Darien, CT-based BI Partners is a sector-specific investment fund focused on the basic materials sector, but with 90% of its $445 million equity assets under management allocated to the gold and silver mining group, per its latest 13-F filing for Q3.
The fund is managed by Chief Investment Officer and Portfolio Manager Trey Reik, who has over 28 years of investment experience. Prior to starting BI Partners, Mr. Reik served as a strategist to Apogee Gold Fund and the Apogee International Fund from 2006 to 2008. Since its founding in 2002, he was also the founder and portfolio manager of Clapboard Hill Partners, a long-short equity partnership focused primarily on precious metal equities and financials. Per our analysis of their filing, about 20% of their portfolio is in large cap equities, another 35% is in mid caps, and the remaining 45% is in small cap and micro cap equities.
The following are the gold and silver mining companies that BI Partners is most bullish about, that are generally trading at a discount to the group, and that have also outperformed relative to the group (see table):
Barrick Gold Corporation (NYSE:ABX) is a Canadian company engaged in production of gold and copper in Peru, Canada, U.S., Australia, Chile, and five other countries. BI Partners added $12 million in Q3, their third largest change in Q3, to its $13 million prior quarter position in the company. ABX is undervalued, trading at a discount 7-8 forward P/E and 2.0 P/B compared to the average of 12.0 and 3.6 respectively for its peers in the gold mining group, while earnings are projected to increase from $3.33 in 2010 to $6.01 in 2012, at an annualized growth rate of 34.7%. Furthermore, in the current down move for gold stocks that started in April, ABX has outperformed its peers, dropping just 18% from its April peak compared to the 21% drop for the gold mining stocks index, as represented by the PHLX Gold/Silver Index ($XAU).
Newmont Mining Corp. (NYSE:NEM) produces gold in the U.S., Australia, Peru, Indonesia, Canada, New Zealand, Ghana and Mexico. At $41 million, including $6 million added in Q3, this is BI’s largest position in its portfolio. NEM trades at a discount 10-11 forward P/E and 2.2 P/B compared to averages of 12.0 and 3.6 respectively for its peers in the gold mining group, while earnings are projected to increase from $3.79 in 2010 to $6.09 in 2012, at an annualized growth rate of 27.0%. Furthermore, NEM is probably among the best performers in the gold mining group, as it is actually up 3% since the April peak while the gold mining stocks index tumbled 21% during that period.
New Gold Inc. (NYSEMKT:NGD) is a Canadian mining company engaged in the exploration of gold, silver and copper in Brazil, Australia, Mexico, Canada and Chile. BI Partners added $4 million in Q3 to its $14 million prior quarter position. NGD trades at a slightly expensive 14.4 forward P/E and a discount 2.2 P/B compared to averages of 12.0 and 3.6 respectively for its peers in the mining miscellaneous group, while earnings are projected to grow strongly from 33c in 2010 to 68c in 2012 at an annual growth rate of 43.6%. Furthermore, NGD has outperformed its gold mining peers, as it is actually down 18% since April compared to the 21% drop in the index during that period.
The following is the only gold mining stock in BI’s portfolio that they are bearish about based on their trading activity for Q3 (see table):
Aurico Gold Inc. (NYSE:AUQ), formerly known as Gammon Gold, is a Canadian company engaged in the exploration and development of gold and silver mining properties in Mexico. BI cut $5 million in Q3 from its $19 million prior quarter position in the company. AUQ trades at a discount 6-7 forward P/E and 1.5 P/B compared to averages of 12.0 and 3.6 respectively for its peers in the gold mining group, while earnings are projected to stage a strong surge from 43c in 2010 to $1.19 in 2012 at an annual growth rate of 66.4%. AUQ is down almost 30% since the April peak compared to the 21% drop in the gold mining stocks index.
The following are gold mining stocks in BI’s portfolio that they are bullish about, as they accumulated stock in Q3, but they do not trade at value prices compared to the rest of the group:
Jaguar Mining Inc. (JAG) is a Canadian company engaged in the exploration, development and extraction of gold in Minas Gerais, Brazil. BI Partners added $6 million in Q3 to its $24 million prior quarter position in the company, and held 4.9 million shares at the end of Q3. Furthermore, as we covered earlier in our daily and weekly coverage of insider and institutional trades, BI Partners filed SEC Form SC 13G last Wednesday, December 14, indicating that it had added another 2.2 million shares since the end of Q3 and now hold 7.1 million or 8.5% of the outstanding shares in the company. This makes it the second largest institutional holder of JAG shares, behind Capital Research Global Investors, which holds 8.4 million or 9.9% of the outstanding shares.
JAG trades at 10-11 forward P/E and 1.9 P/B compared to averages of 12.0 and 3.6 respectively for its peers in the gold mining stocks index, while earnings are projected to more than double from 26c in 2011 to 54c in 2012. Also, JAG stock has outperformed the index as since the peak in April, JAG is about flat compared to the 21% drop in the index.
Goldcorp Inc. (NYSE:GG) is a Canadian company engaged in mining and exploration of silver, copper and gold throughout North and South America. BI added a new $22 million position in the company in Q3. GG trades at a premium 14-15 forward P/E compared to the 12.0 average for the gold mining group, while earnings are projected to increase from $1.38 in 2010 to $3.15 in 2012, at an annualized growth rate of 51.3%. However, it is a slight outperformer to the group, as it is down 20% since the April peak compared to the 21% drop in the gold mining stocks index.
Allied Nevada Gold Corp. (NYSEMKT:ANV) is engaged in the exploration, acquisition, development and operation of gold properties in NV. BI added $9 million in Q3 to its $6 million prior quarter position in the company. ANV trades at a premium 18-19 forward P/E and 5.3 P/B compared to averages of 12.0 and 3.6 respectively for its peers in the gold mining group, while earnings are projected to rocket up from 27c in 2010 to 40c in 2011 to $1.76 in 2012. Also, ANV Is a relative underperformer to the group as it is down about 30% since the April peak compared to the 21% drop in the gold mining stock index during that period.
Click table to enlarge.
Note on table: The companies selected to be included in both the Top Buys and Sells and Top Holdings categories in the Table were picked on both an absolute basis, i.e. the highest dollar amounts of buys and/or sells, as well as those amounts relative to their market caps. That way, the list is not biased towards the largest companies in the group.
Credit: Historical fundamentals, including operating metrics and stock ownership information, were derived using SEC filings data, I-Metrix® by Edgar Online®, 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.
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