By Ben Kramer-Miller
Wall Street Cheat Sheet
Gold mining shares have performed terribly over the past couple of years. Since peaking in 2011, the Market Vectors Gold Miner ETF (GDX) has lost more than half of its value. Nevertheless, I think this is an excellent reason to consider investing in gold miners along with the fact that the fundamentals are very strong in the gold market. However, I don’t think it is a good idea to simply go out and buy the Market Vectors Gold Miner ETF. Investors need to realize that gold mining is an extremely difficult business. As a result, there is a bifurcation in the industry: some companies perform well while others do not. Investors should therefore single out those companies that have performed well and purchase them as opposed to a basket, which contains the bad with the good.
In what follows, I highlight one excellent gold miner — Randgold Resources (NASDAQ:GOLD) and juxtapose it with a poorly run company — Barrick Gold (NYSE:ABX). It will become clear why the former has succeeded while the latter has not, and it should become clear that investors would be wise to take the time to research individual companies in order to select the winners.