Gold stocks, as represented by the Market Vectors Gold Miners ETF (GDX), have been weak in the last six months, with the index over 27% below the highs that it set in September of last year. Just at the end of last month, UBS AG cut its full-year gold forecast 18% to $1,680 per oz, based on signs that the U.S. economic recovery was taking hold, and a lower likelihood that the Fed will add further stimulus. Most gold stocks traded lower last month, with many near 52-week lows.
In this article, via an analysis based on the latest available Q4 institutional 13-F filings, we identify the large-cap gold mining companies that are being accumulated and those being distributed by legendary or guru fund managers, such as Warren Buffett, George Soros, Carl Icahn, Steven Cohen and Mario Gabelli, that are well-known for being savvy in picking winning stocks year after year. Taken together, these guru managers are slightly bearish on gold mining companies in general, cutting a net $13 million in Q4 from their $7.18 billion prior quarter holdings in the group (for more general information on these guru funds, please look at the end of the article).
The following are the large-cap gold mining companies that these guru fund managers are most bullish about, that also trade at a discount to the peers in their group (see Table):
Kinross Gold Corp. (KGC): KGC is engaged in mining and processing gold, silver, and copper in the U.S., Brazil, Ecuador, Chile and Russia. Guru funds together added a net $7 million in Q4 to their $136 million prior-quarter position in the company, and taken together guru funds hold 1.3% of the outstanding shares. The top buyers were Arnhold & S Bleichroeder Advisers ($18 million), also the top holders at $103 million.
KGC reported a weak Q4 in February, missing analyst revenue and earnings estimates, but re-affirming its 2012 gold production and raising its common dividend by 33% to 8cents/share. Its shares have moved lower since that report, and they currently trade at 8 forward P/E and 0.8 P/B compared with averages of 10.1 and 3.6 for its peers in the gold mining group, while earnings are projected to grow at a strong 24.8% annual rate from 77cents in 2011 to $1.20 in 2013.
Anglogold Ashanti Ads (AU): AU is a South African gold producer with 20 operations in 10 countries on four continents. It also produces silver, uranium oxide, and sulfuric acid. Guru funds together hold $1.41 billion worth or 10.8% of the outstanding shares of AU, after cutting a comparatively minor $96 million in Q4, compared with its 2.8% weighting in the gold mining group. The top holder by far was famed hedge fund Paulson & Co. ($1.18 billion), followed by Arnhold & S Bleichroeder Advisers ,($138 million) and Australian hedge fund guru Kerr Neilson's Platinum Investment Management ($67 million).
AU on Tuesday announced its Q1 production update, reporting that safety related stoppage at its South African mines resulted in 76,000 oz. of lost production in Q1, so that Q1 gold production is now estimated at 980,000 oz. v/s the 1,030,000 oz. that it guided in mid-February in its Q4 report. Its shares have taken a nose-dive this year, down over 20% year to date, and trading at 7-8 forward P/E and 2.6 P/B compared with averages of 10.1 and 3.6 for its peers in the gold mining group, while earnings are projected to rise steeply from $3.60 in 2011 to $4.85 in 2012 and then fall off to $4.39 in 2013.
Freeport McMoran Copper & Gold (FCX): FCX is engaged in the exploration and development of copper, gold, silver and molybdenum mines in Indonesia, North and South America. Guru funds together added a net $1 million in Q4 to their $453 million prior quarter position in the company, and taken together guru funds hold 1.3% of the outstanding shares. The top buyer was guru Stephen Cohen's hedge fund SAC Capital ($93 million), and the top holders were Fisher Asset Management ($254 million) and SAC Capital ($106 million).
FCX is among the cheapest large-cap mining companies, trading at 7-8 forward P/E and 2.2 P/B compared with averages of 19.5 and 2.3 for its peers in the non-ferrous mining group, and compared with averages of 10.1 and 3.6 for its peers in the gold mining group, while earnings are projected to rise at a modest 4.7% annual rate from $4.89 in 2011 to $5.36 in 2013. The stock is a favorite pick among Wall Street analysts, with 19 of 23 analysts that cover the stock rating it at buy/strong buy, with the remaining four rating it a hold; with a mean price target of $54, well above current prices near $38.
The following are some additional large cap gold mining stocks that guru funds accumulated in Q4 (see Table):
- Goldcorp Inc. (GG), a Canadian company engaged in mining and exploration of silver, copper and gold throughout North and South America, in which guru funds together added a net $172 million in Q4 to their $299 million prior quarter position in the company; and
- Ivanhoe Mines Ltd. (IVN), a Canadian company engaged primarily in the exploration of gold and copper mines in central Asia and the Asian Pacific region, in which guru funds together added a net $36 million in Q4 to their $137 million prior quarter position in the company.
Guru funds based on their Q4 trading activity indicated that they are bearish on the following large-cap gold mining stocks (see Table):
- Barrick Gold Corporation (ABX), a Canadian company engaged in production of gold and copper in Peru, Canada, U.S., Australia, Chile, and five other countries, in which guru funds together cut a net $148 million in Q4 from their $678 million prior quarter position in the company;
- Newmont Mining Corp. (NEM), that produces gold in the U.S., Australia, Peru, Indonesia, Canada, New Zealand, Ghana and Mexico, in which guru funds together cut a net $22 million in Q4 from their $568 million prior quarter position in the company;
- Silver Wheaton Corp. (SLW), a Canadian buyer of purchase agreements for silver and gold from mining companies operating in Mexico, Sweden and Peru, in which guru funds together cut a net $19 million in Q4 from their $82 million prior quarter position in the company; and
- Yamana Gold Inc. (AUY), a Canadian company engaged in the exploration and development of gold properties in South America and Mexico, in which guru funds together cut a net $10 million in Q4 from their $173 million prior quarter position in the company.
Credit: Fundamental data in this article were based on SEC filings, 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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