By Ben Kramer-Miller
Gold Stock Bull
There is no substitute for gold. But gold miners, if you choose them correctly, can not only leverage your exposure as they grow their businesses, but they can generate cash-flow and dividends that are correlated to the gold price.
This sounds great! Unfortunately it isn’t so easy to pick gold miners that provide these advantages.
If you take a look at some of the largest gold mining companies in the world, you’ll find that they have done a lousy job of generating leverage to the gold price. In fact some have even lost value! Just consider the performances of the following gold miners over the past 10 years and keep in mind that the gold price has more than tripled during this time frame.
- Barrick Gold (ABX): Down 9%
- Newmont Mining (NEM): Down 40%
- Harmony Gold (HMY): Down 68%
Even if you look at some of the winners, and some of the stocks that gold mining investors tend to like, you’ll find that their performances over this time frame is lackluster.
- Goldcorp (GG): Up 132%
- Yamana Gold (AUY): Up 233%
- Agnico Eagle (AEM): Up 192%
Of these six companies, only Yamana Gold has kept pace with the gold price. So, picking winning gold stocks is more difficult than it would appear on the surface. Indeed, it requires hours of research, due diligence and a little bit of luck for good measure.