Gold Stocks Shine
Gold stocks have performed spectacularly in the past month, and as the gold price tests all-time highs again we’ll take this opportunity to review how to position your portfolio accordingly.
In our weekly wrap back on August 27, we highlighted that gold and agricultural stocks were shining, even though the overall market performance at the time was dismal. In the investment themes we suggested trades that should be considered:
“Opportunities in this market include gold. For the past 10 years gold has made two thirds of its annual gains in the last one third of the year and September has been the best performing month. So traders should keep gold and gold stocks in their sights in the next month”.
Interest in this sector has been sparked by the Newcrest merger with Lihir Gold and the bidding war that has been underway for the Sydney-based gold explorer, Andean Resources (AND). In the past couple of weeks, Andean Resources has had a number of takeover bids from Goldcorp Inc and Eldorado Gold at a 40 percent premium to its previous traded price. Eldorado Gold has since dropped out of the bidding war.
We are taking this opportunity to review the gold mining sector and have highlighted key outperformers within this sector. In the analysis below we’ve highlighted stocks that have good Return on Asset and Return on Equity and also stocks that have some room to move on a Price Earnings Growth measure (PEG):
Gold stocks that are providing good returns on a Return on Equity and/or Return on Assets include: Avoca Resources (AVO), Bendigo Mining Ltd (BDG), Kingsgate Consolid. (KCN), Medusa Mining Ltd (MML), Newcrest Mining (NCM), Norton Gold Fields (NGF), Ramelius Resources (RMS) and Silver Lake Resources (SLR).
Another key fundamental measure is the improving earnings, and stocks that meet this measure include: AngloGold Ashanti (AGG), Avoca Resources (AVO), Crescent Gold (CRE), Kingsgate Consolid (KCN), Medusa Mining Ltd (MML), Newcrest Mining (NCM), Norton Gold Fields (NGF) and Ramelius Resources (RMS).
The chart above illustrates the performance of key gold stocks over a weekly, monthly and half yearly timeframe. Gold stocks that have returned over 25 percent in the past month include: Ramelius Resources (RMS), Andean Resources Ltd (AND), Resolute Mining (RSG), Tanami Gold NL (TAM), Intrepid Mines (IAU), Crescent Gold (CRE), Carrick Gold Limited (CRK), St Barbara Limited (SBM), Red 5 Limited (RED), OceanaGold Corp. (OGC), Regis Resources (RRL), Dominion Mining (DOM), and Mineral Deposits (MDL).
Gold has had a great run since early August and is now testing all-time highs. If it can breakout to the upside then this would give the Australian Gold sector added impetus to move higher, however gold is now backing these levels. This may provide investors with an opportunity to trade those outperforming stocks on any pullback.
Gold stocks underperformed the gold price in the first half of this year, but it now appears that they’re playing catchup. Keep the stocks that have been highlighted here on your watchlist.
By Michael Hevern
Head of Research