This Day On The Street
Continue to site
ADVERTISEMENT
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

Mining stocks may be poised for a rebound

By David Levine

There wasn't much activity in the Aspect Large Cap Value portfolio on the Covestor platform in April as the broader stock market indices continued their choppy movement up and down.

I added a position in Verizon (VZ) and also increased my holdings in Pan American Silver (PAAS). I have no way of knowing this for sure, but I believe that precious metal prices may have bottomed. In fact, political tensions in Ukraine and further economic sanctions against Russia have sparked a rally in that asset class, particularly gold, platinum and palladium.

My preferred method of investing in precious metals at this point is to buy the beaten down mining stocks. Of course, due to the lack of investment opportunities, I am also holding a higher percentage of cash than I would normally.

If you look back over the decades, you will find that in times of investor panic gold and silver really don't react and aren't much of a "safe haven" investment play. However, these assets do seem to react well to anxiety - which is different than fear. Anxiety seems to happen when things are doing fine, but there are increasing worries that something will go wrong in the future.

That's the situation we're in now in my view. People are prone to worrying about things these days. Using excess cash to buy precious metals related stocks such as gold and silver is sort of a security blanket.

In my opinion this kind of investor behavior, plus the fact that mining stocks have declined, could point to a rebound in these stocks at some point.

For a while I thought that Newmont Mining (NEM) would be acquired by Barrick Gold (ABX), but merger talks ended in acrimony. On a fundamental basis, I believe Newmont Mining is worth a bit more than what it is selling for and there is still a chance that Barrick could do some sort of deal at some point. The fact that a possible merger was entertained by both sides makes me bullish on the one- to three-year outlook for gold and silver.

At some point in the next few quarters, I expect Rick's Cabaret (RICK) to do something about spinning off its real estate. Obviously, I don't have a crystal ball, but it would not surprise me if one or more of my stocks in the portfolio participated in some type of M&A activity before the end of the year.

When a company that you own gets a bid, it is one of those rare opportunities where you know that if you sell you will probably be doing the right thing. In my opinion, the reason is that execution risk is brutal and most of the time mergers and acquisitions don't have the intended results.

In the meantime, I'm staying cautious. I am waiting for some reason to make a trade, but I can't find one right now. In fact, I may raise cash or place bets on a pullback. That said, in my opinion, the market may be higher overall by the end of the year.

DISCLAIMER: The investments discussed are held in client accounts as of April 30, 2013. These investments may or may not be currently held in client accounts. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable. Past performance is no guarantee of future results.

David Levine

David Levine

I am a value-oriented investor and a former financial adviser for Prudential Securities. I left the industry in 2000 and

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
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG

Markets

Chart of I:DJI
DOW 16,643.01 -11.76 -0.07%
S&P 500 1,988.87 +1.21 0.06%
NASDAQ 4,828.3250 +15.6170 0.32%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs