With gold trading down sharply from its highs, Keith-Fitzerald offers a special report on gold stocks in Money Morning, highlighting three companies that he consider to be the "very best of the best."
"Gold remains a key profit opportunity -- especially if inflation, or even stagflation, is taking hold. It should also help that economic uncertainty is escalating. However, since the economic outlook has grown more uncertain, we've decided to our recommended list down to just three picks:
"The StreetTracks Gold Trust (NYSE: GLD) is an ETF that tracks the price of gold directly, making it the simplest way to invest in the yellow metal via an ETF. And with a market cap approaching $17 billion, this fund has ample liquidity.
"Barrick Gold Corp. (NYSE: ABX) is a Toronto-based company with mostly North American production, as well as properties in South America and Africa, and some copper and zinc add-ons. It has a $38 billion market capitalization, so there's plenty of liquidity.
"The recent pullback in commodity prices has opened up this window of opportunity," says resources expert Larry Edelson who reaffirms his long-term bullishness on gold.
In his Real Wealth newsletter, he explains, "If you think the slowdown in the U.S. economy is impacting China and other emerging markets - ground zero for the natural resources boom - think again." Here, he discusses his favorite gold plays.
"Not only are the Chinese and Indian economies expected to surge more than 9% this year, countless other economies throughout Asia, the former Soviet states and Latin American countries are also growing by leaps and bounds.
"As long as this massive new demand continues, natural resources and commodities will continue to soar And investors who use temporary pull-backs in this long-term bull market stand to multiply their money - over and over again - for years to come.
"You must own some gold in this economic environment. Gold represents the epitome of the natural resource boom because it is the world's best barometer of inflation and financial crises. When inflation is on the rise, as it is now all over the world, gold thrives.
"You must own some gold in this economic environment," emphasizes natural resources authority Larry Edelson who sees the recent setback in gold prices as "an ideal time to buy."
"Gold represents the epitome of the natural resource boom. It is the world's best barometer of inflation and financial crises. When inflation is on the rise, as it is now all over the world, gold thrives.
"And when there are financial crises, as we now have with the plunging dollar and the meltdown in the mortgage markets in the U.S. - gold gets an extra boost. Savvy investors flock to the safety of the precious metal, pushing its price even higher.
"In addition, there's more to the bull market in gold than just inflation and financial problems in the United States. Three billion new consumers in Asia are buying gold hand over fist! Previously in China, investors were not allowed to own gold. Now they can, and they are buying up gold like crazy.
"The recent decline in gold from above $1,000 is prompting gold bears to say that the great gold bull market has reversed itself," says Martin Hutchinson who states, "Let me say right now: They're wrong."
In his Money Map Reporter, he explains, "Thanks to three key catalysts, we may well see gold at $1,500 an ounce this year, if not higher." Here's his outlook and a trio of ways to play this trend.
"These three catalysts – worldwide monetary policy, global supply-and-demand for gold, and gold's past performance – have already ignited a powerful rally that's virtually certain to carry gold to much higher price points, despite the breather the rally appears to be taking right now.
"Don't be fooled. Every rally needs a catalyst – something that ignites and then fuels the bullish trend. As noted above, gold has three. Let's take a look at each of them:
1. Monetary policy: More than for any other investment, gold's price depends primarily on the world's monetary policy. When monetary policy is loose, as it was in the 1970s, gold prices soar. When it is tight, as in the 1980s, prices decline sharply.
When gold recently moved above $1,000 the Aden Forecast presciently noted that the metals were overbought and forecast a "well deserved breather" for the precious metals.
Now, with the setback in metals prices, Mary Anne and Pamela Aden explain, "We can't stress enough that you should stay invested in the major uptrend, which still has years to run. Don't get left behind or shaken out." Here is their outlook on metals and some favorite mining stocks.
"Are commodities the new bubble? Have they replaced the real estate bubble, which replaced the tech stock bubble, as investors move from one bubble to another? It sure looks like it.
"But the big difference is that this metals and commodities bubble has a lot further to go. Why? Basically, the perfect storm has been gathering and it's going to fuel a mega rise that will likely last for years to come.
"Most important is China and other growing nations, which are keeping demand and prices super strong. China's growth has been astounding at over 9% each year for more than 25 years. During that time, China has lifted 300 million people out of poverty and it's quadrupled the average income.
MOST NOTEWORTHY: BHP Billiton, Rio Tinto and Prudential Financial were today's noteworthy upgrades:
Bernstein upgraded shares of BHP Billiton (NYSE: BHP) and Rio Tinto (NYSE: RTP) to Outperform from Market Perform as they believe urbanization in China will increase demand for metals.
Prudential Financial (NYSE: PRU) was raised to Overweight from Underweight at Lehman as they believe the company's exposure to commercial mortgage-backed securities is limited.
