Daily Gains Letter

gold mining stocks


Why Investors Should Prepare for a Rebound This Spring

By for Daily Gains Letter | Mar 14, 2014

Should Investors Rebalance Their Portfolios for the Spring ThawThe winter storm that recently tore across the northeastern United States will, no doubt, take the blame for the continuing weak economic news and data that have been coming out of Wall Street.  Having been the economic scapegoat since December, there’s no reason to change tactics.

But the raft of ongoing disappointing economic news and data suggests there’s more to the nation’s weak economic news than cold weather. After all, it’s not as if the U.S. economy had been red-hot and then suddenly hit a brick wall in December. If there’s one thing the U.S. economy has been—it’s consistently weak.

For example, while the S&P 500 and other stock indices have been enjoying prolonged bull runs, the U.S. economy has been stalling.  Since the magical bull market began in 2008, the U.S. unemployment numbers have remained stubbornly high and the underemployment numbers eye-wateringly high. At the same time, wages are stagnant and, not surprisingly, retail sales have disappointed. More and more Americans are saddled with out-of-control debt and a record 20% of American households (one in five) were on food stamps in 2013.

Speaking of 2013, while the S&P 500 notched up a 30% annual gain, each quarter, an increasingly larger percentage of companies revised their earnings guidance lower. Saving the best for last, during the fourth quarter of 2013, a record 88% of S&P 500 companies that provided preannouncements issued negative earnings guidance.

But 2014 didn’t start out that well, either. For the first quarter of 2014 so far, 80% of the S&P 500 companies that have issued guidance revised their earnings lower; this compares to the 78% of … Read More


Why I Recently Turned Bullish on Gold Mining Stocks

By for Daily Gains Letter | Feb 14, 2014

Gold Mining StocksA friend of mine asked me the other day about the best way to build a long-term investment strategy. This is a great question, but it’s also one of the most difficult ones to answer.

Obviously, different people have various goals and objectives, especially when it comes to risks. For me, the way I put together an investment strategy is by looking to buy things when they are on sale, including stocks.

Over the past couple of months, if you’ve been following my articles, you’ve likely noticed that I’ve started to become quite bullish on gold mining stocks. This is the classic investment strategy of buying when most people are selling. When you consider the current sentiment, it’s clear that gold mining stocks haven’t experienced this much negativity in years.

Of course, you can’t simply have an investment strategy to buy any random stock or sector when it goes down; that’s doomed to fail. At some point, for the investment strategy to work, there must be some fundamental strength over the long term.

We all know about the pain felt by most gold mining stocks. But don’t forget: the market is a forward-looking mechanism. Your investment strategy should not focus on what’s happening today, but what is likely to occur over the next several quarters and even years.

Why did I recently become bullish on gold mining stocks?

I believe part of the reason for the significant weakness in the precious metal, especially in December, was due to institutions continuing to play the trends. You have to remember that large funds are measured by their performance (yearly and quarterly), and … Read More


How to Profit Big from Gold Mining Stocks Left for Dead

By for Daily Gains Letter | Jan 15, 2014

Gold Mining StocksLeft for dead: that’s what appears to be what most investors have done to gold mining stocks.

With the price of gold bullion down significantly in 2013, it appears many are simply ignoring all gold mining stocks, lumping them into one category and avoiding the group as a whole.

Personally, I love buying when things are on sale. I hate paying full price on anything, no matter if it is for a stock or clothes. When it comes to gold mining stocks, the market sentiment hasn’t been this bearish in years.

Market sentiment tends to oscillate, and for the long-term investor, one should be looking to buy when others are selling and looking to sell when others are buying.

Market Vectors Gold Miners Chart

Chart courtesy of www.StockCharts.com

The above chart shows the price of gold bullion (black line) on top of the price of gold mining stocks (red line) as exhibited through the exchange-traded fund (ETF) Market Vectors Gold Miners ETF (NYSEArca/GDX).

As you can tell from the chart, gold mining stocks are close to reaching lows not seen since the fall of 2008. While there are some gold mining stocks in financial difficulty due to their high cost of production, there are certainly some companies that are extremely attractive, considering how much bad news is priced into the market.

This is what you have to consider as an investor: is market sentiment too bullish, too bearish, or somewhere in between?

I believe that both gold bullion and gold mining stocks look attractive at this point because most of the bad news has already been priced into the market.

