Barrick Gold Corporation (USA) (ABX), SPDR Gold Trust (ETF) (GLD): Should You Follow Billionaire John Paulson and Dump This Gold Miner?

Page 1 of 2

Billionaire hedge fund manager John Paulson has soured on Barrick Gold Corporation (USA) (NYSE:ABX). According to his latest regulatory filings, Paulson sold his options to purchase 360,000 shares of Barrick Gold Corporation (USA) (NYSE:ABX) in addition to trimming his stake in SPDR Gold Trust (ETF) (NYSEMKT:GLD).

best gold ETF

But should investors rush for the exits as well? Probably not — there’s a turnaround taking shape at the troubled gold miner.

A turnaround is brewing
Since taking over in June 2012, Chief executive Jamie Sokalsky’s new mantra has been to focus on better capital management and optimizing shareholder returns.

In response to falling gold prices, the company has been forced to make some tough decisions. During the second quarter, Barrick Gold Corporation (USA) (NYSE:ABX) wrote off $8.7 billion in value from its global assets, slashed its dividend by 75%, and cut its administration headcount by 30%. To bolster profitability, Barrick Gold Corporation (USA) (NYSE:ABX) plans to sell, close, or curb production at 12 of its 27 mines. Any operations with production costs above $1,000 per ounce will undergo mine-plan adjustments or be sold .

It’s been bitter medicine for investors to swallow. But like an overweight jogger returning to the gym for the first time in months, the painful process is necessary if Barrick Gold Corporation (USA) (NYSE:ABX) is to get back in shape.

Fortunately, Sokalsky’s efforts appear to be already paying off. Last quarter the company’s production costs fell year over year ahead of analysts estimates. Barrick Gold Corporation (USA) (NYSE:ABX) reduced its capital spending budget by about $1 billion and cut its forecasted expenditures for year end . It’s a complete shift from the Barrick of old. Sokalsky is no longer interested in growth for growth’s sake, but rather, maximizing shareholder value.

Too much pessimism
This impressive turnaround is taking place during one of the most challenging periods in the industry’s history. Over the last few months, we’ve seen record outflows from gold exchange traded products . In addition to Paulson, we’ve seen other legendary investors trimming their SPDR Gold Trust (ETF) (NYSEMKT:GLD) shares including Daniel Loeb. Commodities bull Jim Rogers has even turned against the yellow metal.

Have we reached a point of maximum pessimism? Now, I agree that the fundamentals for gold look awful with the Federal Reserve expected to taper its bond-buying program in the upcoming months. But with gold 30% off its all-time highs, hasn’t this been priced in already? It’s not like a more hawkish Fed will really come as a surprise to anyone at this point. If anything, we could be due for an upside surprise if the Fed remains dovish.

The miners are in even worse shape with the Market Vector Gold Miners ETF  down 50% over the past two years. Even George Soros threw in the towel last quarter, selling his entire position in the fund.

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 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

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

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!