Brent Cook - Top Picks

In less than a month, junior gold and silver mining companies continue to fall. GDXJ, a popular junior gold and silver mining ETF, is down a staggering 32%. Compare this to a 14% decrease in the price of gold for the same timeframe. For some it is now bargain hunting time in junior resource stocks - looking for gold nuggets in the rubble. 


In a recent interview on BNN, Brent Cook - a respected veteran geologist and junior resource stock newsletter writer - offers a few of his top picks and explains why he likes them.  To watch the 5 minute Top Picks video segment, click here.


One of Cook's top picks is Almaden Minerals (AAU), a prospect generator.

Almaden Minerals has "chances for a real home run out there in terms of a major discovery that someone buys. There are so few good sexy big systems and this is one of them." He is referring to Almaden's Ixtaca gold and silver project in Mexico. It was mentioned that Cook added to his position a little over $3.00. 

AAU closed today at $2.31. In full disclosure, I own AAU. Do your own due diligence.


The whole interview  is in 7 parts and well worth watching it in it's entirety. 

Rick Rule: Aggressively Buying Gold, Silver and Miners

The sharp correction in gold, silver and mining stocks continues. In just 3 weeks, here is where we stand:

                                        GLD:     -15%

                                        SLV:      -28%

                                        GDX:    -18%

                                        GDXJ:  -27%

It is not a pretty picture - to say the least! It takes a strong stomach to handle this volatility. 

What is Rick Rule, founder of Global Resource Investments, one of the most respected veteran resource investors and self-proclaimed contrarian investors doing with his own money right now? In an interview this week with King World News, Rick Rule answers this question and more. Good insights.

Rick Rule: What we are seeing in the markets right now is exactly the type of psychotic break, the type of non-fundamentally related volatility, that has over the last twenty or thirty years given us the entry points that have, in fact, built our track record.

The idea that 30 year US Treasuries are safe seems to me to be a widely held perception that’s wrong. . . . What I am doing by buying bullion is taking the back side on a trade of a widely held perception that I believe to be wrong.  I am further, if you will, taking that trade on steroids by buying the smaller market cap advanced stage developers or small producers. 

I think what’s causing the volatility in these markets in the very near-term is a constraint in credit.  The European banks, in particular, have been big providers of credit in the commodities business. The European banks have less availability of near-term credit themselves and so they are cutting back credit lines to their commodity related customers.

The set of circumstances you are seeing now in commodity markets, this extraordinary volatility, is a function, in the very, very near-term, of increasingly constrained credit markets and that is going to continue for a while.

I see a bit of a rebound this week as gold is oversold, and then the decline may resume, but I’m not sure I see gold settling on a daily basis below $1,500.  What’s important here, Eric, is that the action that we are seeing now isn’t fundamental action, it’s volatility.  

The junior producers, the sub $1 billion or sub $250 million stocks, are absolutely being decimated.  In particular, the stocks that are being decimated are in frontier markets in places like West Africa or South America or Asia.  So I’m going to be concentrating my efforts on the most decimated sectors in the precious metals markets.  Bullion markets are being decimated with people moving into long US dollar instruments.  I’d like to be on the other side of that trade, and I’m going to.

Disclosure: I am a client of Global Resource Investments 

Gold Stocks - Moving on Up

As I pointed out in my first blog post a few weeks ago (quoting John Hathaway of the Tocqueville Gold Fund), "gold stocks represent extraordinary value and extraordinary opportunity right now." In the last 6 weeks, $HUI (the AMEX Gold Bugs Index) is up 20% and is now flirting with hitting new highs. Fundamentally gold stocks are still cheap and have plenty more room to go, according to Chris Mayer, editor of Capital and Crisis.

Chris Mayer: Gold Stocks are fundamentally cheap based on cash flow. One of the most remarkably chart I've come across is the nearby one showing the collapse in the cash flow multiples of gold stocks. They've gone from 20 times in 2008 to about 10 times this August!

The last time gold stocks got this cheap, on this basis, was back in 1979, when the group touched 8.5 times cash flow. This preceded a parabolic move in gold stocks in which they ultimately ran up four-fold. The 1970s is an interesting period to look at because gold stocks also lagged the price of the metal all the way up. 

Check out the rest of the Chris Mayer's article which includes 3 reasons why the gold stocks have underperformed the gold price so far. He also provides a chart that shows how gold stocks performed (very well!) shortly after the last time gold stocks multiples were this cheap in the 1970's.