CHICAGO, July 15, 2011 /PRNewswire/ -- Today, Zacks
Investment Ideas feature highlights Features: Hecla Mining
Co (NYSE: HL), Coeu d'Alene Corp (NYSE: CDE), Pan
American Silver (Nasdaq: PAAS) and Aurico Gold (NYSE: AUQ).
(Logo: http://photos.prnewswire.com/prnh/20101027/ZIRLOGO)
Junior Mining Stocks are Cheap
In case anyone hasn't noticed, gold and silver are once again on
a tear. The long-term bullish trend in gold that is now going on
its tenth year has been driven by the ongoing devaluation of the
Dollar due to growing fiscal imbalances and the Fed's easy money
policies of the last few years.
But here's the thing; neither of these trends is showing any
sign of slowing. In fact, they are actually accelerating. We just
heard from Ben Bernanke and the Fed
yesterday, saying that the Central Bank is once again prepared to
intervene and support the market on any additional signs of
weakness in the economy. And what did gold and silver do on the
news? Gold hits an all-time high and silver jumps 5% in one day.
Further stimulation means spending money that the Federal
government doesn't have, which of course leads to further currency
devaluation.
And even more immediately, we have a huge battle raging in
Congress where Republicans and Democrats are duking it out over
raising the debt ceiling. This has two very important implications.
The first is the credit worthiness of the US, whose pristine AAA
rating is now clearly in jeopardy after ratings agency Moody's
placed the country's debt on negative watch. The second implication
of the political standoff is tidal wave of uncertainty it's causing
in the market, a factor that has investors seeking out "flight to
safety" assets like gold and silver.
Gold is a Dollar Trade
The bottom line on gold is that it's a Dollar trade. And when
you look at the massive deficit and total debt load of the Federal
government, it's pretty obvious that there is only one way out. And
that path is to "monetize" the debt, which is basically a covert
way for economists and politicians to say print more money.
But playing gold can be confusing, you have many options. If you
want to track underlying gold prices you can buy a gold ETF that
will give you straight 1-to-1 exposure to the price of gold. But
keep in mind, even if gold goes parabolic and hits $3,000, best case scenario has you doubling your
money. You can juice your ETF trade a little bit by going with a
double gold ETF, which will give you 2X the daily movement of gold.
Beyond the ETF's, you can go with miners, buying stock in companies
that own and extract gold/silver from beneath the ground in exotic
locations all over the world. While this is a more aggressive play
on gold, there is one more strategy that offers both unparalleled
risk and upside.
Junior Miners to Play Precious
Metals
Enter the junior miners, a very high-beta play with the ability
to produce big gains in a bull market. Although the junior miners
will be volatile, there is no other instrument that gives you more
upside to bullish prices in gold and silver.
So if you're looking for a few satellite holdings for your
portfolio to provide more exposure to gold and silver, be sure to
check out the junior miners. Here are a few top picks in the
category.
Top 4 Junior Miners
Hecla Mining Co (NYSE: HL) is a silver and gold miner
with a market cap of $2.28 billion.
In spite of gold and silver's meteoric rise over the last six
months, HL has actually pulled back sharply from its 52-week high.
That means estimates have been on the rise, creating some very
serious relative value. HL is a Zacks #2 Rank stock.
Coeu d'Alene Corp (NYSE: CDE) is a silver and gold miner
with a market cap of $2.35 billion.
CDE has also been under pressure over the last six months in spite
of the bullish gold and silver market. We have seen some very
strong movement in estimates, with the next-year estimate up
47 cents in the last three months to
$3.29. With a forward P/E of 10X and
bullish growth projection.
Pan American Silver (Nasdaq: PAAS) is a Zacks #1 Rank
stock, and you guessed it, shares are down over the last six months
while estimates have been moving higher. That means this gold and
silver miner with a market cap of $3.55
billion has serious value.
And finally, we have Aurico
Gold (NYSE: AUQ), the only name of the lot that has seen
gains over the last six months, currently trading at a multi-year
high. The company recently changed its name from Gammon Gold, but
either way, this is a very unique combination of growth and value
to spice up your precious metals portfolio.
Junior Miners are
Cheap
So as you can see, there is some serious value in the junior
miners right now, where an anomalously weak correlation to
underlying gold and silver prices has created a long-term buying
opportunity.
**Disclosure: The author own shares of CDE and AUQ**
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