It is commonly known that the international monetary system collapsed three times in the twentieth century, in 1914, 1939, and 1971. James Richards, the author of the book “The Death of Money: The Coming Collapse of the International Monetary System”, warns that the next financial collapse is rapidly approaching. He also believes that money and wealth have become more apart, while the true wealth should be permanent and tangible. And gold is believed by many to be the proven long-term store of wealth. Those who share the same thoughts on gold or simply believe that the gold mining industry is undervalued, may increase their portfolios’ exposure to gold by investing in gold mining stocks or simply invest in ETFs. It is worth noting that the hedge funds from our database are bullish on the gold mining industry, as the Market Vectors Gold Miners ETF (NYSEARCA:GDX) is one the five favorite ETFs among hedge funds (read more details here). In this article we will provide a list of five gold mining stocks under $10 that may represent a bargain at the moment, although it is not the actual price of a stock that really matters, but its intrinsic value. Therefore, we will take a look at the hedge funds’ sentiment in order to assess the upside potential of these five stocks.
We track hedge funds and prominent investors because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 50 most popular large-cap stocks among hedge funds had a monthly alpha of about 6 basis points per month between 1999 and 2012; however the 15 most popular small-cap stocks delivered a monthly alpha of 80 basis points during the same period. This means investors would have generated 10 percentage points of alpha per year simply by imitating hedge funds’ top 15 small-cap ideas. We have been tracking the performance of these stocks since the end of August 2012 in real time and these stocks beat the market by 60 percentage points (118% return vs. S&P 500’s 57.6% gain) over the last 36 months (see the details here).
5. Cliffs Natural Resources Inc (NYSE:CLF)
Investors with Long Positions (as of June 30): 19
Aggregate Value of Investors’ Holdings (as of June 30): $102.21 Million
Two more hedge funds monitored by the Insider Monkey team had Cliffs Natural Resources Inc (NYSE:CLF) in their portfolios at the end of the second quarter, whereas the value of their investments in the mining stock reduced by $7.98 million quarter-over-quarter, partly owning to the 10% drop in the company’s share price during this period. The broader picture is not cheerful either, as the shares of Cliffs Natural have lost 55% year-to-date. It is worth noting that Cliffs Natural Resources is a mining company that produces iron ore and metallurgical coal, which could explain its poor stock performance. The demand in the iron-ore market has dropped significantly, primarily caused by the slumping steel production. Jim Simons’ Renaissance Technologies reported owning 3.85 million shares of Cliffs Natural Resources Inc (NYSE:CLF) in its latest 13F filing.