Dick, Bernie, and Jim Go Mining

04/18/2003 12:00 am EST


Bernie Schaeffer

Chairman and CEO, Schaeffer's Investment Research

"For the past eight weeks, the precious metals complex has been sinking," says Richard Band, editor of Profitable Investing . However, this decline must be seen within the context of a larger bull market dating back to 1999.  My chart studies indicate that the recent pullback is ending--and that the bull is about to snort again, probably soon after the Allies declare victory in Iraq. Longer term, the outlook for gold is favorable because the Federal Reserve is desperately pumping cash into the banking system in an effort to stave off recession and deflation.  This policy has already weakened the dollar, and will continue to do so.  As the dollar softens against other currencies, global investors who doubt the inflation-fighting resolve of the U.S. government will shift a portion of their assets into gold. For the model portfolio, we'll buy Newmont Mining (NEM NYSE), the world's largest gold producer, at $25 or less.  I'm inserting NEM under World-Class Franchises, because the company really is a global leader in its industry, with outstanding mines and management. Within a year, I look for NEM to be trading in the low to mid-30s."

Adds Bernie Schaeffer, editor of The Option Advisor, "In its March earnings report, Newmont Mining posted net income of $75.1 million, or $0.19 per share, compared to $20.2 million, or $0.10 per share, for the same period a year ago. After putting in a strong rally on the heels of the report, NEM declined back to support at 25. The 10-day has bullishly crossed above the 20-day trendline, which is a technical sign of short-term price strength. Furthermore, NEM has outperformed the S&P 500 Index since November 2000. Despite the stock's show of strength, options players are firmly entrenched in the bearish camp. Traders should target a move up to 28.45 with a stop-loss set for a close below 24.57."

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