“Last week everything was going down the drain, and now everything’s perfect” — that’s a comment I heard on CNBC this morning, facetious though it was, that goes a long way toward mirroring the movement in gold prices. Last week armageddon was coming and everyone wanted to own gold, today maybe the world financial system will recover so perhaps we don’t all need to buy gold.
But even though the price of an ounce of gold has come down by close to 10% from it’s crazy highs over $1,000 in very rapid fashion, it’s certainly still got everyone’s attention. And Mark Skousen is aware of that.
Which is why his latest “buy this one before earnings” alert is about a company that’s somehow related to gold.
Skousen seems to rely on this as one of his core marketing techniques — picking out a company he has recommended that’s abou to release earnings, predicting blowout earnings, and urging you to buy the stock. As soon as you’ve subscribed to his newsletter to find out the name of said stock.
In this case, the subscription being peddled is the Skousen Hedge Fund Trader, which is one of his pricier offerings at an introductory price of about $1,000 a year. Actually, just about the same as an ounce of gold … I wonder which one is the better buy?
So I must warn you, my intrepid sleuthing friends, that this may be an effective marketing technique but it’s not necessarily a guaranteed money making strategy. Skousen in my memory has been mildly right once or twice and largely wrong a couple times in making these “earnings bounce” predictions — though to be fair, an ability to predict earnings bounces probably has little relation to his overall success rate. Making predictions like this is generally a good way to go broke, since it’s very hard to both predict whether a company will beat estimates and predict how the market will react to those earnings and to whatever guidance might be offered. Calling it a “crap shoot” is an insult to back alley dice rollers everywhere.
But hey, maybe he’s right. Maybe this company will have blowout earnings tomorrow. Here are his words:
“I’ve just uncovered a gold stock — one that’s up close to 40% over the last three months while the S&P was down double-digits — that’s set to unleash a glowing earnings surprise on Tuesday, March 25! And I fully expect this earnings announcement to send this stock soaring… even higher than it has been recently!”
“I’m predicting this gold company’s March 25 earnings announcement will be the scene of a stunning earnings surprise. And when the company reveals that they’ve handily beaten analyst expectations, the stock will likely soar instantaneously! … It’s no exaggeration to say that come Tuesday, March 25, you could take home some of the biggest gains of 2008!”
What else does he tell us by way of a clue to this company’s identity?
“Last quarter, total gold production soared 48% to 131,366 ounces. Not to mention revenue quadrupled to $199.7 million and earnings per share rose 20-fold!”
So that’s plenty of information for the mighty Gumshoe Thinkolator to chew on. I can tell you that this company is …
Yamana Gold (AUY)
They will be releasing earnings tomorrow, assuming that you’re reading this on Monday. They’ll be releasing their next results, the year-end earnings, on Tuesday … but if you’re reading this on Tuesday you’re still probably in plenty of time, the release will be after the market close and the conference call won’t be until Wednesday morning at 11am, both of which could move the stock price in either direction.
That quarter of growth when their production soared 48% was last year’s third quarter, the last one released.
It’s down about 20% from its highs — and those highs were set just a week ago with Gold cresting over $1,000. So that’s one example of the way that mining companies often trade as whips at the end of the tail of the gold market. Big moves up or down can make the miners move even more dramatically, even big miners like Yamana.
Here’s a chart comparing AUY with GLD, the gold ETF that’s a pretty fair tracker of the spot gold price — you can see the blue AUY line moves around a lot more than even the fairly jumpy price of gold. This is more or less the same kind of thing you’ll see with most gold miners:
Yamana is a fairly diversified gold miner based in Canada, with mines in Nevada, Mexico, and throughout South America, but their main revenue generation and success has come from Brazil. According to the company, they hedge a lot of their copper production but do not hedge their gold production, which means they can potentially do much better as the (if the) price of gold moves up.
They’ve also been growing through relatively small acquisitions from their Brazilian base, and have certainly gotten plenty of attention over the last couple years. For a while this was Jim Cramer’s favorite gold miner, but that was probably in 2006 and I’m not sure what he thinks of them today (or if that matters). This was also the solution to another teaser that said you could buy gold for “a penny an ounce” — a teaser that has been around for eons but still gets trotted out now and again (I don’t think I’ve ever written about them before, but there have been several Yamana threads on the forum, including this one). Whenever you see miners touted as being incredibly low cost, it’s often because of the ancillary revenues from a secondary product that they’re mining — which in the case of Yamana and most other gold miners is copper. Copper miners will tell you that they can extract copper cheaply because they’re subsidized by the gold that also comes out of the ground in the same mine, gold miners will tell you the reverse. All great, as long as they hedge well or their commodity prices remain high.
So … wanna buy a gold miner? I’m not in the market for one at the moment, but Skousen is convinced that these shares will explode this week. Maybe he’s right, maybe not … I’ll be watching.
Happy Investing, all … and for those of you lucky enough to have been on spring break, stop bragging about your sunburn and get back to work!
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