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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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....
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Gold investing can expose you to unique risks
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Use caution when investing in Canadian gold stocks
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How to profit from a potential gold shortage
With commodity prices on an upswing, many investors have turned their attention to companies that produce and explore for minerals. These include Canadian gold stocks, especially in light of gold’s recent rise to over $1,030 U.S. an ounce. (In the current Stock Pickers Digest, we take a close look at a junior gold explorer we’ve recommended in the past. It has a presence in one of the world’s most productive gold-producing regions. What’s more, it’s up 72.2% for us since early this year. Read on for further details.)
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