Business & Finance
Business and Finance
Business and Finance
Mon, October 4, 2010
Sat, October 2, 2010
Fri, October 1, 2010 
CHICAGO--([ BUSINESS WIRE ])--Today, Zacks Investment Ideas feature highlights Features: SPDR Gold Shares (NYSE: [ GLD ]), AngloGold Ashanti (NYSE: [ AU ]) and Barrick Gold Corp. (NYSE: [ ABX ]).
Gold Stocks: Join the Rush
If you haven't heard yet, gold is trading at all-time highs...again. While it is not hard to see that the yellow metal is on fire, it can be hard figure out how to profit from the move.
But first things first, just how long can this surge last? In my opinion, there is plenty of room to keep climbing. Let's get into some of the factors in play that will keep the gold glimmering, and then get into ways to profit from it.
Fear Pushes Gold Higher
One main component of gold as an investment is that it is the universal destination for those seeking safety. Our economy is much better off than it was a year ago, but there are plenty of question marks.
Our economy is no longer isolated to one region. Through decades of technological and social advances, the global network of local economies is linked through a complex web of connections.
While it does make for an overall more robust economy, it leaves some feeling like the current recovery is a house of cards. One slip up could cause it to crumble. Think of the downward moves we see upon the slightest talk of European debt troubles.
Historically Low Interest Rates
Gold is also the classic inflation hedge. With our governments pumping out cash at an astronomical rate, many see insurmountable inflationary pressure as a foregone conclusion. Additionally, real (and nominal) interest rates are microscopic, if even measurable. This makes gold a more attractive investment than bonds and other "safe" investments.
49er's Delight
Our current gold rush, like the iconic mid-19th century boom in California, has everyone and their brother interested in gold. Fortunately, we don't have to make a life altering trek into undeveloped territory with an pickaxe over our shoulder.
I don't think any football teams will be named after this gold rush, but here are 4 easy ways to gain exposure to gold from your computer.
First of all, if you want to avoid potential volatility in gold stocks, you can always invest directly into SPDR Gold Shares (NYSE: [ GLD ]). The ETF tracks the performance of gold bullion. The tracking error can cut either way, but you definitely lose about 0.4% to the expense ratio. However, that is much easier than trying to trade gold in the futures market. The mini gold contracts move $33 per $1 move in gold!
As for stocks you can try:
AngloGold Ashanti (NYSE: [ AU ]) is a Zacks #2 Rank (Buy) stock. The company operates as both an explorer and prouder of gold around the world. Additionally, AngloGold deals with silver, uranium and sulphuric acid.
In the latest quarter AngloGold said it expects strong organic growth, looking for at least 40% more output in the Americas. The company also said it will not have to make "high-priced acquisitions to secure" its future, like others often do.
Currently, estimates the Zacks Consensus Estimate for this year is calling for a 29% contraction in earnings, next year's estimates are back up 56%.
Shares of AU have been trading with a nice correlation to the SPDR Gold Shares, which tracks gold bullion.
Randgold Resources mines and explores for gold in West and Central Africa.
While the estimates can be very volatile, the overall growth picture is absolutely fantastic. The full-year 2010 consensus is now $1.81, which is more than double last year's EPS of 84 cents. Next year's forecasts are calling for earnings of $4.14, which is a 128% growth rate.
Think you will be overpaying for those growth rates? You won't. The PEG ratio is actually showing a decent bargain at 0.8 times.
Below is a chart of the full-year Zacks Consensus Estimate through 2013. The blue dots represent reported data while the red are for projections. Estimates are forecasting a huge surge over the next couple years.
Barrick Gold Corp. (NYSE: [ ABX ]) is one of the world's biggest gold players. The company primarily produces and sells gold, but is also active in exploration and mine development.
Barrick has had the most steady estimate picture of the 3 stocks mentioned thus far. The full-year Zacks Consensus Estimates have been inching higher for the past 3 months. Forecasts for this year average $3.11, which is 64% higher than the previous year. The 2011 consensus is $3.41, a 10% growth rate.
Shares of ABX also trade with nice valuations. The forward P/E is only 10 times and the PEG ratio shows the growth is a great deal at 0.6.
Barrick's stock has been trading almost in lockstep with the GLD over the past year. So it is also a good tool to capitalize off of future gains in gold.
Good as Gold
Gold is the universal sign of value and has been since virtually the dawn of time. If you want to benefit from this classic inflation hedge or simply just want to park your money in a safe asset, gold is your answer. After all, it's called the "Gold Standard" for a reason.
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