Tag - Ng

It seems like every financial journal or publication has been extolling the benefits of gold over the last year. Sometimes widespread acceptance of a trend is a sure sign of a bubble waiting to pop. But that’s not the case with the precious metal right now, especially if you play the trend by investing in junior gold miners.  

It's true that gold miners stand to make big profits if the price of gold continues to increase from its current price of $1,120 an ounce. But even if it doesn't, these little companies still maintain big margins that ultimately trickle down to earnings. That’s because their gold recovery costs are essentially fixed - everything above those costs is pure gravy.  

The worst thing investors can do right now is to ignore this trend. Just because you weren’t buying gold at $850 or $1,000 doesn’t mean you missed the boat. And waiting will only make it worse because a big pullback just isn’t likely to happen.  But what is likely is that investors who buy and maintain positions in strong gold mining companies will be sitting on nice gains in a few years, if not a few months. And the best investments right now are the junior miners...

"In the 2000s, as we’ve alternated between deflationary and inflationary worries, gold has been the only major investment to rise every year," says Stephen Leeb.

In his The Complete Investor, he explains, "We think that many miners are exceptional bets today. And among our favorite gold investments is one that we hold in our small cap value model portfolio: NovaGold Resources (ASE: NG)."

"That’s not to deny the risks, such as possible shortfalls in production, sudden price increases, environmental costs, and so on. Still a miner that can increase production and maintain or boost margins will outperform the metal over time.

"NovaGold -- and its relationship with Barrick (NYSE: ABX) -- illustrates particularly well the potential a superior miner can have even when gold prices are flat.

"Barrick, now Nova’s partner in developing one of the world’s largest gold deposits, proves that miners can rise independently of a bull market in gold. Between the mid-1980s and early 1990s, Barrick climbed more than fifty-fold on extraordinary increases in gold production.

"Production of gold, copper, and silver from Nova’s major properties, Donlin Creek and Golore, may come close. The Donlin discovery, one of the largest ever in North America, is estimated to contain at least 54 million ounces of gold.

"How much gold is this? In 2006 with gold trading below $700, Barrick offered to buy Nova for the equivalent of $16 a share. Then as now Barrick had a 50% interest in Donlin.

"Today, in the midst of a credit crunch, Nova has been beaten down to where it trades at some 80% below Barrick’s 2006 bid. Barrick still has a 50% interest in Donlin, whose potential reserves are considerably higher than in 2006.

"Moreover, the other significant holding of Nova is Galore, which represents one of the largest undeveloped copper deposits in the world.

"What are the risks? The only meaningful one is that the company does not get the financing to develop the properties. But that’s extremely unlikely given Barrick’s 50% interest in a deposit that would more than double its North American gold resources.

"Clearly any company that has no production and is dependent on others for its continued existence has to be rated as highly speculative. That said, from a risk/reward perspective you won’t find a better play than NovaGold."
 

Small-cap stocks plunged as investors engaged in a “buy-the-rumor, sell-the-fact” response to the official rollout of the bank bailout plan. After Treasury Secretary Timothy Geithner served up details on the rescue strategy stocks swooned, safe-haven flows abounded and credit default swaps widened as the hand-wringing began in earnest. At 12:22 p.m. ET, the Russell 2000 (NYSE:IWM) was down 13.40, or 2.89%, at 454.40.

Bank and financial stocks have been in rally mode in recent days in anticipation that the government would swoop in, stave off nationalization of banks, clean out bloodied balance sheets and clear the way for lending to flow freely. However, now that the plan has been unveiled, a realization that this process won’t necessarily be easy appears to have taken over investor confidence. The KBW Banking Index slumped nearly 10% at mid-session, while financial stocks in general paced the selling rout.

Bank of America Corp. (NYSE:BAC) tumbled some 14% after the Geithner press event, while Citigroup Inc. (NYSE:C) was off 10%. Regional banks, which had been a star performer on Monday, were the worst performing S&P group so far today. Small-cap bank Fifth Third Bancorp (Nasdaq:FITB) was down 16% while Zions Bancorporation (Nasdaq:ZION) was off 11%.

Outside of the Treasury market, gold stocks were about the only safe spot to park money in the wake of the bank slide move. The Gold and Silver Index was up 1.3%. Small-cap gold stock Novagold Resources Inc. (AMEX:NG) was up 4.6% at midday, while large-cap group leader Newmont Mining Corp. (NYSE:NEM) was up 1%.

