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Sell Newmont Mining (NEM)
02/23/2011 3:10 pm EST
First, gold is looking kind of toppy with traders edging toward an exit just in case the violence in Libya shows any sign of resolution. The noon price for gold of $1414 an ounce is only about $20 an ounce below the record of $1437.50 set on December 7.
Second, Newmont Mining hasn’t been as effective a hedge as I’d like. For example, on February 22 when events in Libya sent fear through the financial markets and stocks tumbled, shares of Newmont moved in the same direction—albeit they fell by just 0.6%, a much better performance than stocks as a whole. Still the best hedges zig when the market zags. Goldcorp (GG) climbed yesterday, for example, even if by just a tiny 0.4%.
Today when most gold stocks are up, Newmont isn’t keeping pace with, for example, Agnico-Eagle Mines (AEM).
The problem reaches back further than just the last few days. From September 3, 2010, the date I added it to my Jubak’s Picks portfolio http://jubakpicks.com/ , Newmont Mining is down a little less than 2%. Goldcorp, also a Jubak’s Picks, is up 7% in that period. The problem, I think, is that Newmont’s costs of production aren’t especially low and keep rising—and that’s not what the market (or this investor) is looking for in a gold stock.
Over the long term I think inflation and worries over the value of the U.S. dollar will drive gold higher. So today’s “sell” on Newmont is just a call for a temporary top and an effort to find a better gold hedge.
I’m selling with a 2.24% loss since I added this stock to Jubak’s Picks on September 3, 2010 at $60.76 a share.
Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund, may or may not now own positions in any stock mentioned in this post. The fund did own shares of Agnico-Eagle Mines and Goldcorp as of the end of January. For a full list of the stocks in the fund as of the end of January see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/
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