Adamo Aims at Gold & Silver

10/26/2016 9:00 am EST


Jack Adamo

Editor, Jack Adamo's Insiders Plus

We have three more months of what is normally the strongest season for gold. Meanwhile, gold miners are still significantly undervalued by their historical ratio to the price of gold. The same goes with silver, asserts Jack Adamo, editor of Insiders Plus.

As such, I want to add to our holdings in both of these assets. Because of the large amount of late analysis compelled by events late in the week, I'll keep these write-ups brief, then fill out details in coming weeks.

We already hold Hecla Mining (HL) in our portfolio. The stock is selling for 27-times this year's expected earnings (fiscal year-end in December) but only 17-times next year's.

With a year-over-year growth rate of 63%, that would certainly lead to a much higher stock price if it happens.

I'm not sure if that timetable will hold, but I know that the precious metals have to strengthen significantly sometime in the next several years.

In part, this is based on my view that precious metals are the only currency that requires any work or investment to produce, unlike the proliferating digital dollars, yen, euros, etc., that are produced by pushing a button. Buy Hecla Mining up to $5.65 for this position only.

New Gold, Inc. (NGD) explores for gold, silver, and copper deposits. Its mines have the benefit of being in extremely stable countries.

Properties include a 100% interest in the New Afton gold-copper mine in British Columbia, Canada; the Mesquite gold mine in California; the Peak gold-copper mines in Australia, and the Cerro San Pedro gold-silver mine in Mexico.

It also has exploration and development projects, including a 100% interest in the Rainy River gold project in Ontario, Canada; and the Blackwater gold-silver project in central British Columbia.

The company was founded in 1980 and is based in Vancouver, Canada. New Gold is selling at 30-times next year's expected earnings. Like Hecla, this represents a 63% growth rate.

Of course, we cannot guarantee that rate will continue, but production will certainly grow and prices are likely to at least stay where they are now, and eventually rise, since supply is restrained throughout the precious metals mining industry.

However, I believe the real story here is that the company will be acquired by a larger miner when the industry conditions improve. We should then do very well. Buy New Gold up to $4.20.

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