The Top 3 Shorted Gold Stocks

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Includes: AUY, KGC, NGD
by: Felix Pinhasov

Whether you agree with the short interest or not, the bets against these stocks should motivate you as an investor to dig deeper before you buy into any of these companies. These three gold stocks made it to the top twenty most shorted stocks on the TSX, and all are listed on the NYSE.

Personally, I don't think high short interest always represents negativity. A common attribute of these gold companies, aside from being gold producers, is their large market size. All of these companies have market value north of $5 billion and therefore, are likely candidates for hedge funds to hedge their exposure to the sector.

Nevertheless, high short interest should make you think twice before jumping into the trenches.

New Gold Inc (NGD)

New Gold has a market capitalization of about $5.05 billion and is listed on the NYSE and TSX. The company had a short interest of about 24.68 million shares, or about 5.5 percent of shares outstanding as of January 31, 2012. The company is reporting on March 1, 2012 for the quarter ended December 31, 2011 and is expected to report earnings per share of $0.10, according to consensus estimates.

Earlier this month, New Gold reported that the company reached record annual production in 2011 of 387,155 ounces of gold with cash cost of $448 per ounce. The company operates in North and South America, as well as in Australia.

Kinross Gold Corporation (KGC)

Kinross has a market capitalization of about $11.82 billion and is listed on the NYSE and TSX. The company had a short interest of about 23.93 million shares, or about 1.7 percent of shares outstanding as of January 31, 2012. The company is reporting on February 15, 2012 for the quarter ended December 31, 2011 and is expected to report earnings per share of $0.22, according to consensus estimates.

Kinross has been an unfavorable stock as it failed to justify the amount it paid for Red Back Mining, the owner of the Tasiast project in Mauritania. Most recently, the company announced it will take a goodwill impairment charge related to the Red Back acquisition. Kinross operates in North and South America, Africa and Russia.

Yamana Gold Inc. (AUY)

Yamana has a market capitalization of about $11.98 billion and is listed on the NYSE and TSX. The company had a short interest of about 23.52 million shares, or about 3.2 percent of shares outstanding as of January 31, 2012. The company is reporting on February 22, 2012 for the quarter ended December 31, 2011 and is expected to report earnings per share of $0.23, according to consensus estimates.

Yamana recently reported its annual production for 2011 was 1.10 million gold equivalent ounces with cash cost of $50 per gold equivalent ounces after by-product credits. Yamana's South American mines produce copper as a by-product and thereby reducing the cash cost of gold production. Yamana operates in various countries in South America.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.