Because the price of gold … Read More


A New Year’s Resolution in Gold Bullion?

By for Daily Gains Letter | Jan 7, 2014

Gold BullionDid gold make a New Year’s resolution? If it happened to set its sights on 2014 being better than 2013, then that might not be too hard to accomplish. For gold bugs, 2013 was abysmal. Gold bullion prices ended the year down about 28%—the biggest annual drop in more than 30 years.

Gold bullion prices experienced an unprecedented run-up after the tragic events of September 11, 2001 and soared higher in 2008 as the global economy teetered on the brink of a recession. Investors’ justifiable fears of economic turmoil and inflation sent them running to gold bullion and gold mining stocks to hedge against this economic uncertainty. Between September 2001 and September 2011, gold prices soared more than 560%.

But since then, gold prices have lost their lustre. And in June of this year, the precious metal hit a three-year low of $1,179 an ounce after the Federal Reserve hinted it would begin to taper its generous $85.0-billion-per-month quantitative easing policy. Investors took this as a sign that the U.S. economy was on solid footing.

Gold bullion prices remained weak near the end of the year after the Federal Reserve announced on December 18 that it would begin to reduce its monthly bond buying program to $75.0 billion a month starting in January. Gold bullion ended the year at $1,202.

2013 will be remembered as the year when (misguided) economic optimism helped lift the Dow Jones Industrial Average by 26%, the S&P 500 by almost 30%, and the NASDAQ by 34%. In 2013, that same optimism also shaved off half of the value of gold mining stocks.

But it could … Read More


Should Investors Still Diversify with Gold?

By for Daily Gains Letter | Jun 6, 2013

Should Investors Still Diversify with GoldWhen it comes to investing, it’s important to diversify and spread your money around. Put all your assets in one basket and it could evaporate overnight if the markets go into correction mode. As a result, diversification is a good strategy to follow, because it can protect you from losing your entire retirement portfolio should the markets turn.

Having a number of different stocks does not make a portfolio diversified. A diversified portfolio means having different kinds of investments, including stocks, bonds, cash, and so on. While we all know diversification is key, it’s important to know where you should park your assets.

When the markets are bad, people turn to inflation hedges like gold. When the markets are doing well, they park a good portion of their portfolio in the stock market. Right now, a lot of people are turning to the stock market. And why not? The current bull market is now in its fifth year, the Standard & Poor 500 is up more than 18% since December 31, 2012, and the Dow Jones Industrial Average is up almost 20% since the end of 2012.

Many economists think this is just the beginning and that investors should keep their money parked in stocks. Others are not so sure, pointing to a raft of terrible economic news, including stubbornly high unemployment, falling median incomes, an increasing number of Americans receiving food stamps, high personal and student loan debt, and stagnant wages.

Wall Street is even getting a little nervous. Almost 80% of S&P 500 companies have issued a negative outlook. The S&P 500 may be reporting strong returns, but … Read More


Investing in Gold: ETFs or Individual Stocks?

By for Daily Gains Letter | Apr 1, 2013

010413_DL_clark

Lots of investors believe investing in gold as an investment theme is a good idea. But I would bet that a lot of those investors don’t have any exposure to the commodity.

The track record of gold prices is self-evident, but it is a market that is controlled by speculators. Even if you think spot gold should be at $2,000 an ounce, it certainly could drop to $1,250 an ounce if futures traders wish it to.

So investing in gold comes down to just one thing—the amount of risk and exposure you are willing to have in your portfolio.

Gold stocks have certainly been hit hard in recent months. The whole sector has suffered from rising costs and a weakening spot price. One of the things that could be holding a lot of investors back from investing in gold is the fact that so few gold stocks pay dividends.

Barrick Gold Corporation (NYSE/ABX;TSX/ABX)) is currently yielding around 2.7% on the stock market. But the company is still a huge risk; it’s been going down on the stock market for ages now, and who knows where it will end up? Barrick’s stock chart is featured below:

04012013_dailygains1
Chart courtesy of www.StockCharts.com

Those in retirement aren’t likely to be interested in junior gold mining stocks. A collection of gold coins, however, might be stashed away in the dresser drawer.

Investing in gold or any commodity that trades on the futures market has always been a high-risk endeavor. The prevalence of gold exchange-traded funds (ETFs) certainly has made it a lot easier for investors to express an investment view regarding the commodity. And today, … Read More