A Day in the Life of a Gold Stock Investor: Goldcorp Inc. (GG), Barrick Gold Corporation (ABX), Newmont Mining Corp (NEM)

Page 1 of 2

At Insider Monkey, we have teamed up with MarketWatch to create the Billionaire Hedge Fund Index to measure how well the smart money can pick stocks. The Index tracks more than 40 billionaire fund managers, and after a full year of its existence, the results are truly exemplary. In 2012, this index returned 24.3% vs. 16.0% for the S&P 500 ETF. That’s an outperformance of 8.3 percentage points (learn more about how to use this market-dominating strategy).

For today’s average gold stockholder, though, times have been much tougher. Some days must feel like an endless series of lost minor battles. Wednesday, January 30, 2013 was just such one.

Goldcorp Inc. (USA) (NYSE:GG)

A day in the life.

The 30th of last month turned into a day of frustration for shareholders of gold equities.  However, conditions were in place for a nice performance.  Gold bullion, stronger overnight in Europe and Asia, opened in New York firmly up (~+15/oz).  Silver followed.  Pre-market, the quarterly US GDP report had surprised to the downside.  The dollar index was weak.

By the end of the trading day, these backdrop conditions had held, and in some cases strengthened, as an afternoon Fed policy announcement reaffirmed an uber-easy dollar policy.   As a result, the dollar weakened further against the Euro, Swiss franc, Pound sterling, and Canadian dollar, losing anywhere from .3% to 1% depending on the currency cross and closing near day lows against all of them.  The commodity-based CRB Index also closed at an intraday high, up 1%.

Ostensibly, everything pointed to a good day for gold equities.

Gold equities only briefly followed suit, though. Initially, gold issues opened up nicely. They hit day highs at 10:30 am EST: Goldcorp Inc. (NYSE:GG) +1.8%, Barrick Gold Corporation (NYSE:ABX) +1.4%, Newmont Mining Corp (NYSE:NEM) and Kinross Gold Corporation (NYSE:KGC) both up 2.1%, and Royal Gold, Inc (NASDAQ:RGLD) + 2.4%. However after these highs, in frustrating, confounding, and hair pulling fashion, gold equities began fading and proceeded to sell off the rest of the day.

Had gold bullion sold off?  No, gold held the majority of its morning gains throughout the day. Had the stock market sold off? No, the S&P 500 did not seriously sell until after 2:00 pm.  The S&P sell-off only exacerbated the steady down move already in the sector. At the close of trading, gold shares had not simply given up the morning’s gains, but unbelievably finished solidly down: ABX -1.3%, GG -.4%, NEM -.6, RGLD -1.6%, and KGC -1.2%.

Even more depressingly, a popular ratio measure of relative value, the share price/gold price ratio, hit or hovered near three year lows for numerous issues. What looked promising ended as another gut check for gold equities. The day’s price action could only leave a gold equity investor asking “what’s next?” and then trudging onto the next day.

Of course, the relative under-performance story of gold equities is old and known (see “What’s Wrong With Gold Stocks?”), particularly the last two years.  Another strong wave has occurred the last four months. Last Wednesday was a shining example of this trend. Gold stock investors must feel isolated; their belief in the sector betrayed.

What have insiders been doing?

Have insiders moved in to buy their own supposedly cheap shares, take advantage of days like January 30, and rebuild investor confidence?  The answer appears to be no.  A search for insider purchases over the last year for the five issues discussed above gives pause. Three issues—Barrick, Goldcorp and Kinross—showed no overall insider activity over the last twelve months.  This dearth of activity includes a lack of selling as well.  But as readers of Insider Monkey know (learn why you should track insider activity), the importance of actual, consistent insider purchases is paramount.  This lack of buying is disquieting.  For Royal Gold, only a slew of selling is found.  The case of Newmont Mining produces two purchases by the company’s COO, but these occur within a tsunami of selling over the same period.

Curiously, a search for insider purchases over an expanded period of the last five years produces little more—a handful of purchases (4) of Royal Gold from 2009 through 2011 by Director Craig Haase.  The lack of overall insider buying and the swamping by selling when purchases do occur clearly shows that insiders have not been that “into” their companies.  The paralleling of this lack of buying with flat gold equity returns is both ironic and telling.  Over the years, managements of gold miners have often talked up a glowing outlook for the gold sector, given their investing behavior; perhaps they need to tone it down.

What can retail investors do?

Page 1 of 2

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The World’s Most Famous Circuses

Best Hair Stylists

Most Popular NASCAR Drivers

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!