Times are good for gold and gold miners, and there’s potential for uranium miners, says investor educator Jason Burack. He names some picks from those areas, as well as the agricultural sector, in today’s interview.
Kate Stalter: Today, I’m speaking with Jason Burack from Wall St. for Main St.
Jason, we talked back in October. At the time, you were invested in a number of commodity and agricultural plays. Many of these were lower-priced, perhaps somewhat speculative, and that’s an area that you specialize in. How has your portfolio changed since then, and what names do you like these days?
Jason Burack: Well, for these types of stocks, they’re smaller growth stocks. They’re undervalued growth stocks, so investors really need to be patient if they’re going to buy these shares, and they need to let things play out for at least two to three years while the company and management executes the growth strategy.
So for people who are going to buy these, you need to have at least a two- to three-year timeframe. If you get a 20% to 40% dip on some of these shares, this is why you don’t buy all of your positions at once.
So in terms of actual names, though, for additional ag and other stocks, for people who don’t want to go and buy like an Allana Potash (Toronto: AAA), which I think is the top fertilizer stock, they can just buy the Global X Fertilizer/Potash Miner ETF (SOIL). You get Allana and some of the other juniors in there, too, plus you get exposure to the larger potash and fertilizer companies that pay a dividend like Potash (POT) and Mosaic (MOS).
Kate Stalter: OK, so those are a couple. Any other ideas? You had been talking about some of the junior miners previously.
Jason Burack: Yeah, well, I still think gold and silver are going to outperform all the other commodities as a whole in the next three to five years. There will be some smaller patches within that timeframe where some of the other commodities will outperform gold and silver, but it’s just going to be for a short amount of time. So I think people need to keep adding to positions in the gold and silver sector.
Some of the names that people need to look at for gold: I prefer to buy the value plays. I look for where the assets of the gold company are selling for pennies, and some of those companies that people should look at are Brigus Gold (BRD).
I like Jaguar Mining (JAG) a lot. It’s a pretty good arbitrage play, because I think there was a takeover bid already from a Chinese firm for Jaguar that’s above its current price, and I think there will be other bidders. Their assets are worth quite a lot more than the current market price.
I think you can’t go wrong with some other plays including Gold Resource Corporation (GORO), and that pays a monthly dividend. They have a really good organic growth profile for production growth. So I think that’s a good company.
AuRico (AUQ) is another one. AuRico has good gold and silver production. That’s what we call a hybrid company, so you’re getting gold and silver production and not really that much base-metal production.
Kate Stalter: You’re pretty bullish on the gold space, it sounds like. I know you’ve written some reports on this particular sector. Any forecasts for what we might be seeing in 2012, with regard to gold and then the gold miners?
Jason Burack: Well, at the beginning of 2011, I made a prediction when gold, I think, was around $1,200. I said gold would actually go above the $1,600 to $1,650 level, and it would go to $1,800 to $1,900, and then it would correct back down to around these levels by the end of the year. So I nailed that on gold. I nailed the gold price pretty accurately.
I was definitely not as accurate on the silver price with the volatility, but gold, I’m comfortable for 2012 saying that gold is definitely going to test the $2,000 to $2,500 range by the end of 2012.
Now, will it stay in those levels on the first try? I don’t know about that. So I think what could happen for 2012 is that gold could test around the $2,500 level, and then correct back down to around the $1,850 to $1,900 level again before it starts moving higher, unless there are more things that come out in the macro stuff.
The reason people should have a gold position—either physical gold bullion as wealth and insurance preservation and/or some exposure to some of the better gold producers—is because the gold stocks are just really good insurance outside of the system in general. A lot of these gold stocks have never been in better financial shape in their entire history. These guys are literally minting money right now.
A lot of the producers have tremendous free cash flow, their profit margins are expanding very, very rapidly and there’s a good possibility going forward here now of increasing dividends. The larger companies are already implementing share buybacks, and you’re starting to see the Goldcorp (GG), the Newmonts (NEM) and the Barrick (ABX) start going out and doing acquisitions now every few months.