Photo: Barrick Gold
Lately, the price of gold has been on a notable rally.But gold mining stocks have been doing even better.
And David Rosenberg thinks they have room to rise even further.
From Rosenberg’s note this morning:
One of the markets that is now doing quite well, as we had been anticipating for some time, are the gold mining stocks which as a group are up 10% so far this month – acting better than the actual bullion price after lagging badly in the prior eight months – and better yet, with little fanfare. Dividend payout ratios in this sector are on a sharp upward path (albeit from microscopic levels). Today’s WSJ hints that the sector is priced for a $1,400/oz gold price, so there would also seem to be some nice downside protection (a 16% discount to the current price). The gold miners also trade at a 10% P/E discount to the overall market and a 50% discount to their traditional multiples of the past and they have been severely re-rated due to past mistakes as well as the advent of competing ETFs. But these companies are now profitable, pay a dividend, are underpriced and…unloved.
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