If we have learned anything in the gold and silver markets over the past three weeks, it is that volatility is the new norm. Nothing has really changed except that the world’s economic situation has gotten worse. The Euro zone is no closer to a real solution to the Greek problem, so they kicked the can down the road. They must have taken a look at the U.S. and determined that you can spend your way out of debt. Despite what you hear from the press, economics is not bound by political ideology nor by political expediency.
The general equities markets will come out of this manipulated rise and revert to the norm that the conditions require. So, without further pause, let’s look at one silver royalty company and two gold mining stocks that are really undervalued and set to soar during the next leg up in gold.
Silvercorp Metals (SVM)
This stock has been beaten up by rumors and a vicious short selling campaign that dragged the stock down. The company has fought back and proven that the allegations were false. With gold prices locked in a trading range, SVM has not gained in price and is extremely undervalued at its current price of $6.93.
There is very little downside risk here!
SVM’s market cap is $1.2 billion. That is not the largest market cap in the sector, but combine that with the fact that it has no debt and is experiencing very large profit margins and you are looking at a very rare opportunity in a precious metal stock.
With a gross profit margin of over 65% and a return on equity of a little over 28%, Silvercorp Metals is poised to move dramatically when gold resumes its march towards $2,000 per ounce. This stock should be in everyone’s portfolio, as a key holding because it is extremely undervalued, and it is a royalty stock!
Goldcorp Inc. (GG)
Goldcorp Inc, (GG) has a share price of 44.09 and a market cap of near $37 billion, which makes it second only to Barrick (ABX). Just as Barrick, Goldcorp is way below its 12 month high, by more than 19% at this point. The correction that we have just witnessed is based on market manipulation which will not withstand the test of time. Gold is coiling for a move that will shock most with its violence.
Can you see the trading range here? This is not rocket science!
Goldcorp has reported record revenues of $1.5 billion for the fourth quarter of 2011. The company expects to produce 2.6 million ounces of gold in 2012 at a record low cash cost for the senior gold miners. Goldcorp’s Red Lake mine is a huge money generator with well over 20 million ounces of gold that have already been taken out of the ground.
Here we have a company with record revenues that is trading around $11 below its high. You tell me what is wrong with this picture. Any move above the trading range that pushes gold towards $2,000 and beyond will launch Goldcorp to new record highs. GG is definitely a must have for your portfolio.
Barrick Gold Corp (ABX)
This last pick is a hedge against all evil, if that term is even allowed to be used these days. Barrick, ABX should out perform all the majors when gold goes ballistic because it is the penultimate major with the most ounces above and below the ground. I really feel that it should be a major part of everyone’s portfolio. If I am wrong, your profits will be in the 20 t0 30% range, if on the other hand, I am right, your profits will approach 300% to 500%!
Is The Trading Range Evident? It Should Be!
Barrick Gold (ABX) is the world’s largest gold producer with a market cap of roughly $47 plus billion. ABX stock is currently trading at $43.95, which is roughly 20% below its 2011 high. The company is going to produce around 7.5 million ounces of gold at a cost of approximately $550 per ounce, which makes Barrick one of the lowest cost gold producers of all the major companies.
Is there any reason not to hold this company in your portfolio? I am sure that you can think of many, but in reality, why not hold the largest of the majors as a security position? The numbers all point to a major gain as gold moves to and through $2,000 per ounce. If you don’t think that is going to happen, why have you read this far?
Blah de Blah, de Blah!
If you are reading my post, then you are interested in my opinion and already know that I am not a financial adviser, and anything that I say is not designed to get you to buy or sell anything! If you get lucky, then hey, life is good!
Till next time, good luck, and good trading!
More Gold Market Analysis:
- Goldcorp Update: A Shining Star Among The Downtrodden Gold Miners
- Penasquito, Goldcorp’s Future
- Goldcorp Stumbles
- Picking Undervalued Gold Stocks
- How Two Major Gold Miners Took Different Paths At The Fork In The Road!