As the mega-merger that created Citigroup (NYSE: C) is nearing ten years, the Financial Times interviewed John Reed, one of the masterminds behind the deal. Interestingly, he told the paper that the deal was a mistake and blasted several segments and personnel at the bank.
In other Citi news, the bank has agreed to pay $33 million to settle a discrimination lawsuit involving about 2,500 current and former female brokers at the company's Smith Barney subsidiary.
The Wall Street Journal reports that senior executives of Microsof (NASDAQ: MSFT) and Yahoo! (NASDAQ: YHOO) met this week to discuss Microsoft's bid for Yahoo!. Already we heard a few days ago that Microsoft is unwilling to raise its offer, and for now at least, Yahoo! continues to refuse to enter formal negotiations without a better offer. While no doubt Microsoft wants Yahoo!, it may be that Yahoo! needs Microsoft. On that basis, it's possible Microsoft could hold its own, betting Yahoo! would cave in first.
"Gold is the only true hedge against the falling dollar, the unfolding credit crisis, inflation, and geopolitical turmoil," notes resource expert Larry Edelson in Real Wealth. Here's a look at Yamana Gold (NYSE: AUY).
"I've been saying for a long time that gold could hit $1,000. Many called me crazy. Now, all of the market fundamentals - from the beleaguered U.S. economy that faces imminent inflation spikes to a battered dollar and global economic uncertainty – point to gold taking off to well above $1,000 an ounce.
"This is great news for our the gold positions in your portfolio, including our newest recommendation, Yamana Gold. Yamana is aToronto-based miner that has operations in both North and South America.
"Last year, the company produced 773,000 ounces of gold. This year, the company expects to boost production to 1.3 million ounces.That's a 68% increase!
"On top of that, if AUY's quarterly profits come in at the expected 22 cents a share when they report earnings on March 25, that would put full-year profits at 77 cents a share -- 1,000% higher than last year! If this happens, and it looks like it will, these shares are primed for a nice upward move."
Each day, Steven Halpern's TheStockAdvisors.com offers the latest market commentary and favorite investment ideas from the nation's leading financial newsletter advisors.
In sharp contrast to the ten horrifically downtrending stocks I warned against buying in this article, today I feature these 10 solidly uptrending stocks.
It's charts like theirs that make you wonder why you're messing around with any other stocks. Ahhh, if it was only that easy. No matter that all the stocks listed above are making new highs, now the concern is that they may have come too far too fast. In 2008, several of these stocks-the gold plays in particular-have risen nearly 50%. Obviously the oil stocks have also been surging, but how much further can the "black gold" plays really run?
MOST NOTEWORTHY: Spansion, Yamana Gold and Combinatrox were today's noteworthy initiations:
Spansion (NASDAQ: SPSN) was initiated with a Buy rating and $5 target at CRT Capital. The firm expects a stable pricing environment and seasonal demand to improve financial and credit metrics towards the back half of this year.
Yamana Gold (NYSE: AUY) was initiated with a Neutral rating at HSBC.
Punk Ziegel views shares of Combinatrox (NASDAQ: CRXX) as undervalued given its broad pipeline of drugs with significant potential. The firm started shares with a Buy rating and $7.50.
"Will there be a recession or not?" asks Mary Anne and Pamela Aden. In The Aden Forecast they note, "The scales are now tipping to inflation," which they view as bullish for gold and silver.
"Sure, the economy will probably slow down in the months ahead and stagflation is also a likelihood. That is, slower economic growth combined with inflation.
"The Fed and the world's largest central banks are working together in a massive, historical concerted intervention to provide all the money and liquidity that's globally needed to keep things rolling along. Money supply, for instance, is soaring at a 16% growth rate, the most in 47 years.
"The latest producer price figure strongly supported our view since it was the highest in 34 years, showing inflation running at a 38% annualized rate. Since producer prices lead consumer prices, this is a huge red flag that big inflation is coming.
"The new record high in the gold price is telling us the same thing, and so are the record highs in oil and the commodity markets. In other words, if a serious recession were coming, gold and commodities would not be soaring.
"Gold is an inflation barometer and the action in this market alone is signaling that inflation will very likely dominate the economic scene in 2008. Inflation is bad for bond prices. It usually means higher interest rates and this time is not an exception.
For 25 years, Steven Halpern, editor of TheStockAdvisors.com, has surveyed the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is one of 100+ ideas in the Best Stocks for 2008 report.
"The momentum for large-cap gold producers looks very bullish and my top speculative idea for 2008 is Yamana Gold (NYSE: AUY)," says Eric Roseman, editor of Commodity Trend Alert.
"Based in Toronto, Canada, Yamana is a large-cap gold-mining company with probably the best exploration portfolio in all of Central and South America.
