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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Gold now trades at $1,240.70 U.S. an ounce. That’s up 32.7% from $935 a year ago, but down from its all-time high of $1,256.50 U.S., where it closed on June 18, 2010. Investor fears about European sovereign debt — Greek and Spanish debt in particular — have been a major factor in gold’s recent rise. These fears are prompting more investors to buy gold and gold investments, because they believe gold will provide them with additional security. (In a just-published issue of Stock Pickers Digest, our newsletter for aggressive investing, we update our buy/sell/hold advice on a gold mining stock that has risen over 132% for us in the past year. That’s more than four times the rise in the price of gold. Read on to learn more.)...
Gold is currently trading at around $1,183 U.S. an ounce. That’s up 4% from April 19, 2010, when it was trading at around $1,138 U.S. an ounce, but still short of gold’s all-time high of $1,214.80 U.S., which it reached in late 2009. Gold’s recent rise has partly been driven by investor fears about European sovereign debt — Greek debt in particular. These fears are prompting more investors to buy gold and gold investments, because they believe gold will provide them with additional security.
Further European debt problems would push gold up even further
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Higher commodity prices and an improving global economy have pushed up the prices of many junior mining stocks recently. And we think the best juniors have the potential to go even higher. (In a recent Stock Pickers Digest hotline, we updated our buy/sell/hold advice on a junior mine that’s risen more than 50% in the past six months, Baffinland Iron Mines. It’s got an iron-ore project with strong potential on remote Baffin Island. Read on for further details.) Despite the strong potential of top junior mining stocks, it’s important to remember that these stocks are among the riskiest you can buy. That’s why we think it’s a mistake to load your portfolio up with these highly volatile companies. Instead, make sure your investments are diversified by spreading your holdings out across the five main economic sectors (Manufacturing & Industry, Resources & Commodities, the Consumer sector, Finance and Utilities)....
Right now, gold is trading at roughly $1,125 U.S. an ounce. That’s down from its all-time high of $1,214.80 U.S., which it reached in late 2009. But it’s still far above the fall 2008 price of roughly $700 U.S. We think gold could well move higher in the long term, although it will continue to be volatile. Rising gold would be mainly driven by investor fears that low interest rates and government stimulus spending will spur inflation. That could prompt many investors to seek security by investing in gold. The best way to profit from rising gold is by sticking with gold stocks, particularly shares of gold-mining companies with rising production, positive cash flow and strong prospects. Even so, because of their volatile nature, we continue to recommend that gold stocks only make up a limited portion of your portfolio’s resources segment....
8 tips for spotting the best Canadian gold stocks
Last week, Newmont Mining (symbol NEM on New York), one of the world’s biggest gold producers, said that it believes that gold could rise as high as $1,350 U.S. an ounce this year. Gold has fallen from the all-time high of $1,214.80 U.S. that it reached in late 2009, and now trades around $1,092 U.S. We cover Newmont in our Wall Street Stock Forecaster and Canadian Wealth Advisor newsletters. See below for more on this gold mining stock’s wide-ranging operations.
Gold investing can expose you to unique risks
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In mining exploration, an “anomaly” is a geological formation that might attract a prospector’s interest. However, one rule of thumb is that you have to look at 1,000 anomalies to find one prospect. And fewer than one prospect in a thousand turns into a mine. In other words, finding a mine is a million-to-one shot. That’s one reason why junior mining stocks are highly speculative. Another reason is that it’s much easier to launch and promote one of these stocks than it is to build a profitable business. So junior mines attract more than their share of unscrupulous operators and stock promoters. But there are little-known ways to cut your risk. Here are 9 “secrets” we use to pick junior mines to analyze in our Stock Pickers Digest newsletter. We’re sure they can help you find the gems among the rocks in this fast-changing industry:...
Today, many investors worry about a “W” shaped recession. That is, they worry that we are on the brink of a second recession that follows shortly after the first. Others are concerned that inflation will rise as the economy recovers. This explains the recent run-up in gold prices, for example, and the popularity of certain resource stocks (including crude oil stocks), which many investors see as a hedge against inflation. (See below for a full analysis of a diversified producer that’s been moving up recently.)
Stick with well-established companies no matter what the economy does
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We’ve analyzed junior gold and mineral stocks for many years in Stock Pickers Digest, our newsletter for more aggressive investors. Many of our picks have shot up during the recent rise in gold from around $700 U.S. an ounce in the fall of 2008 to a recent peak of above $1,200 U.S. Gold has since dropped by about $100. But we think that’s a temporary fluctuation.
Use caution when investing in Canadian gold stocks
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Iraq’s instability has weighed heavily on its oil exports. That’s caused many oil companies, including some Canadian oil stocks, to hold off on investing in the country. However, the situation has presented some real bargains for foreign firms willing to take larger interests in Iraq. For example, China’s Sinopec recently paid $8 billion U.S. for Addax Petroleum, which was developing the huge Taq Taq oil field in Iraq’s northern Kurdistan region. (See below for an update on a Canadian oil stock with a new presence in Kurdistan. We’ve updated our view on this company in the latest Stock Pickers Digest.)...