We are still bullish precious metals, and continue to be much more heavily weighted towards silver than gold, or even platinum for that matter. We did want to cover two of our gold miners and we remain bullish on them even with the recent price action in gold since we last discussed them. As we head into the close of the year, it is important to note that the equities might be impacted by the fiscal cliff profit taking, but actual gold should not as it is taxed as a collectible and, to our knowledge, that tax rate is not changing, so gold and silver prices should remain steady in relation to their equity counterparts (discussing the miners, not ETFs). For those looking for interesting Christmas gifts, we would recommend a silver coin as a potential stocking stuffer which will save you a trip to the busy malls and offer a really intriguing gift for a young one.
AuRico (AUQ) closed Friday at $8.27/share, which is above the $8/share we like to see it trade and still near 3-month highs. We are still bullish of this gold miner as we think it is turning the corner with its production issues and working its way towards our price target in the low teens that we have previously discussed. Easy money has been made here with the bounce off of the lows set when the company ran into production issues; however, long term there is still plenty to be made as the company continues to unlock value for shareholders via improving operations and asset sales.
Another gold name hanging in near 3-month highs, and coincidentally 52-week highs, is Yamana Gold (AUY) which is one of our favorite gold plays. We point this name out this morning because shares closed Friday at $19.55/share and once again bounced off of the $18.50/share level where investors have seen some support recently. We want readers to watch that point and see if shares once again approach that level and, if so, we think that is where buys should be made on any future dips. We remain bullish on this name and are in the camp that thinks it can bounce higher from current levels for a quick trade.
Shares in Cliffs Natural Resources (CLF) traded to new 52-week lows last week as the shares dropped to $29.80/share. The drop coincided with Goldman Sachs cutting its rating on the stock to a sell from neutral, while the company also is poised to have lower production. Goldman specifically called out the company's higher cost production as a red flag and pointed out that its dividend may not be as safe as many think. However, for those thinking of buying shares in order to get that ever growing yield, be careful because the stock went ex-dividend last week, so you have some time until you get the next dividend payout.
It appears that the short play in Molycorp (MCP) is over as the stock rallied again Friday to close at $8.62/share after rising $1.39 (19.23%) on a volume of 12.9 million shares. The big move upward was caused by the company's executives, including CEO Mark Smith, buying shares in the midst of the SEC investigation. Also, the company has released an investor conference schedule which its CEO will partake in, and we think that we could see some analysts come out with upgrades or positive notes regarding the company. We also must point out that no one ever knows what the company may or may not say at these events, and junior resource companies have a history of surprising at these functions. The company is already under scrutiny, but we could see the CEO reaffirm guidance and plans, which could get the Molycorp bulls moving this one again. We would not be short, heading into those conferences, and they start on November 28th for those interested.
We have been around the markets for a long time, but we still run into situations which make us stop and simply shake our head. To this day, we cannot figure out why private equity and hedge fund players insist upon harassing well run and managed companies and agitating for break-ups to increase short-term returns for investors rather than letting management deliver consistent returns over the long term. It makes little sense to us, and even less so when one looks at JANA Partners and their efforts to agitate for change at Agrium (AGU). We disagree with their thinking, but it is pushing the shares higher as investors could profit from the plan quicker than if they were to sit around and wait for the company to deliver on their long-term plans - which we must point out that the company has been doing quite well since the financial crisis. We think JANA would be better served, along with shareholders, attempting this nonsense with some of the other potash players.