Guru David Dreman - Silver, Gold, and Patience
, the billionaire founder of Dreman Value Management once said,
"Investors repeatedly jump ship on a good strategy just because
it hasn't worked so well lately, and, almost invariably, abandon
it at precisely the wrong time." He also said, "A course of
investment, once charted, should be given time to work out.
Patience is a crucial but rare investment commodity."
With so much talk of silver and gold and the patience required in those markets, here's a look at two precious metals mining stocks in the portfolio of contrarian Guru David Dreman .
On the silver side, investor Dreman increased his Pan American Silver Corporation ( PAAS ) position by 168.76% quarter ending Dec 31, 2012. His current shares are 1,404840.
Pan American Silver Corporation ( PAAS ) is engaged in silver mining and related activities in Peru, Mexico, Argentina, and Bolivia, and is exploring for new silver deposits throughout South America and Mexico. Its main product is silver, although gold, zinc; lead and copper are secondary. At present, Pan American has or is developing mining projects in Mexico, Peru, Argentina and Bolivia, and has control over non-producing silver assets in those jurisdictions and in the United States.
Pan American Silver Corporation ( PAAS) has a market cap of $2.5 billion. The P/E ratio is 268.6, and the P/S ratio is 2.4.
Dreman's holding history:
GuruFocus did a thorough financial and performance check up on the mining company and found warning signs: The company has a Beneish M-Score 0.92, higher than -2.2, which implies that it might have manipulated its financial results. Also, Pan American Silver Corporation's gross margin has been in long term decline. The average rate of decline per year is -3.4%. Cash flow from operations also shows a severe divergence from the reported net income. This may suggest that the company is not receiving payment from its customers or it has other activities affecting its cash flow. Other warnings are that the company's assets are growing faster than its revenue, and its inventory is building up. Further, Pan American Silver Corporation's per share revenue has been in decline over the past 12 months.
Two good signs are that the Pan American Silver Corporation operating margin is expanding, usually a good sign. Also, the PAAS stock dividend yield (1.6%) is close to a five-year high of 1.09%.
On the gold side, David Dreman also keeps buying Kinross Gold Corporation ( KGC) .
He owns 773,511 shares of KGC, valued as $8 million, as of Dec. 31, 2012. His KGC shares account for 0.22% of his equity portfolio. Dreman added his positions in the Sept. 30, 2012 quarter by 4.23%, again in the Dec. 31, 2012 quarter by 11.49%.
Kinross Gold mines and processes gold, and silver ore as a by-product, and also explores and acquires gold-bearing properties in the United States, Canada, Mexico, Ecuador, Brazil, Chile, Mauritania, Ghana and Russia. The company says its strategy is to increase shareholder value through increases in precious metal reserves, net asset value, production and long-term cash flow and earnings per share.
Kinross Gold Corporation ( KGC) has a market cap of $9.05 billion with a P/S of 2.2. The dividend yield of Kinross Gold Corporation stocks is 2%.
See the GuruFocus financial checkup on Kinross Gold Corporation.
His holding history:
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Dreman Value Management has a portfolio of 284 stocks with a total value of $3.48 billion, and a quarter over quarter turnover of 5%.
David Dreman's top buys, sells, and holdings:
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