Mining Stocks
While sometimes risky, mining stocks can also be strong performers when commodity prices move up. However, due to the volatility of these stocks, Pat McKeough recommends that they only form a modest part of a well-balanced portfolio.
Canadian penny mining stocks are some of the riskiest stocks you can buy. These companies are trying to find mineral deposits that mine at a profit and such a find are exceedingly rare. Because of this, it’s even more important to look for investment quality in penny mines.
For example, we automatically rule out investing in penny mines that promote themselves too aggressively or do so misleadingly. The mine-finding effort is more likely to succeed if the managers focus on finding a mine rather than hyping their stock.
Junior mining stocks are usually smaller companies that typically take on riskier mining projects. However, if a junior mining stock is successful at finding and mining, it can mean huge returns for investors.
No matter what type of mining stocks, or other stocks you invest in, TSI Network recommends following our three-part Successful Investor strategy:
- Invest mainly in well-established, mostly dividend-paying companies;
- Spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; Consumer; Finance; and Utilities);
- Downplay or avoid stocks in the broker/media limelight.
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Members of our Inner Circle service often ask for our advice on stocks they are thinking of buying that we don’t cover in our newsletters. These companies range from large multinational companies to the most speculative penny mines and gold investments. For example, an Inner Circle member recently asked for our advice on Northern Abitibi Mining. The company has reported some promising drill results from its gold project in Newfoundland. To give you a sense of how my Inner Circle service works, I’d like to share this question, and our answer, with you. I hope you enjoy and profit from it....
All gold investments, even large, multinational gold-mining stocks like Newmont Mining (symbol NEM on New York), are somewhat speculative, due to their sensitivity to gold prices and the difficulty of finding gold mines. That’s why we recommend that you limit them to a small part of your overall portfolio — this is especially true of more volatile junior gold stocks. (You can get our latest views on the outlook for gold, as well as our latest advice on lower-risk gold investing strategies, in our free special report, “Gold Investing: 7 Profitable Strategies for Investing in Canadian Gold Stocks.” Click here to download your copy now.)...
Higher commodity prices and an improving global economy have pushed up the prices of many junior mining stocks recently. That has prompted more members of our Inner Circle service to ask us for our recommendations on junior mines they are considering investing in. (See below for further details on a junior firm that explores for rare earth elements, which have attracted a lot of investor attention lately. We recently analyzed this company for a member of our Inner Circle service.)
Junior mining stocks have strong potential — but use caution
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Many investors fear that today’s artificially low interest rates and high government budget deficits will spur a huge rise in inflation. These fears are prompting many investors to devote more of their money to investing in gold and gold investments, because they believe gold will provide them with additional security. That helps explain why the price of gold has risen more than 50% since the fall of 2008. We agree that a huge burst of inflation is a possibility in the next few years. But it’s a mistake to assume that vastly higher inflation is a certainty, as many who are investing in gold do today....
Uranium prices have jumped from around $40 U.S. a pound in March 2010 to a recent high of around $58.50. That’s still well below uranium’s peak of $140 a pound in 2007. But conditions look favourable for higher long-term uranium demand. (In a Stock Pickers Digest hotline, we updated our buy/sell/hold advice on a Canadian uranium explorer whose shares have jumped since early October — and it could go higher. See below for further details on this uranium stock’s prospects.) China and many other emerging countries, such as India and Russia, are increasing their nuclear-power use as they switch from power plants that run on coal and oil. This expansion has sharply pushed up China’s uranium imports to as much as three times last year’s levels. In addition, China recently increased its nuclear-power targets by 60% over the next decade....
Gold hit yet another all-time high of $1,383.10 U.S. an ounce in yesterday’s trading. It closed the day at $1,381.00, up $45.50. A major factor in this latest gold-price rise was the Federal Reserve’s Wednesday announcement that it plans to inject $600 billion into the U.S. economy. That could spur inflation or further weaken the U.S. dollar. Continued low interest rates only add to inflation concerns. These fears are prompting more investors to buy gold and gold investments, because they believe gold will provide them with additional security....
Gold now trades at around $1,226.00 U.S. an ounce. That’s up 28.2% from $956 a year ago, but down from its all-time high of $1,261.00 U.S., where it closed on June 28, 2010. Gold’s recent gains have partly resulted from investor fears about the sovereign debts of European countries, especially Greece and Spain. That’s creating uncertainty about the strength of the euro. These fears are prompting more investors to buy gold and gold investments, because they believe investing in gold will provide them with additional security. We think gold could well move higher over the longer term, due to investor concern that low interest rates and large amounts of government stimulus spending will spur inflation. This could prompt even more investors to flock into gold —and drive prices up even higher....
The price of uranium rose steadily from $7.10 U.S. a pound in December 2000 to as high as $138 U.S. a pound in June 2007. Prices have moved down from that speculative high to today’s price of about $40.00 a pound. But conditions look favourable for higher long-term uranium demand.
Risks and rewards of Canadian uranium stocks
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Discover how you can make higher profits in gold investing — and minimize your risks Click here to immediately download our new free report, Gold Investing: 7 Profitable Strategies for Investing in Canadian Gold Stocks. When the economy is weak, gold’s popularity rises. As an informed Canadian investor, you’ve likely noticed that this has been the case in the wake of the 2008/09 stock-market crash and recession....
We’ve had lots of success with the junior mining stocks we recommend in Stock Pickers Digest, our newsletter for aggressive investing. For example, in a recent issue of Stock Pickers Digest, we updated our buy/sell/hold advice on a junior mine that’s risen more than 300% for us in the past year. See below for further details on this up-and-coming diamond producer.