Thursday, December 20, 2012

Depressed Assets After a Strong Year

In a year with significant gains in most U.S. stock prices as well as in other asset classes like corporate bonds and emerging market bonds, where can a contrarian look for depressed assets?  Gold and gold equities would be a place to start.

Though I wonder whether gold's 12-year bull market has ended, from a trading standpoint I think it is worth considering gold and gold equities.  The gold price is approaching oversold levels with fairly wide pessimism among market participants.  Gold equities are even more depressed, with several leading gold equities selling at 52-week lows, at a time when most major stock indexes and leading companies are selling near 52-week highs.

I have serious concerns over the social and environmental costs of gold mining.  Those who do not have those concerns might consider a trade in the SPDR gold exchange traded fund (GLD) or a stock like IAMGOLD (ticker:  IAG).  IAG has fallen 32% in the last three months, and it has net cash on the balance sheet and is trading for close to tangible book value per share.

Steve Lehman

GLD:  159
IAG:  11.17

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