Buy Gold, Dirt Cheap!

Happy Friday, everyone. Sean Brodrick here. I need to share a chart with you. One I snagged off my Bloomberg terminal. It shows what I think could be a golden opportunity in one of the world’s biggest gold miners: Barrick Gold (NYSE: ABX).

The chart shows a couple things. You can see how the yellow line plunged compared to the black line.

The black line is the price of gold. The yellow line tracks Barrick’s enterprise-value to EBITDA multiple.

I’ll explain that …

Enterprise value is market capitalization, plus debt and a couple other things, minus cash and cash equivalents.

EBITDA is essentially net income with interest, taxes, depreciation and amortization added back to it.

Why am I using this, and not price-to-earnings (P/E)? Because EV/EBITDA is the multiple that Wall Street uses when figuring the theoretical takeover value for a company. In other words, how an investment banker might look at it.

Investment bankers might look at Barrick right now and lick their chops.

Why might you want to use this metric? Academic research has shown that stock selection based on EV/EBITDA outperforms P/E and price-to-book value methodologies on a risk-adjusted basis.

Now let’s add in the fact that, the last time Barrick traded at this valuation, gold was selling for 12% less than it is today.

Sure, Barrick is down because it had a lousy earnings quarter. It had problems. Let me tell you, Barrick’s problems with production and costs are temporary. They will pass.

Gold, meanwhile, is still in the early stages of a big bull cycle. There are many fundamental forces lining up to push the metal higher.

So, do I think Barrick will get over its problems and ride the rising surge of gold prices higher?

You bet I do.

Now, if you know about me and my Red-Hot Resource Millionaire, you know I focus on the big opportunities in smaller stocks. Gold and silver explorers, developers and miners that are trading for pennies compared to where they will be a year or two down the road.

But I’m not going to ignore big opportunities like Barrick is showing us here. It might not fit in Red-Hot Resource Millionaire. But it sure will fit in the portfolios of investors with vision and a little patience.

You can decide for yourself if that’s you. You’re in charge of your own investment destiny.

And we might not have to wait long …

Gold is coiling up. A blind fool could see that. Bear raids are ending in frustration. We’ve probably seen the last of Fed interest rate hikes this year, as U.S. GDP growth is crawling along at 0.7%.

Hell, yeah! This is a fertile environment for gold, silver and miners of all sizes. We might not have to wait long at all.

All the best,
Sean

***

Brad note: Thanks, Sean. I appreciate you sharing your opinion on Barrick. It’s just one of the extraordinary opportunities you’ve shown us in recent weeks. It looks like fireworks will come early this year for gold miners — May could be downright explosive!

***

It may not have been an explosive week in the markets, but it was memorable in a good way. The Dow Industrials touched 21,000 midweek on what Wall Street perceived as good news out of Washington.

Congress prevented a shutdown this week, approving a short-term spending bill to keep the lights on for another week. But the real driver for stocks was President Trump’s proposed tax reform. Whether it becomes a reality is still anyone’s guess. But hope was enough to send stocks higher for the week. The Dow gained almost 2% during this final week of April, and the S&P 500 edged 1.5% higher during the same time frame.

The Nasdaq Composite was the index to watch this week, though. It crossed above the 6,000 mark for the first time ever, and notched a nice 2.3% weekly gain on the back of big earnings from the world’s biggest tech companies.

This was a nice end to an otherwise-uneventful month for stocks. The broader-market indices gained about 1% for April.

• Big moves for Amazon (AMZN), Alphabet (GOOGL): Both companies reported earnings last night. And both notched some nice weekly gains — 3% for AMZN and 8% for GOOGL. And Comcast (CMCSA) gained 7.2% since announcing earnings Thursday. (A reminder: Comcast is one of the ISPs that stands to benefit from recent internet privacy rollbacks.)

