Submitted by QTR's Fringe Finance
For the most part, this review is going to highlight two things: first, the most important fact about my favorite position for the year, and second, highlighting how my 24 stocks for 2024 are finally outperforming the S&P 500.
While I’m excited about the outperformance, I still think the best is yet to come.
Let’s start by examining my favorite pick for the year, which is the VanEck Gold Miners ETF (GDX), as I laid out in this article at the very beginning of the year.
And as I reiterated a little more than a month ago: The Only Deep Value Left In This Bloated Circus Of A Market
Those who read me regularly and listen to my podcast will know that miners have performed poorly compared to the spot price of gold. This is because miners are “hated” (out of favor with the masses in the market still) and expectations for the future price of gold in most mining company models are still below $2,000 an ounce.
Call me crazy, but even in a panic sell-off and market crash, I don’t think gold may see its way back down under $2000 an ounce. It is prudent to assume that quantitative models across the board compiling the “all-in” price of mining for gold (now estimated in the $1800 range) are not giving fund managers accurate profiles of the true upside and leverage that miners could soon to achieve.
“This also explains why gold stocks trade like shit. Hell, ASIC’s will be $1,700 in 3 years if current cost inflation persists. When the market wakes up to the fact that $5,000 is more likely than $1,700 these stocks are going to fly,” Larry Lepard wrote last night on Twitter.
Fred Hickey also made a similar point on Twitter yesterday:
At this price, gold is $400 per ounce higher than the average realized price by gold miners in Q4. Currently in Q2, most of the increased margin is falling right to the miners' bottom lines (excluding taxes & increased royalties). Yet, gold miners' stocks still badly lagging. The two largest (Newmont & Barrick) are down YTD. If this price level is sustained (could be higher given gold's trend), margins, cash flow & earnings growth will be terrific (& hard to ignore).
He adds:
If one looks at all the negative comments here against the precious metals miners, one can see why they're so undervalued/hated. The 10+ year gold bull market that began in the early 2000s (miners skyrocketed 1660%) began with virtually no one interested in gold or the miners - just as is the case today. But many did pile in around the top in 2011-12 (as my subscribers know, I came into the sector at the beginning of that move in 2002).
The latecomers then got torched in the severe bear mkt. that followed (and they haven't forgotten). There were lessons learned in that bear market. There were management excesses and poor decisions made during the boom. However, most of the management teams that had made the bad decisions were rousted out & replaced by more disciplined ones focused on shareholder value & returns to shareholders. Growth for growth's sake was out. Debt was sharply reduced. Cash flows improved.
To answer one of the questions - most producers no longer hedge. To hold the current management teams in the sector responsible for what occurred a decade+ ago is silly and will lead to the same mistake investors made when they ignored the sector nearly 25 years ago.
It’s for these reasons – coupled with the fact that I think gold and silver are going much higher, not only as inflation hedges but hedges against geopolitical volatility – that the GDX and SIL still remain my two favorite positions as we start heading into the middle of Q2 2024.
To add to what Fred writes, I wrote last month:
Miners are also getting a lot of hatred nowadays because of how well Bitcoin is doing. I hear Peter Schiff talk a lot about how people are pulling their money out of gold miners and putting it into Bitcoin. At first, it sounds like he’s just making excuses (or as the bitcoiners say ‘coping’), but I’m sure this is what’s happening. If you look on social media, or you watch financial media, the hype is around Bitcoin as a safe haven asset, not gold. It is reasonable to assume that money is coming out of precious metals and moving into Bitcoin, even by investors who are just rejiggering their allocations and not necessarily abandoning gold altogether.
At the same time, the arrogance and hubris coming from the Bitcoin community that I have railed against for years (as recently as a couple days ago), even though I am now a bull, casts off gold as a relic of the past that simply will no longer be used as a store of value.
To believe that the whole world is going to abandon 5000 years of financial standards and reliance on the precious metal that has done its job as a safe haven is extraordinarily foolish, I don’t give a shit how bullish you are on Bitcoin.
I don’t believe that for Bitcoin to be successful, gold has to fail. There are going to be markets for both of them, and as I have said in numerous interviews and articles I’ve written over the last two months, gold still remains the bedrock underneath the world of finance for me.
Still think nothing big is happening? Check out this chart and the other 23 stocks I own that are...(READ THIS FULL REPORT HERE).
