Augusta Gold (G.TO)

This is among the largest producers of gold in Canada. He is cautious on gold producers, as the commodity has been in a multi-year slump. The problem with miners in general is that they seem to find myriad ways to go off the rails. He can see a place for physical gold as a strategic hedge against doomsday or general economic malaise, but thinks there are better ways to own gold than this company.

He is not in gold. This stock has deliberately been going down since February. The next support is at $14.67, and it just closed at $16.41. He is not a big fan until he sees a positive transit and puts any money into it. His model price is $21.34, 30% higher than where it was. You are buying this cheap, and you are willing to buy it cheaper as the price goes down. He likes that strategy.

This would be a good choice. A 2^nd one would be Agnico Eagle (AEM-T).

(A Top Pick May 10/16. Down 6%.) Sell: Goldcorp Oct 24 calls at $2.80. Sell: Goldcorp Oct 24 puts at $2.80. A Covered Straddle. What made this interesting was that Goldcorp was around $24 and he had an October straddle in place. In October, this stock was trading at $21.68, so the Call option expired in May and he got to keep that money. The Put option he sold would have been exercised, or alternatively he would just buy it back and then sell the stock. That would have been the end of the trade. He collected $4.40 for the 2 premiums. With the stock decline and the Put that had to be bought back, there was a 5% loss on the trade.

This has been in the penalty box because of troubles in Red Lake, but people didn’t understand that it was just a temporary issue with some activities that fell out of sync. Thinks they will be back on stream for the remainder of the year. Gold companies these days are really driven by efficiencies. This company has excellent assets in Mexico and Argentina. They also have some joint ventures with some major companies. Dividend yield of 0.57%. (Analysts’ price target is $23.56.)

Has owned this in the past. About a year ago, they had great promise in terms of growth outlook, but stumbled. Now they have a new CEO and there certainly has been a change, from the mine level up to the top, in terms of management ranks. He sees a consolidating trend with about an $800 million commitment. The visibility of payback is several years, if at all.

She never knows what to do with gold as it seems such a sentiment trade. In 2008 gold was the only thing that worked. As market sentiment comes off gold does well, but now you are trading the timing of when that sentiment comes off. She thinks that is very difficult. G-T is focused on cost with the lower commodity price.

He is a value investor, not a gold investor. Gold is an emotional commodity. When people are expecting things to be not good, they go into gold. When the US$ is weak, commodities do better, especially gold, but the US$ has been on a tear, which can’t be good for gold.

This is trading worse than 88% of the stocks on the TSX, over the course of this year. It is not showing any signs of reversing. He would not be buying as a long-term Hold or long-term Buy. He is Short gold stocks right now.

This was always considered a growth name, the well capitalized financial name. They brought in a new CEO who cleaned house. Nobody believes they are going to actually meet the targets they have set, and he believes that they will. Had a good 3^rd quarter and the 4^th quarter is shaping up well. Dividend yield of 0.62%. (Analysts’ price target is $26.15.)

He likes this company. Gold is at a cyclical low. ROC is very low. They have done well in the past and he thinks they can rebound. They haven’t been putting new capital to work. He can see this at $25 easily, or more.

Has fallen off dramatically, and thinks it is time to buy it. It is probably only up 15% for the year, where if you look at the other big players, they are closer to 80%-100% increase. A couple of their mines had less than spectacular performance during the year. It seemed like they were working throughout the year to correct the problems. Last quarter’s production looked much better, and it is sort of in a “show me” state as to what can you do over the next few quarters to build that trust. Good high grade assets.

It does not make it on some metrics. Possibly they could get bought out, though.

High quality company. It has been oversold. A new CEO came in and threw out anything that might be a problem. He thinks this is way oversold.

(A Top Pick Jan 16/14. Up 37.55%.) He no longer owns this, and is waiting to see the current transition go through. It is more of a focus on NAV. They have had to slow things down. Usually on these turnaround situations, he likes to give them some time to sort things out. Probably something to look at in 2017.