It’s time we think for ourselves
I’ve been somewhat bullish on GLD, FCX, and ABX since quantitative easing began. So, I’ve experienced the euphoria (and now) a bit of heartache. Suffering declines is never fun, but I certainly won’t panic now.
Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) and Barrick Gold Corporation (USA) (NYSE:ABX) are each expected to earn around $4 per share this year, if they meet expectations today’s prices will seem like a value. But that will only happen if gold prices stabilize, especially for Barrick.
I think the aforementioned catalysts are in tact, gold is not “useless.” If you share my belief, a small position soon could make sense, I prefer the miners (over GLD) because they’ve fallen further.
That also means they’re riskier. This decline, if nothing else, illustrates how volatile speculative assets like gold can be. So in addition to starting small, if you’d like to buy, please consider buying call options that don’t expire for a while. You’ll limit your downside risk for a small price, and when gold stabilizes you could still make a clean double.
Exploit the panic
The extreme pull-back in gold, and Chinese data has also created a pull-back in the greater commodity market — including oil. If you’re looking for a way to play the commodity slump, outside of gold, I recommend National-Oilwell Varco, Inc. (NYSE:NOV). The company is trading just off of its 52-week low, due largely to lower oil prices and especially margin concerns. But NOV is betting that those near-term pressures will lead to a long-term monopoly.
Recent acquisitions and expansion into new product lines has led to lower-margin business but market share gains are afoot, as NOV becomes a “one-stop shop.”
This company, which makes drilling equipment for the oil industry, has over 60% market share. With the recent acquisitions, this number will only increase. Eventually NOV will be able to increase its prices and widen margins, as customers will have no viable alternative. For growth and value, I love National Oilwell Varco here.
Commodities: the anti-stock market
Gold, copper, oil: they’re all the things Mr. Market doesn’t like right now. To be sure, there are risks in commodities but definitely not more than in the broader stock market (at record, inflated levels). The world needs copper and oil as it grows to 9 billion people, and I don’t believe that society (after hundreds of years) is magically ready to give up gold as a safe haven.
The stock market is on a tear while gold, oil, and broader commodities are slumping — is a correction overdue?
The article Gold Drops! What ‘They’ Don’t Want You to Know originally appeared on Fool.com.
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