Prospecting for Gold Stocks

NEW YORK (TheStreet) -- The uncertainty regarding whether or not the U.S. economy will fall off the fiscal cliff should be giving Comex gold a bid, but instead, the precious metal has been moving sideways to down since trading as high as $1,798.1 on Oct. 5 and as low as $1,672.5 on Nov. 5. This price action still has gold above its 200-day simple moving average at $1663.4.

When prospecting for gold mining stocks using www.ValuEngine.com I found seven that have "four-engine" buy ratings. All seven are undervalued by 18.4% to 45.2%. One has a gain of 41.1% over the last 12 months, while the other six are lower by 16.0% to 28.8%. By comparison Comex gold is up 6.9% over the last 12 months. Three of seven gold miners have single-digit 12 month trailing price-to-earnings ratios, three have reasonable P/E, while one has an elevated P/E.

Fundamentally ValuEngine shows the basic industries sector just 3.2% undervalued with the gold mining industry 10.5% undervalued, which is a reason to consider gold shares over Comex gold. The last time I made this type of comparison was on Sept. 10 when I wrote Gold Stocks Continue to Lag Gold.

With the gold mining industry undervalued and with most gold mining shares lagging gold significantly, investors considering buying gold should prospect among the gold miners I profiled today.

Reading the Table

OV/UN Valued: The stocks with a red number are undervalued by this percentage. Those with a black number are overvalued by that percentage according to ValuEngine.

VE Rating: A "1-engine" rating is a strong sell, a "2-engine" rating is a sell, a "3-engine" rating is a hold, a "4-engine" rating is a buy and a "5-engine" rating is a strong buy.

Last 12-Month Return (%): Stocks with a red number declined by that percentage over the last 12 months. Stocks with a black number increased by that percentage.

Forecast 1-Year Return: Stocks with a red number are projected to decline by that percentage over the next 12 months. Stocks with a black number in the table are projected to move higher by that percentage over the next 12 months.

Value Level: The price at which to enter a GTC limit order to buy on weakness. The letters mean; W-weekly, M-monthly, Q-quarterly, S-semiannual and A-annual.

Pivot: A level between a value level and risky level that should be a magnet during the time frame noted.

Risky Level: is the price at which to enter a GTC limit order to sell on strength.

Barrick Gold ( ABX) ($34.23 vs. $40.16 on Sept. 10): Is trading well below its 200-day SMA at $38.53 after a 12 month decline of 21.9%. The stock has a single digit 12 month trailing P/E of 8.9. My monthly value level is $32.03 with my semiannual risky level at $37.60, and 200-week SMA at $42.35.

Agnico Eagle Mines ( AEM) ($53.45): Has outperformed the other gold miners profiled today with a 12 month gain of 41.1%. The stock has an elevated 12 month trailing P/E of 28.4 and is trading well above its 200-day SMA at $43.85. This is not the stock to prospect as it has failed to take out its 200-week SMA at $56.34 for the past eight weeks. My quarterly value level is $50.06 with my semiannual risky level at $58.61.

AngloGold ( AU) ($29.90 vs. $34.18 on Sept. 10): Is the worst performer over the last 12 months trading lower by 28.8%. The stock is well below its 200-day SMA at $34.26, has a single-digit 12 month trailing P/E at 9.4 and set a multi-year low at $29.58 on Nov. 28. My weekly value level is $29.07 with a monthly pivot at $30.12 and quarterly risky level at $34.75.

Gold Fields ( GFI) ($11.70 vs. $13.31 on Sept. 10): Is trading well below its 200-day SMA at $12.87 after a 12 month decline of 20.7%. The stock has a single-digit 12 month trailing P/E at 8.9 and set a multi-year low at $11.09 on Dec. 7. My monthly value level is $11.45 with a weekly pivot at $11.87 and semiannual risky level at $12.89.

Goldcorp ( GG) ($36.82): Is trading well below its 200-day SMA at $40.37 after a 12 month decline of 18.1%. The stock has a slightly elevated 12 month trailing P/E at 18.7. My semiannual value level is $34.53 with a weekly pivot at $37.19 and quarterly risky level at $47.21.

Kinross Gold ( KGC) ($9.77 vs. $9.66 on Sept. 10): Has a price pattern most similar to Comex gold by trading between its 200-day SMA at $9.18 and its 50-day SMA at $9.99 after a 12 month decline of 16.0%. The stock has a reasonable 12 month trailing P/E at 12.9. My monthly value level is $8.57 with a weekly pivot at $9.52 and semiannual risky level at $14.93.

Newmont Mining ( NEM) ($44.29 vs. $51.69 on Sept. 10): Has a price pattern showing the stock trading near a multi-year low and a potential triple bottom with lows of $43.23 on May 16, $42.95 on July 27 and $43.51 on Dec. 13. The stock is well below its 200-day SMA at $49.64 after a 12 month decline of 26.1%. The stock has a reasonable 12 month trailing P/E at 12.0. My weekly value level is $39.33 with a monthly risky level at $47.23.

At the time of publication the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Richard Suttmeier has an engineering degree from Georgia Tech and a master of science from Brooklyn Poly. He began his career in the financial services industry in 1972 trading U.S. Treasury securities in the primary dealer community. In 1981 he formed the Government Bond Department at LF Rothschild and helped establish that firm as a primary dealer in 1986. Richard began writing market research in 1984 and held positions as market strategist at firms such as Smith Barney, William R Hough, Joseph Stevens, and Rightside Advisors. He joined www.ValuEngine.com in 2008 producing newsletters covering the U.S. capital markets, and a universe of more than 7,000 stocks. Richard employs a "buy and trade" investment strategy and can be reached at RSuttmeier@Gmail.com.

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