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Goldcorp: Mining for Value

02/02/2015 8:00 am EST


Mark Skousen

Editor, Forecasts & Strategies, High-Income Alert

There’s only one sector on Wall Street that qualifies as ‘fast money’ right now, and that’s the deeply undervalued mining sector, suggests Mark Skousen in Fast Money Alert.

The plunge in energy prices and a selloff in the stock market have created a unique opportunity in gold mining stocks. 

Mining stocks have been in a bearish trend for several years, but several factors are in their favor right now. Interest rates remain extremely low despite constant threats that the Fed is going to increase rates. 

Meanwhile, the economy is picking up strength with Gross Output and gross domestic product (GDP) rising at 5-6% now. 

Finally, one of the greatest expenses for mining operations is energy and prices are coming down fast. At the same time, gold prices are now back up above $1,200 an ounce and looking strong on a short-term basis.

One of my favorite mining stocks is Goldcorp (GG), based in Vancouver, British Columbia. It has major gold, silver, and zinc mining operations in the United States, Mexico, South America, and Canada. 

Like almost all gold miners, it is losing money, but its operating margins exceed 15% and revenues are down only slightly.

GG is a low-cost gold producer located in safe jurisdictions in the Americas and it is expected to be profitable next year. 

It is selling for 23 times earnings.

Meanwhile, it continues to pay 5 cents per share per month in dividends to its shareholders, making it one of the highest yielding mining stocks (3%).

It is poised to profit from higher gold prices, since its production of gold is 100% unhedged. Let’s buy Goldcorp at market and set a protective stop of $16 a share. 

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