With 2006 now behind us and a fresh year on the horizon, let’s take a look at how well our stock picks have performed in the context of the larger gold market and the stock market in general.
Gold for the year was up about 23% and Silver was up 46%.The HUI, which tracks a basket of 14 leading (unhedged) gold miners, failed to provide the leverage it usually offers to metals, increasing by only 13%. Still impressive annual returns, considering that a record-breaking year for the Dow Jones Industrial Average produced only a 16.7% return and the Nasdaq gained just 10%.
It's even more impressive considering that the gold market underwent a major correction during the third quarter of 2006. With the threat of a recession looming in 2007, we think the Dow might have just posted its best results for the foreseeable future.
Now let’s take a good look in the mirror and see how well Gold Stock Bull has performed. Our aim is to discover and profile companies that outperform the overall market and outperform their peers, thus maximizing returns. We also look to minimize risk, by picking companies with solid management and clear mid to long-term strategies for success.
Our first article was published in July of 2006, so we don’t have a full year of results to work with. However, in addition to calculating the absolute percentage gain, we have run a simple calculation to derive the annualized percentage gain. While this is only a projection, it will provide context and allow for comparisons versus industry benchmarks.
With gold up 23%, we knew our stock picks would be posting some solid numbers. However, the results were even more impressive than we had anticipated:
As of the end of 2006, the average annual gain of our stock picks was 93%! If you would have invested in each of the companies that we profiled, you would be on course to nearly double the value of your portfolio. Jim Cramer eat your heart out.
YGC Resources (YGC), which we profiled on September 25, produced the highest return of any stock we covered. In just 100 days, the stock price increased by 72%. Annualized, this return equates to 264%. We also profiled a small company by the name of Vitasti, just as they were changing their focus to wind energy and their name to Welwind. In the 63 days following our article, the stock price increased by 43%, for a projected annual return of 248%. We view Welwind as a speculative investment, but with plans to build a wind farm along the South China Sea, the stock could easily double on news that the project is moving forward.
Other notable successes include Yamana Gold (NYSE:AUY), which we highlighted on September 13th. The stock price proceeded to climb from $9.49 to over $13. This generated a return of 39% in just over 100 days, for an annualized return of 130%. We own stock and warrants in Yamana and plan to hold our position long-term.
Metalline Mining (NYSEMKT:MMG) produced a similar return, increasing by 40% in just 116 days for an annualized gain of 125%. We do not currently hold shares of Metalline, but believe the company is well-positioned to capitalize on increased demand for base metals and silver from a Chinese economy that is still showing no signs of slowing. We will look to pick up shares on any dips below $3.
Sasol (NYSE:SSL), in all fairness, only had four days to use with projecting the annual return. Not the best sample size and you might think we simply had good timing. But good timing can make or break investments and we think the upleg for Sasol is just getting started.
Out of the 10 stocks that we profiled in 2006, only one generated a negative return. We purchased shares of NGAS Resources (NASDAQ:NGAS), a small natural gas company based in Kentucky, expecting a jump in natural gas prices going into the 2006 hurricane season. However, to the delight of coastal Floridians, the hurricane season never really materialized and the stock proceeded to fall 28% in the following 146 days. We still like the company and hold the stock, believing natural gas prices will rebound from current levels.
Our annual results will be recalculated for each stock pick as a full year of statistics becomes available. However, we feel confident that our projected annualized gains will end up underestimating the actual annual returns. The third quarter of 2006 witnessed the largest correction in the gold bull since its inception in 2001. In a matter of weeks, the price of gold dropped by $150 and the HUI corrected over 30%.
Another correction of this magnitude is not expected until well after the completion of the massive wave III upleg. It is our view that 2007 will be a much stronger year for gold and silver, dwarfing the returns realized in 2006.
We are proud of what we have accomplished at Gold Stock Bull in our first six months. Not many fund managers or investment advisers can boast returns of this magnitude. Our picks performed nearly three times better than the overall gold market and absolutely smashed returns generated by the Dow or S&P 500 during the same time period.
We take our research seriously and work hard at uncovering companies that can produce returns like these. Yet, the fruits of our labor are provided to our readers absolutely free of charge. We hope that you find this information valuable and that it has been helpful in meeting your investment objectives.
Cheers and Happy New Year!