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
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

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 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!