Gold and silver are often chosen as "safe havens" when
equities are losing ground and earnings are on the
decline. The former is considered by many to be a
form of global currency while the latter tends to track its price
at a fraction of the cost.
While long term trends for precious metals like Gold have been
bullish, buying them at the wrong time can sometimes mean months
or years of your investment being underwater until prices
Mining stocks can sometimes amplify the volatile movements of
precious metals they gather from the Earth, especially when there
are dramatic movements in the price of the commodity itself
combined with no reduction or even increases in the costs
associated with mining the commodities themselves.
This can turn a "safe haven" into a big headache…
Even though shares are only trading at 14 times forward
Yamana Gold AUY
may be one of the precious metal miners to avoid; at least for
Gold & Commodities Struggling
2013 has been the year of the quiet commodity correction with
everything from corn, wheat and soybeans to silver and gold,
commodities have been on the decline for many reasons. The
main impetus for gold moving lower has been a normal correction
in an asset that has seen tremendous appreciation sparked by a
global slowdown, increased taxation of the yellow from countries
like India (the world's top consumer of gold) and other
While central banks print money in unison, we have to remember
that [gold] markets have already priced much of this in and
since much of that cash has not found its way into consumers'
hand directly, global inflation has been kept as bay (for
While I believe that the long term outlook for gold is good, I
still see further deterioration in prices as economies and
consumption continue to struggle. That said, if the U.S.
recovers enough for the Fed to remove/reduce stimulus and begin
to raise rates, the price of gold could also be negatively
All of these factors may make it tough for Yamana Gold and its
peers to please investors and keep their stock prices up as
elevated gold prices are their key to increased margins and
A good friend of mine always says "it always comes back to
commodities," but I think this is not the commodity I would be
coming back to just yet, especially not with a mining stock.
Yamana has been seeing more than its stock price fall over the
last 6 months; earnings have also suffered and AUY has seen back
to back misses in its earnings reports. Last quarter, AUY
delivered a profit of just 16 cents, missing the Zacks Consensus
estimate by 5 cents or almost 24%. It has missed earnings 3
of the last 4 reports and just barely met Q3 2012 estimates.
The majority of analysts have been lowering forecasts for the
mining company with 2013 estimates being slashed by 34% and 2014
estimates by 25% in the last 90days alone.
One might argue that shares are down 50% from the highs in
2012 and could be a buy here. While this is true, you could
be catching a falling knife if gold prices continue to
falter. 2014 estimates are still 31% higher than current
year estimates, which could be a hard target to hit if gold
prices don't come roaring back.
Instead of looking at another miner likeAgnico Eagle Mines
, who has a Zacks Rank of 3 (hold), maybe you could focus your
energy (literally) on a space that has some legs under it.
is a natural gas play and is investing quite a bit of time and
money into natural gas delivery infrastructure here in the
States. Companies like Ryder, UPS, FedEx, AT&T and
others are migrating their fleets to natural gas as an
alternative to high petrol prices. This should be a huge
motivator for nat gas prices.
The price of natural gas has already been on the rise, but
remains relatively low. You could also explore theU.S.
Natural Gas Fund
to invest in natural gas in the form of an ETF.
Regardless of which commodity you choose to put your money
in, be sure that the macro fundamentals play into your
thesis in the near term and the long term.
Jared A Levy is one of the most highly sought after traders in
the world and a former member of three major stock exchanges.
That is why you will frequently see him appear on Fox Business,
CNBC and Bloomberg providing his timely insights to other
investors. He has written and published two tomes,
"Your Options Handbook"
"The Bloomberg Visual Guide to Options"
. You can discover more of his insights and recommendations
through his two portfolio recommendation services:
- Learn to buy stocks likely to have robust earnings BEFORE they
- Technical Analysis + Zacks Rank. Best of both worlds approach
to find timely trades.
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AGNICO EAGLE (AEM): Free Stock Analysis
YAMANA GOLD INC (AUY): Free Stock Analysis
CHESAPEAKE ENGY (CHK): Free Stock Analysis
US-NATRL GAS FD (UNG): ETF Research Reports
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