I'm going to make the argument for
in two parts. First I'll make a pretty bullish case for gold, then
I'll make the case for the best gold stock to buy right now. With
this powerful one-two punch, I think that this Bull of the Day will
lead to big time profits.
I could probably give you several arguments for why gold is on the
move right now. Negative interest rates in the Euro Area. Continued
bond purchases by the Fed. Japan's application of Abenomics. The
Chinese shadow banking system. Insert theory here.
Today, gold futures traded near $1320 for most of the session. This
is a far cry from where we were trading a month ago right about the
$1250s. Looking back to the all-time highs skews your perspective
of the move we are in now. I'm not here to make an argument for
$1800 an ounce. Being a little more conservative here can still
allow us to make some big bucks betting on a much smaller move.
The last time gold approached $1400 was March 2014. That marked the
end of a run for gold that began the last day of 2013 with prices
below $1200. The run took three short months and gold moved over
$200 from the start. Using this crude and somewhat elementary
observation and applying it to our current situation that puts gold
close to $1500 an ounce by September.
Now let's look at Goldcorp. In 2013 production was 2.7 million
ounces. This year GG is looking for 2.95 to 3.1 million ounces and
next year 3.6 to 3.8 million. This outlook has Goldcorp becoming
free cash flow positive in Q4 2014 assuming
at $1200 an ounce.
We have it as a Zacks Rank #1 (Strong Buy) due to recent earnings
estimate revisions over the last 60 days. Four analysts have
increased their estimates for the current year and next year. The
revisions have pushed consensus up from 70 cents per share to 80
for this year.
Last quarter's earnings surprise came in at 26 cents versus
expectations for 14 cents. This firm beat along with the agreement
and magnitude of the revisions by analysts are what give this stock
such a strong Zacks Rank.
The Zacks Rank isn't the only reason why I like the stock at these
levels. The technical chart is very bullish for GG as well. Over
the last two weeks GG has been consolidating just below $28. During
the consolidation the stock has remained firmly above its 40 day
exponential moving average which currently sits down at $25.86.
The stochastics are showing an overbought position currently but
that shouldn't stop anyone from buying the stock. This indicator
can stay overbought for extended periods of time during rallies.
The last big run for the stock took it from support ant $23 up to
the level it trades at today. The next push upwards will likely
approach the 52 week high just above $29. If the stock can push
through that level than the August 2013 high near $32 comes into
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