Energy stocks took a dive as well, giving back morning gains amid worries that the bank plan could not provide a quick economic recovery and help restore demand for energy products. Crude oil futures slipped back below $40 a barrel, . . .

Small-cap stocks rallied back into positive territory, rejecting a morning slide to seven-week lows as technology firms, energy companies, gold stocks and downtrodden financial shares attracted buying interest from bargain hunters. The Russell 2000 (NYSE:IWM) closed up 1.51, or 0.34%, at 444.36. Despite the rally off morning lows, this still marked the lowest weekly close for small caps since the bottom was formed in mid-November and was the second lowest weekly finish in more than five years. For 2009, the Russell is off 11%, while the Dow is down 7.9% and the S&P 500 is down 7.8%.

Technology stocks were a clear source of strength for the market today, with Google Inc. (Nasdaq:GOOG) climbing 5.9% after reporting solid earnings. Earlier this week, Apple Inc. (Nasdaq:AAPL) beat the forecast and these good vibes on select tech stocks have helped offset terrible reports from Microsoft and from a handful of chipmakers around the world (such as Samsung and Advanced Micro Devices).

It has been a bruising run for bank and financial shares in recent weeks, but that group found buyers today, perhaps linked to bargain hunting and also likely supported by hopes for a stimulus-tied jump next week as more details about the Obama plans come to light. In addition, the market is starting to expect embattled Treasury Department appointee Timothy Geithner will clear a Senate vote on Monday, providing some leadership in the financial arena. Geithner today said that he would strengthen regulation on over-the-counter derivatives and oversight of hedge funds. For the day, bank stocks were up 4.1%, while the Financial Select Sector SPDR Fund rose 3.3%.

Gold prices steamrolled to $900 an ounce Friday, gathering momentum from short-term investors seeking a safe-haven and perhaps even some long-term traders . . .

Seabridge Gold Inc. (Nasdaq:SA), NovaGold Resources Inc.(Nasdaq:NG) and Hoku Scientific Inc. (Nasdaq:HOKU) are among the biggest percentage gainers in Tuesday's trading among companies with market capitalizations under $1 billion.

Also included among the results: Novogen Depository Receipt (Nasdaq:NVGN), Emcore Corp. (Nasdaq:EMKR), China Architectural Engineering Inc. (Nasdaq:CAEI), 4 Kids Entertainment Inc. (Nasdaq:KDE), Somanetics Corp. (Nasdaq:SMTS) and Minefinders Corporation Ltd. (Nasdaq:MFN).

Here are the biggest percentage gainers among small caps:

The Russell 2000 (NYSE: IWM) rebounded after three consecutive losses as investors cheered upbeat earnings news from Goldman Sachs. The small-cap index advanced 15.00 points, or 2.03%, to 754.06. The Dow Jones Industrial Average (INDU) rose 65.27 points, or 0.50%, to 13,232.47.

On a year-to-date basis, the Russell 2000 is down 4.24%, while the Dow is up 6.08% and the S&P 500 has added 2.71%.

Small-cap stocks began and ended the session on a bullish note following news that investment bank Goldman Sachs Group Inc. (NYSE: GS) reported a rise in fourth-quarter profit and beat Wall Street’s expectations.

Unlike many of its rivals, Goldman Sachs has not been seriously affected by the meltdown in the subprime mortgage sector. However, the New York-based company cautioned that some of the world’s capital markets will remain in turmoil in the near future.

Investors apparently disregarded the warning, just like they did news that U.S. housing starts in November declined 3.7% to a seasonally adjusted annual rate of 1.187 million, according to the Census Bureau.

That’s the slowest pace in 16 years but a whisker above the annual rate forecasted by economists. November housing starts are 24.2% below the revised annual rate of 1.565 million units in November 2006.

The same report also showed that building permits, a sign of future construction, fell 1.5% to an annual rate of 1.152 million. That decline is in line with economists’ projections.

Separately, the International Council of Shopping Centers announced that U.S. retailers saw chain store sales grow 1.4% for the week ending Dec. 15.

“Unfortunately, retailers were battered by several forces this past week, including storms and a procrastinating consumer,” said Michael Niemira, the trade association’s chief economist, in a statement. “According to an ICSC-UBS household holiday-tracking survey, consumers are completing their holiday shopping slower than they have in the last four years since these surveys have been taken.”