Large-Cap Gold stocks have been ignored

my personal favourite is Newmont (NEM, NMC.TO) but i agree with Charles Oliver’s basic point

TGR: But what’s going to make those large caps move? We haven’t seen a dramatic movement in large-cap share prices despite having a gold price above $1,300/oz. for some time.

CO: You’re absolutely correct. The large caps have performed terribly over the last four or five years for a couple of reasons. When the gold exchange traded funds (ETFs) came out, a lot of money that had been in large caps migrated to the ETFs. That’s been going on for several years. When people migrate out of the large caps they help depress the price. So when I look at the large caps today I’m seeing valuations that are cheaper than I’ve seen this decade. If you look at companies like Goldcorp Inc. (TSX:G; NYSE:GG) and Barrick Gold Corporation (TSX:ABX; NYSE:ABX)—the big boys out there—these companies are trading very close to where they were in 2006 and 2007 when gold was at $600–$700/oz. Today, we’ve got nearly double that gold price.

These companies are making huge profits and generating a lot of cash flow. I think there’s going to be a day when people suddenly wake up and say, “Wow, look at the value!” I think part of the driver will be new investment from dividend-seeking individuals, dividend funds and value funds. If you look at dividend funds, they never held a gold stock because, during the 20-year bear market in gold, most gold companies weren’t paying a dividend and those that were certainly weren’t increasing it. Today, companies like Barrick are actually increasing their dividends and have the potential to do even more. I’m looking for that tipping point and I believe it will come.

via The Gold Report – Charles Oliver: Out of Africa, into Americas.


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