Gold miner stocks could be an interesting contrarian play for brave investors in 2014 after the sector lost more than half its value last year as gold snapped its 12-year winning streak.
Market Vectors Gold Miners ETF (GDX) has seen a little bounce to start the new year following its 54% loss in 2013. Still, trying to time a bottom in this poor-performing sector has been a disaster for bargain hunters.
Arthur Hill, senior technical analyst at StockCharts, said the gold miner ETF remains in a downtrend overall, but is showing signs of life with a resistance challenge to start the year. From a technical perspective, he thinks the ETF needs to clear $23 a share before the recent rally can be considered more than just an oversold bounce.
Chart source: StockCharts
David Levine, who manages the Aspect Large Cap Value portfolio on Covestor, started looking at beaten-down gold and silver miners in late 2013 as a value play. He currently owns Newmont Mining Corp. (NEM), a large gold producer, and Pan American Silver Corp. (PAAS) in Aspect Large Cap Value portfolio.
“I like to look among the year’s losers in December and see if I can find some bargains, and the precious metals miners seem to fit the bill nicely,” Levine said Friday.
“Pan American Silver is especially interesting – selling at well under book value, with a 5% dividend and a share buyback in place,” the portfolio manager said. “While I am not a gold bug, I do expect gold to rebound off these levels a bit since there is almost no fear in the market, and at some point there could be a certain amount of inflation. I could see where these miner stocks could rebound nicely from tax loss selling.”
Levine doesn’t expect new all-time highs for gold and silver, and he thinks the rebound could take some time.
“That is why I wanted the biggest mining companies with generous dividends to pay me while I wait,” he said.
DISCLAIMER: The investments discussed are held in client accounts as of December 31, 2013. These investments may or may not be currently held in client accounts. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable. Past performance is no guarantee of future results.