This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Less-Than-Shiny Gold Miners

His reasoning is based on the massive leverage that many futures contracts are traded on "up to 16 to 1 -- just a 6.4% rally in the gold price would obliterate all the capital of those fully leveraged contracts," Krauth postulates.

Just a small percentage rise in the gold price may lead to a massive short covering, "...which would feed on itself, pushing gold still higher and faster. Short covering rallies can lead to violent upside surges," he adds.

It's not hard to agree with his feeling that at the present time the negativity about gold hasn't been this great since gold's bull market began in 2001.

"After the extreme bearish sentiment of 2008, gold rallied 70% in a little over one year" Krauth reminded readers.

The View from a Contrary Perspective

There are only two things that get less respect than gold. Junk food and gold stocks are not high on any investor's food chain at the moment, and I'm not sure junk food isn't more venerated.
[Read: <a target="blank" data-add-tracking="true" href=""><em>Our 401(k)s Show We're Not Taking Investor Confidence Seriously </em></a>]

Take the world's largest gold producer Barrick Gold (ABX - Get Report). Shares of Barrick closed on Monday at $18.14, in spite of an analysis published by Two Fish Management valuing the company's stock above $44 a share.

Barrick estimates its gold production this year will be 7.2 million ounces, over two million more ounces than the next biggest miner, Newmont Mining (NEM - Get Report).

There are a number of chinks in its armor. Its net debt is around $13 billion versus Newmont's $5 billion. Plus, Barrick has earned a sour reputation for its capital expenditures and shaky leadership.

Let's take a look at both of these two famous gold producers, starting with a 1-year chart of ABX. The chart also includes its trailing twelve month (TTM) EBITDA earnings.

ABX Chart ABX data by YCharts

Barrick's earnings and sales growth depends on the price of gold staying afloat. In a recent interview CEO Jamie Sokalsky proclaimed, "This company has a more disciplined capital-allocation framework and is focused on cost control, portfolio optimization return on investment and free cash flow."
2 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
ABX $19.37 0.00%
NEM $34.97 0.00%
AAPL $93.74 0.00%
FB $117.58 0.00%
GOOG $693.01 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs