2015's Top Performers: Stephen Leeb

01/06/2016 10:00 am EST


Stephen Leeb

Founder and Research Chairman, Leeb Group

Last January, we featured our annual Top Picks report, highlighting the favorite stocks from the leading newsletter advisors. Here, we talk with one of 2015's top performers, Stephen Leeb, editor of The Complete Investor, whose favorite for 2015—a gold miner—rose 45%.

Steven Halpern:  Our very special guest today is Stephen Leeb, an industry-leading growth stock expert and the editor of The Complete Investor.  How are you doing today, Stephen?

Stephen Leeb:  I’m doing fine, Steve, thank you.

Steven Halpern:  Well, thank you for taking time to join us. In last year’s annual Top Picks report, you chose NovaGold (NG) as your favorite idea for 2015 and the stock’s up 45% so far. Could you tell our listeners what the company does and remind them about your original rationale for choosing this as your top pick for the year?

Stephen Leeb:  Well, basically, Nova is in partnership with Barrick (ABX) in controlling one of the largest gold deposits in the world, which is undeveloped. 

It’s a junior gold mine, but in my opinion, possibly the best-situated junior gold mine around and current estimates are that they have about 40 million ounces in reserves. They’re easy to get. There’s an infrastructure issue in getting the reserves to market but there’s not any environmental issues. 

They have extremely good relationships with the community and it’s in Alaska, it’s North American, which is also very important, so it—in many ways—is the single best junior gold mine in the world, a gold mine that is not producing but has a potential to produce just enormous amounts of gold and their partner again in Donlin is Barrick.

Steven Halpern: Now are there any particular developments that occurred during the course of the year that would help account for such a strong performance by this stock?

Stephen Leeb:  I think that there are a couple of things that could explain it but I’m kind of speculating, and to be honest, I thought that gold might have a better year than it did. 

I do think on long-term, I’m exceptionally bullish on gold.  I think you’re going to have historic bull market.  Obviously this was not the case in 2015, but what did happen with NovaGold is that their partnership with Barrick became a more real partnership.  Barrick had been a company in massive transition. 

They had made a lot of bad acquisitions. They had taken on a lot of debt.  A lot of disappointment had surrounded the company.  Its stock had actually declined over 80% from its high in beginning of the decade and for pretty good reason, but they were a company that has a lot of assets and they changed managers or they changed CEOs. 

Peter Munk who founded the company and did a tremendous job in building it initially, really, I don’t mean to be cruel or anything like that but he just became too old.  He wasn’t really making correct decisions. 

A fellow named John Thornton came in and took over the role and he was a former president of Goldman Sachs in Europe, a European division of Goldman Sachs, an exceptionally bright guy, strong connections with China, and strong views on the gold market.

I never talked to him personally, only secondhand, but I believe that he thinks that gold is going dramatically higher or else he wouldn’t have taken over Barrick and he also recognized the importance of the asset that NovaGold and he owned or NovaGold and Barrick own.

I think investors and betting and betting rightly so that this is very, very high on the Barrick agenda, whereas before the appearance of Thornton, no one knew what Barrick was going to do, but it’s clear from anyone that’s looked at this asset and studied it, etc., that this has to be developed unless gold just crashes. 

If gold continues to move up, it’s going to be worth a tremendous fortune so people are now betting much more heavily that Barrick will join in developing it and they certainly do have access to the kind of cash it would take to develop the asset. 


Steven Halpern:  Now, highlighting one of the things you mentioned, NovaGold has done well at a time when gold itself has been a real underperformer.  Would you think looking out to 2016, if gold has a better year, would it continue to improve the prospects for NovaGold?

Stephen Leeb:  I think it will improve it dramatically for all golds.  I think Nova and if you look at it from the perspective of gold’s high or even how gold’s performed during this century, beginning of the century, gold stocks have dramatically underperformed the metal. 

Steve, what people don’t appreciate is that gold, since the beginning of the great recession, has actually outperformed almost every other asset including bonds, including stocks, including cash. 

That’s from the third quarter, the end of the third quarter of 2007 and certainly from the beginning of the century to 2007, gold also was a sterling performer.  I think gold will have a good year in 2016 but I would’ve said in 2015 too. 

I think it’s just a question of waiting but your question being that if gold does have a good year in 2016, will Nova follow?  Yes, in spades.  I think Nova remains dramatically leveraged to the price of gold because it is, I think, arguably the world’s leading undeveloped gold asset.

And I think as gold goes higher, the ability to finance that development becomes much, much easier and much easier to see and also the reserves that they’re now reporting would also climb in concert with the price of gold, so yeah, it could be a multiple beneficiary of higher gold prices. 

It could, I mean, I expect gold and some of these small junior companies like Nova, which I think is the best, really enter a historic bull market in the not-too-distant future, and by not too distant, I don’t mean two weeks from now but I mean by 2020, I think you’re going to be looking at prices that are perhaps many multiples of where they are today.

Steven Halpern:  Many people at MoneyShow might have followed your advice to buy the stock earlier in the year.  Would you still recommend that they hold the shares and for those hearing about it for the first time in this conversation, would you recommend they purchase?

Stephen Leeb:  I would, yes, but I would also say, to be frank, it’s a speculation.  They’re not really producing gold, so it’s a stock where if I’m right, if I’m right on gold, and I don’t mean right in the sense that gold goes to $10,000 necessarily but if gold goes to $2500, which I think is very reasonable for many, many reason.

I’m writing a book on that actually. You’ll could make 10 times your money on NovaGold, so you don’t need to own a lot of it in order to make a lot of money because there’s that kind of upside potential, but on the other hand, if I’m wrong, then it becomes a speculation that doesn’t work out. 

You can’t regard this as a stock like IBM (IBM) which is down and I don’t think is going to go to zero or I can’t see a scenario.  You have to regard Nova as a stock that could make you very rich in and of itself. You don’t have to own a lot because of the upside potential. 

If I’m right on the upside potential, you will make a tremendous amount of money or will multiple many, many times over but going with that is a lot of risk so this is not a stock to put 20% of your capital in, but it is a stock to have an investment in, and yes, I would buy it now and if you own it, I would not sell it.

Steven Halpern:  Again our guest is Stephen Leeb, editor of The Complete Investor.  Thanks for your time today and hopefully you’ll take some time to speak with us when your next book comes out so we could talk a little about that. 

Stephen Leeb:  Thank you so much, Steve.

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