• GOOGL co-founder joining space race: Sergey Brin has been building an airship, modeled after the U.S. Navy’s USS Macon, at a NASA research center. His co-founder Larry Page will keep his focus on flying cars. (Bloomberg)

• U.S. Steel (X) dropped 26.6% this week: Even though steel prices rose, the company’s second-largest producer reported "abysmal" earnings, as one Jefferies analyst put it. Nucor (NUE), the nation’s largest steel producer, finished the week flat.

• Weekly, monthly loss for oil: Black gold fell 0.6% this week, and 2.5% for the month of April. Even though OPEC continues to cut production — and even as Russia reportedly honored its production cuts this month — U.S. output kept a lid on prices. WTI crude ended the day at $49.33 a barrel.

• Big gain for Weight Watchers (WTW): Mindy Grossman, former CEO of the Home Shopping Network, will join the company as CEO in July. WTW has been without a CEO since late last year. Shares are up 80% year-to-date.

• Good April for gold: The yellow metal gained 1% amid dollar weakness and despite rising stock prices as Wall Street dared to hope for tax reform. Bullion ended the month at $1,268 per troy ounce.

Good luck and happy investing,

Brad Hoppmann
Publisher
Uncommon Wisdom Daily

Your thoughts on “Buy Gold, Dirt Cheap!”

  1. Gold and silver are heading south through summer and so are the miners. Why do you folks keep looking the other way?

  2. How can i invest in Barrick, I have put off investing in Gold and Silver for a few months, Im not an investor just an indivigal who would like and need to make a few bucks for a first Honeymoon that we never had in 36 years, Thank you

  3. It’s funny how Broderick is recommending ABX while Edelson’s Gold Mining Millionaire service says to avoid Barrick like the plague!

  4. We are not in an conventional investment cycle, to the contrary, unless you crave tulips, and debt, and manipulated markets, where the few profit, leaving a shambles for most, to pick out what gives the allusion of safe, and sound investing.
    Now, where is that tulip soup receipe, and I need to check if the recent debt expansion, for the soup bowl factory is paid this month, or if we should close the factory, and retail stores selling the soup bowls, and purchase the bowls as an import item. Hummmmm, now let me seeeeeee. While I am pondering this, I will make a few SAFE retirement investments, now let me see.
    This writer can provide factual detail, if satire you don’t understand.
    Buy in May and go away does not hack it boys and girls. You better sleep with your thumb on the button.

  5. hi brad.,

    i would like to share your enthusiasm about the things that could be in your country.
    but unlike your country, russia and china are getting ready to defend themselves against the THAAD missile shied that u.s.a. military is deploying in s. korea and other places close to russia’s border. (and china’s). warnings have already been sent to your ‘leaders’ that things WILL turn very nasty if your guys don’t back off. nuclear weapons to kill 70 million of your countrymen are to be used in very short time if something very nice is done by your so called leaders. none of your people realise that china and particularly rusia are streets ahead of your country in intelligence and military capability. its all very well for hillary c. to run around last year telling her generals to nuke russia, but now its sort of a bit late for anything but nuclear conflict. your western media has a ‘hate russia’ campaign going full tilt now. WHY!!! what has russia really done? american troops, military hardware : ships , planes etc. are circling the globe just spoiling for a fight. why? because your country and most western countries are going BROKE! and you know that. conversely china and russia have built up enormous reserves of gold. russia has a great economy, the envy of the elite in your country who cannot bear the thought of being outdone peacefully by the russians…so you resort to the old function of WAR!!! that, as you know is the age old solution to everything. when empires start to crumble and the military might is sent to crush opposition..then anarchy sets in on the attacker’s country (usa in this instance) dies. put to the sword. and all of this talk about investments etc. will be a forlorn nightmare. you see brad its never happened before in america. no overhead bombing, no invasion by hostile forces. the hostile forces though are already there courtesy of abama! an attack from within. the ‘patriots act’ will see to it that america is… well… doomed. all wars are planned. all strategies are thought out years before the action. but nobody in your citizenry can grasp it. your elites are fleeing the country. they know the correct version of events. they have prepared. cheers, ron and please tell ‘the donald’ to invite pres. putin for a game of poker before its too late.

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