Whenever you see a stock near its 52-week low, the first thing you ask is whether this is a cyclical or a secular move.
A cyclical move is just the normal business cycles. Industries go down, then they go up. Stocks the same. An operating company with a solid business model, treading water, may be just the pickup your portfolio needs.
A secular move is different. When the wheels come off, when the stock starts to spud in, it doesn't matter to an investor if it's at a 52-week low. You avoid it.
One way to spot the difference is to watch when whole industries reach a low. If the industry has prospects, that's a buying opportunity.
- HMY is an African miner, based in South Africa, which trades as an ADR. It has assets both in that country and Papua New Guinea (PNG). The PNG mines are important to it because its reserves keep falling. Investors need to hope that PNG, a joint-venture with Newmont Mining (NEM), which is just a few dollars over its own yearly low, does well.
- IAG, based in Canada, has mining interests in Africa, South America and Canada. The company is especially high on its Essakane operation in Burkina Faso, said to have 6 million ounces of metal, and overall the company continues adding to reserves.
- EGO, based in Vancouver, claims to have young, low-cost mines and hopes to produce 1.5 million ounces of metal in 2015. Its production mainly comes from Turkey and China, but it's exploring in South America, and has just begun exploring in Greece.
- AU, another South African ADR, is the world's third-largest gold producer, with 20 operations in 10 countries. This has involved improving the cost efficiency of operations - its Ghana mine can now produce gold at about $600/ounce while it sells in the open market for closer to $1,600. This may be why our Bret Jensen has recently added to his holdings in the stock, noting that it also sports a dividend yielding 2.6% at current prices.
As you can see not all gold miners are created equal. There are variations in political risk, in production cost, and in management to consider, none of which hold if you're just buying the metal. Gold itself is more volatile but has lately been more profitable than the miners.
Of the four companies noted here, all trading near their 52-week lows, I agree with Jensen about AU - a dividend limits your downside risk, as does geographic diversity of resources. My second choice would be IAG, which is adding to reserves in West Africa, followed by EGO and HMY.
But if you believe in the future of gold and gold mining, as most readers here do, all these companies are worth a close look right now. They're on sale, and the sale won't last forever.