Following Ben Bernanke's announcement of another round of quantitative easing, it is time to look at the gold and silver mining stocks.
As long as printing money, low interest rates, and uncontrollable debt is the policy of the two party system, gold and silver related stocks are going to outperform.
Gold and silver can not be reproduced via a printing press. This is why precious metals and their underlying stocks will do well, in relation to the dollar, as long as the printing presses are in control. It is indeed fundamentally that simple.
Today, I want to look at four leading stocks in the Mining-Gold/Silver industry group that I want to purchase as soon as the next buy signal is generated.
What is a leading stock? A leading stock has strong EPS growth, strong sales growth, a high profit margin, a high return on equity, low to zero debt to shareholder equity, mutual fund ownership growth, management ownership, high future EPS estimates, a high Relative Strength line to the overall market, and is within 15%-20% of its 52-week high.
First up, Silver Wheaton Corp. (NYSE:SLW). Silver Wheaton Corp. is a Vancouver, BC, buyer of purchase agreements for silver and gold from mining companies operating in Mexico, Sweden, and Peru.
Silver Wheaton Corp.'s EPS has grown 20%, 162%, 950%, 443%, 128%, 21%, and -5% the past seven quarters. Sales growth has been steady growing 33%, 65%, 84%, 105%, 100%, 28%, 26%, and 3% the past eight quarters. Despite the loss in the most recent quarter, annual EPS estimates for 2012 and 2013 are expected to increase 10% and 25% respectively.
Silver Wheaton Corp. has 2% debt-to-shareholder, a profit margin of 73%, a return on equity of 22%, a cash flow of $1.72 per share, an annual EPS growth rate of 37%, and offers a 1% dividend yield.
Mutual fund managers clearly like the numbers above as mutual fund ownership has grown from 557 to 745 funds during the past eight quarters. Management still owns 5% of the shares outstanding, proving that they are vested in the growth of the share price.
Next, we have another company that hails from Vancouver, BC. Primero Mining Corp. (NYSE:PPP) is a Canadian company engaged in the mining and processing of silver and gold in Mexico.
Primero Mining Corp.'s EPS has grown 999%, 300%, 700%, 143%, -58%, 950%, and 183% the past seven quarters. Sales have grown 144%, -14%, 29%, and 40% the past four quarters. Annual EPS estimates for 2012 and 2013 are for gains of 189% and 13% respectively.
Primero Minin Corp. has 8% debt-to-shareholder, a profit margin of 4.7%, a return on equity of 4%, and a cash flow of $0.50 per share. The current P/E ratio is 11 which is in the middle of its historical range of 5-19.
Mutual fund ownership has grown from 22 to 38 funds the past eight quarters. However, there has not been much growth overall the past seven quarters. One disappointing number is that management owns 0% of the shares outstanding. Normally, you want to see management have some skin in the game.
Moving from Canada to South Africa, let's first take a look at Gold Fields Limited (NYSE:GFI). Gold Fields Limited is a South African company engaged in the exploration and extraction of gold in South Africa, Ghana, Australia, and Peru.
Gold Fields Limited's EPS has grown 75%, 55%, 300%, 59%, 71%, 48%, 63%, and 15% the past eight quarters. Sales have grown 31%, 28%, 33%, 23%, 6%, 9%, 10%, and -2% during the same period. More of this growth is expected with 2012 and 2013 annual EPS estimates for gains of 15% and 20% respectively.
Gold Fields Limited has 24% debt-to-shareholder, a profit margin of 16.9%, a return on equity of 16%, a cash flow of $2.38 per share, an annual EPS growth rate of 25%, provides a 3.8% dividend yield, and spends 2.1% of sales on R&D. The current P/E ratio of 8 is at the low end of its five year range of 8-44.
Despite the impressive numbers, mutual fund ownership has dropped from 291 to 201 funds over the past eight quarters. However, fund ownership has increased from 194 to 201 during the past two quarters. Another problem, regarding ownership, is that management owns 0% of the shares outstanding.
Our final stock is Harmony Gold Mining Company Limited (NYSE:HMY). Harmony Gold Mining Company Limited is a South African gold mining company operating in Mpumalanga, the Free State, Gauteng and Northwest Provinces.
Harmony Gold Mining Company Limited's EPS has grown 550%, 29%, 600%, 400%, 0%, 178%, 73%, and N/A (posted a .03 cent loss) the past eight quarters. Sales have grown 17%, 7%, 18%, 17%, 3%, 28%, 3%, and 3% the past eight quarters. 2013 and 2014 annual EPS estimates are for gains of 67% and 1% respectively.
Harmony Gold Mining Company Limited has 17% debt-to-shareholder, a profit margin of 13.2%, an annual EPS growth rate of 39%, spends 1.4% of sales on R&D, and offers a 1.2% dividend yield.
Mutual fund ownership has grown from 129 to 141 funds during the past eight quarters. Management has 0% ownership in the stock.
All of the stocks above make for excellent long-term investments for investors. However, I am a trend follower and thus only want to be long these stocks as they trend higher. Since they are all trending higher currently, I am now looking to initiate long positions.
I want to purchase every stock mentioned in this article as they produce pocket pivot point buy signals off the 10-day moving average. This signal occurs when a stock bounces off the 10-day moving average on higher volume than any down session volume during the past 10 trading days. The next time any of the stocks mentioned above do this, I will initiating a new long position.
One final important note is that if I purchase these stocks and they do not move higher immediately I will cut my losses and wait for the next signal. In the stock market if you do not cut your losses one day you will take the ultimate loss. It is inevitable.