Gold miner stocks could be an interesting contrarian play for brave investors in 2014 after the sector lost more than half its value last year as gold snapped its 12-year winning streak.
Market Vectors Gold Miners ETF (GDX) has seen a little bounce to start the new year following its 54% loss in 2013. Still, trying to time a bottom in this poor-performing sector has been a disaster for bargain hunters.
Arthur Hill, senior technical analyst at StockCharts, said the gold miner ETF remains in a downtrend overall, but is showing signs of life with a resistance challenge to start the year. From a technical perspective, he thinks the ETF needs to clear $23 a share before the recent rally can be considered more than just an oversold bounce.
Chart source: StockCharts
David Levine, who manages the Aspect Large Cap Value portfolio on Covestor, started looking at beaten-down gold and silver miners in late 2013 as a value play. He currently owns Newmont Mining Corp. (NEM), a large gold producer, and Pan American Silver Corp. (PAAS) in Aspect Large Cap Value portfolio.
"I like to look among the year's losers in December and see if I can find some bargains, and the precious metals miners seem to fit the bill nicely," Levine said Friday.
"Pan American Silver is especially interesting - selling at well under book value, with a 5% dividend and a share buyback in place," the portfolio manager said. "While I am not a gold bug, I do expect gold to rebound off these levels a bit since there is almost no fear in the market, and at some point there could be a certain amount of inflation. I could see where these miner stocks could rebound nicely from tax loss selling."
Levine doesn't expect new all-time highs for gold and silver, and he thinks the rebound could take some time.
"That is why I wanted the biggest mining companies with generous dividends to pay me while I wait," he said.