Which Gold Stocks Are Just Too Cheap to Ignore?

NEW YORK (TheStreet) -- Gold mining companies Barrick Gold (ABX) , Yamana Gold (AUY) , Goldcorp (GG) and Newmont Mining (NEM) are trading at lows not seen both before and after the gold bubble inflated -- then burst. This makes these shares extremely cheap as compared to Comex gold futures and an opportune time to add gold miners to a diversified portfolio of stocks.

The bubble for Comex gold began to inflate in October 2008, from $730.30 per Troy ounce, staying above its 200-week simple moving average then at $651.30. The bubble peak was $1923.70, set in early September 2011. Then Comex gold declined from that high to the recent multiyear low at $1160.50, set on Oct. 31 -- a drop of 40%.

Let's take a look at the profiles for gold mining stocks after their decline of 70% and more.

Barrick Gold ($11.92) set its all-time intraday high at $55.95 in September 2011, and is down 80% to an all-time intraday low at $11.33, set on Oct. 31. This is below the previous low at $13.13 set back in November 2000.

Barrick reported quarterly results on Oct. 29. Investors ignored the earnings-per-share beat.

Investors should employ a "good 'til canceled" limit order to buy weakness to the all-time low at $11.33.

Yamana Gold ($4.01) set its all-time intraday high at $20.59 in November 2012, and is down 82% to a multiyear intraday low at $3.80, set on Oct. 31. This is above its prior multiyear low at $3.31 set in October 2008.

Yamana Barrick reported quarterly results on Oct. 29, with a miss of 6 cents a share and a loss of a penny a share.

Investors can consider buying this stock as buying an "option on survival," as the stock can be bought below $5 a share. Investors can then employ a "good 'til canceled" limit order to the stock's October 2008 low as $3.31.

Goldcorp ($18.85) set its all-time intraday high at $56.31 in September 2011, and is down 70% to a multiyear intraday low at $17.01, set on Oct. 31. This is above its October 2008 low at $13.84.

Goldcorp reported quarterly results on Oct. 30. The gold miner missed analysts' earnings-per-share estimates by 9 cents, earning 9 cents.

Investors should employ a "good 'til canceled" limit order to buy weakness to the recent low at $17.01, and then add to the position at the October 2008 low at $13.84.

Newmont Mining ($19.12) set its all-time intraday high at $72.42 in September 2011, and is down 80% to a multiyear intraday low at $18.51, set on Oct. 31. The all-time low is $13.13 set in October 2000.

Newmont reported quarterly results on Oct. 30, and investors ignored a solid earnings-per-share beat.

Investors should employ a "good 'til canceled" limit order to buy weakness to the recent low at $17.01, then add to the position at the all-time low at $13.13.

The price of gold may go even lower, but weakness in gold shares at nearly twice the pace is reason enough to add gold exposure to a diversified investment portfolio.

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

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


TheStreet Ratings team rates YAMANA GOLD INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate YAMANA GOLD INC (AUY) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself, disappointing return on equity and weak operating cash flow."

You can view the full analysis from the report here: AUY Ratings Report

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