Gold stocks, as represented by the Market Vectors Gold Miners ETF (GDX), have underperformed the price of gold that is down by about 12% in the last year. In comparison, the average gold stock is down by about 34% during the same period, and is off about 56% below the peak about 18 months ago. Furthermore, most gold stocks have broken below recent lows from last summer, and many are trading at levels last seen almost four-to-five years ago.
In this article, via an analysis based on the latest available Q4/2012 institutional 13-F filings, we identify the gold and silver mining companies that are being accumulated and those being distributed by legendary or guru fund managers, such as Warren Buffett, George Soros, Carl Icahn, Steven Cohen and Mario Gabelli, that are well-known for their savvy in picking winning stocks year after year. But first, let's review top guru picks in precious metals from our prior article on the group about a year ago.
Guru fund manager's top pick at that time was Agnico Eagle Mines Ltd. (AEM), which is a Canadian company engaged in the production, development and exploration of gold in Canada, the U.S., Finland and Mexico. Fast forward about a year, and AEM still figures among the top holdings in the group, with guru funds together holding a massive $451 million or 8.5% of the outstanding shares, including adding $11.3 million in the Q4/2012. While all precious metals mining stocks have taken a beating lately, AEM has been a relative out performer. Overall, the stock is trading at levels near the lows of early 2012, down about 15% in the past year. Most gold stocks, however, have broken through those support levels from early 2012, and are trading down by between 35% and 50% for the year.
AEM recently reported its Q1 (March) earnings report, missing analyst earnings estimates by a penny, but reporting revenues of $423 million, well above consensus estimates of $408 million. The company maintained its production guidance FY 2013, but with gold prices hovering near recent lows, the key may be whether miners are able to lower their costs to match the lower gold prices. On that count, AEM investors may be at a disadvantage given the higher operating costs at many of its mines. Its shares currently trade at 17 times trailing twelve month (TTM) earnings, at a premium to the average of 15-16 for its peers in the gold mining group. Consensus analyst earnings estimates have gone down rapidly, dropping from $2.91 three months ago to $1.93 currently for FY 2014. Of the 21 analysts that cover the stock, 15 rate it at hold, and the remaining six rate it buy/strong buy.
Of the other guru top picks in that article from a year ago, three others out of a total of five, namely New Gold (NGD), Mcewen Mining (MUX) and Aurico Gold (AUQ) are holding the lows from a year ago, while only one, Novagold Resources (NG) has broken through those lows. And of the three top guru sells in that article, two, namely Gold Fields (GFI) and Eldorado Gold (EGO) have broken through the lows, while one is holding those levels, namely Randgold Resources (GOLD).
The precious metals mining group is not unique, as we have observed similar correlation in other industries as well during the past six to eight quarters during which we have been analyzing leading fund manager consensus picks' data. In fact, we have observed even better correlation between guru fund manager buying and selling activity, taken as a group, that we call 'Consensus Buying and Selling' in other fund groups, a recent example of which can be seen in our recent article on guru fund picks in small-cap biotech stocks.
We believe that the astute investor can leverage this consensus picks' data, available only on GuruFundPicks.com, and combine it with their own unique research and insights to beat the markets just like guru fund managers have over the long term.
For the latest available Q4/2012, guru fund managers together are bullish on the gold mining companies in general, adding a net $562 million in Q4/2012 to their $4.55 billion prior-quarter holdings in the group (for more general information on these guru funds, please look at the end of the article). Beside AEM, the following are additional gold and silver mining companies that these guru fund managers are bullish about:
- Yamana Gold Inc. (AUY), a Canadian company engaged in the exploration and development of gold properties in South America and Mexico, in which guru funds together added a net 9.43 million shares to their 8.54 million share prior-quarter position in the company.
- Goldcorp Inc. (GG), a Canadian company engaged in mining and exploration of silver, copper and gold throughout North and South America, in which guru funds together added a net 3.30 million shares to their 11.76 million share prior- quarter position in the company.
- Newmont Mining Corp. (NEM), that produces gold in the U.S., Australia, Peru, Indonesia, Canada, New Zealand, Ghana and Mexico, in which guru funds together added a net 2.45 million shares to their 10.16 million share prior- quarter position in the company.