"Yamana Gold had been heavily battered due to its buyout of Meridian Gold and Northern Orion. With these acquisitions now completed, the overhang of merger uncertainty has been lifted and the stock has sharply rallied off its 52-week low.
"The big picture for Yamana is a great portfolio of first-rate mines in Central and South America, booming earnings, rising positive cash-flow and production costs of $339 per ounce.
MOST NOTEWORTHY: Tyson Foods, Unilever, Brooks Automation, Akzo Nobel and Yahoo! were today's noteworthy upgrades:
Deutsche Bank upgraded shares of Tyson Foods (NYSE: TSN) to Buy from Hold on valuation and the potential for protein complex improvement.
Goldman upgraded shares of Unilever (NYSE: UN) to Neutral from Sell to reflect the company's diversified product range and growing exposure to developing and emerging markets.
Bear Stearns raised its rating on Brooks Automation (NASDAQ: BRKS) to Outperform from Peer Perform. The firm cited the company's compelling valuation and growth drivers.
Akzo Nobel (OTC: AKZOY) was upgraded to Buy from Hold at SNS Securities, as they see absolute total return greater than 20%.
CIBC upgraded Yahoo! (NASDAQ: YHOO) to Sector Outperformer from Sector Performer on valuation following the recent pullback and their analysis of Yahoo's non-operating assets. They believe Yahoo's stake in Alibaba Group is now worth about $4/share and raised their target to $31 from $28.
OTHER UPGRADES:
First Analysis upgraded Spss Inc (NASDAQ: SPSS) to Overweight from Equal Weight.
UBS upgraded Yamana Gold (NYSE: AUY) to Buy from Neutral.
Here's a defensive/growth hybrid that, I am underscoring, is only for those investors who can tolerate at least moderate risk: it's not for the low-risk investor.
Historically, mining stocks in general and gold stocks in specific are not defensive plays. But Yamana Gold Inc. (NYSE: AUY) breaks the mold. Yamana operates mines in Central and South America with 7 million ounces of proven and provable reserves. In general, analysts project solid gold production gains for Yamana, with the company adding copper to its mining plans, moving forward. The Reuters F2007/F2008 EPS consensus estimate for AUY are 75 cents to $1.00.
Still, as one realizes, production is not the only factor in a mining company's success. The price of precious metals is just as important, and the argument here is that demand for gold will remain strong: driven by jewelry and industrial uses. And, of course, there's gold's use as an inflation hedge. (Gold traded Monday at $792.60 per ounce, up $5.10.) The aforementioned, combined with Yamana's cost containment, make a better-than-adequate case for AUY's shares.
[Note: Technical analysis agnostics stop reading here; all others continue.]
Technically, Yamana's chart is adequate. The stock has recovered from a summer sell-off and is above its 50-day and 200-day moving averages.
Stock Analysis: Yamana is a moderate-risk stock not suitable for low-risk investors. Consider buying AUY's shares if you can tolerate moderate risk, but do not make AUY your primary defensive stock investment. Sell / Stop Loss if you were to buy it: $8.50.
Merrill Lynch downgradedWells Fargo & Co. (NYSE: WFC) to Neutral from Buy, citing the stock's recent outperformance and rising credit losses.
Mattel (NYSE: MAT), which also apologized to China for toy recalls, was upgraded Oppenheimer & Co. analyst Linda Bolton Weiser to Buy from Neutral, with a target of $30. The analyst said that recall-related bad news is now in the past and already priced in. There are a number of catalysts for share price growth like the introduction of new toys related to three movies and others. She expects operating margin expansion and double-digit earnings growth in 2008.
Family Dollar Stores Inc. (NYSE: FDO) was downgraded by JPMorgan anlayst Charles Grom to Underweight from Neutral due to tough competition and a sluggish economy.
Yamana Gold Inc. (NYSE: AUY) was downgraded at CIBC World Market from Sector Outperform to Sector Perform and the price target lowered from $16 to $14.
The least surprising of downgrades come from Bear Stearns of Circuit City (NYSE: CC), to Peer Perform from Outperform.
General Electric (NYSE: GE) has offered €4 billion ($5.6 billion) to buy the property assets which Spanish bank Santander is selling to fund its bid for parts of Dutch bank ABN AMRO.
According to executives at Google Inc. (NASDAQ: GOOG), it's true that U.S. mortgage lenders are cutting advertising budgets due to a global credit squeeze, but they are not likely to reduce internet search marketing anytime soon.
With gold trading down sharply from its highs, Keith-Fitzerald offers a special report on gold stocks in Money Morning, highlighting three companies that he consider to be the "very best of the best."
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Before the bell: Futures lower as oil rises, despite Alcoa earnings
Alcoa's Q2 2008 earnings transcript
Sir John Templeton, best contrarian investor of the 20th Century, dies at 95
