

Each day, Steven Halpern's TheStockAdvisors.com features the latest investment ideas and market commmentary from the financial newsletter community.