- Canadian gold mining company IAMGOLD Corp. (IAG), that is engaged in the acquisition, exploration and development of gold mines in Africa, South America and Canada, in which guru funds together added a net 13.18 million shares to their 15.55 million share prior-quarter position in the company.
- Barrick Gold Corporation (ABX), a Canadian company engaged in production of gold and copper in Peru, Canada, the U.S., Australia, Chile, and five other countries, in which guru funds together added a net 3.64 million shares to their 7.65 million share prior-quarter position in the company.
Based on their trading in Q4/2012, guru funds indicated that they were bearish on:
- Kinross Gold Corp. (KGC), which is engaged in mining and processing gold, silver, and copper in the U.S., Brazil, Ecuador, Chile and Russia, in which guru funds together cut a net 6.56 million shares from their 22.96 million share prior-quarter position in the company.
- Richmont Mines (RIC), a Canadian gold mining company with operations in Quebec, Ontario, and Newfoundland, in which guru funds together cut 1.09 million shares from their 4.08 million share prior-quarter position in the company.
Also, besides AEM, guru fund top holdings in the precious metals group include Anglogold Ashanti Ads (AU), a South African gold producer with 20 operations in 10 countries on four continents that also produces silver, uranium oxide, and sulfuric acid, in which guru funds hold a massive $744 million or 10.2% of outstanding shares. Also, subsequent to the end of Q4, guru funds have indicated via 13D/G filings that they added another 2.86 million shares in the company.
The stocks in the precious metals mining group have been undergoing a lot of turbulence due to a variety of factors including a recovery of the U.S. economy lowering the demand for 'risk-off' assets like gold, lower demand in China due to slowing economic growth, and lower demand from the investment sector. However, the picture looks more optimistic going forward given that the demand continues to be strong in the Indian market, which alone consumes nearly half of the world's gold, and the possibility of a recovery in China increasing the demand for gold.
We believe that knowledge of how the best minds in the investment community, in the form of guru fund managers, are collectively positioning themselves in this turbulent environment, can inform our investment decision-making, often cluing us in to profitable opportunities. Additional examples of how gurus have successfully predicted stock moves for many popular stocks, across all industries, including in the case of Apple Inc. (AAPL), are outlined on GuruFundPicks.com. There, you can access this information not just for guru funds, but for mega funds and four other fund groups, including billionaires, new masters, sector-focused funds (including 22 healthcare-focused funds as a group), and tiger funds. And you can do so for not just biotech stocks, but for all 5,200+ U.S. traded stocks categorized into over 200 industry groups. For your convenience, the site offers memberships as well as individual reports that can be purchased a la carte.
General Methodology and Background Information: The latest available institutional 13-F filings of 78 legendary or guru hedge fund and mutual fund managers, such as Warren Buffett, George Soros, Carl Icahn, Steven Cohen and Mario Gabelli, analyzed to determine their capital allocation from among different industry groupings, and to determine their favorite picks and pans in each group. The hedge fund and mutual fund managers included in this select group include only high profile names who by virtue of their long-term market-beating returns have earned their standing in the investment community and are worthy of our attention. They include well-known names such as those mentioned above, as well as perhaps relatively lesser-known names that also have a stellar long-term history of beating the markets, such as Seth Klarman, John Griffin, Prem Watsa, Robert Karr and Lee Ainslie. Each guru has been carefully selected based on their long-term performance and standing in the investment community. Furthermore, the credentials of most of the 78 guru funds that justify their inclusion in this elite group were detailed in our previous articles that can be accessed from our author page.
Credit: Fundamental data in this article were based on SEC filings, Zacks Investment Research, Thomson Reuters and Briefing.com. The information and data is believed to be accurate, but no guarantees or representations are made.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Disclaimer: Material presented here is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. Further, these are our 'opinions' and we may be wrong. We may have positions in securities mentioned in this article. You should take this into consideration before acting on any advice given in this article. If this makes you uncomfortable, then do not listen to our thoughts and opinions. The contents of this article do not take into consideration your individual investment objectives so consult with your own financial adviser before making an investment decision. Investing includes certain risks including loss of principal.