The Omni Intelligencer

Sell your house faster for more. auction-style-property-sale
  Friday, May 27, 2016  Home > Money > Finance > Investment > Most Profitable Time For Gold and Gold Miner Stocks - Is It Time Yet?
Follow us on Twitter
Every Dollar Helps
Donate using PayPal
Amount:

Most Profitable Time For Gold and Gold Miner Stocks - Is It Time Yet?

| More
The Riskiest Time of the Year for Stocks Is Also the Most Profitable

Next week starts the riskiest month of the year for investors. Stocks have historically performed worse in September — down about 1 percent on average over the past 60 years — than any other time of year, according to the Stock Trader's Almanac.

If that weren't concerning enough, investors have another reason to be on guard: A potential "tapering tantrum" in markets.

The next Federal Reserve policy meeting takes place Sept. 17-18, when the central bank will consider whether to start winding down its $85 billion-a-month bond-buying program known as quantitative easing (QE).

That tapering, a word made infamous by the Fed, has been making headlines since May, when Chairman Ben Bernanke first hinted policy makers might curtail QE depending on the economic outlook. Any mention of that word by Fed officials since then has resulted in turbulent trading for stocks, bonds, commodities and the dollar.

The consensus view is that the Fed will announce a slowdown in the pace of QE purchases at next month's meeting. But no matter what the Fed says, volatility is already on the rise and trends are beginning to shift beneath the surface of the market.

For instance, the S&P 500 Homebuilding Index, a sector I wrote about previously in Money and Markets, went from a top performer in the first quarter (up 13.5 percent) to the second-worst performer since July 1 (down 12.1 percent).

Another dramatic reversal of fortune, but in the opposite direction, is happening in metals and mining stocks. They declined 3.2 percent in the first quarter but have surged 14.1 percent since the end of June.

Investors should pay attention to these shifts in sector leadership, especially when they occur at turning points for the broader market, which may be the case now. That's because the correlation between movements of individual stocks, sectors and the market in general often change over time. Yesterday's winners can easily become tomorrow's losers, or vice versa. And being in the right stocks and sectors at the right time can make all the difference in performance.

What follows are some of the shifting trends to keep an eye on.

First, when I search for stocks and sectors with market-leadership potential, I like to start by screening for those that are undervalued and, perhaps, out of favor. Having both factors working in your favor is best.

Everyone likes to find a bargain. When shopping, the idea is to keep an eye out for high-quality merchandise when it goes on sale. Bargain seekers love sales but, on Wall Street, that logic often fails. When stocks "go on sale," investors run away, shunning the best bargains.

That's because bargains are usually accompanied by bad headlines, inducing pessimism and making it tough to pull the trigger, even for dedicated contrarian investors.

After a 13 percent rally this year, it's not easy to find bargains in the S&P 500. Stocks aren't wildly overvalued, but they're not dirt-cheap either. Still, pockets of value do exist, if you take a closer look at basic valuation metrics.

Take the metals and mining sector. Mining shares have suffered as gold has fallen 20 percent in 2013 while copper has tumbled 9 percent.


Click for larger version

As a result, mining shares are trading at bargain values today: Less than book value and at a substantial discount relative to the S&P 500.

In fact, if the sector were to rise to only average valuation levels based on price-to-book, there would be 42 percent upside potential.

Still, simply identifying undervalued stocks and sectors alone isn't enough.

After all, undervalued and out-of-favor shares can stay that way a long time. In the same way, overvalued sectors can continue to move higher, becoming even more overpriced.

So the second important step in this process is to identify what appears to be a well-defined change of trend for the better. Sometimes sentiment can be a guide. When a sector is so out of favor that you see nothing but a steady flow of negative news, and everyone on CNBC says "sell," that can actually be a positive sign.


Click for larger version

Sure enough, as seen in the graph above, big institutional investors have little exposure to commodities and materials stocks in their portfolios now, according to a recent global fund manager survey from Merrill Lynch. In other words, hedge fund managers and other big investors have already unloaded their basic material stocks — there's nobody left to sell.

That means if an unexpected positive catalyst emerges — perhaps a sharp rebound in gold and copper prices — a huge amount of money on the sidelines could rush back into this unloved and undervalued sector, pushing mining stocks much higher in the process.

In fact, the process may already be under way.

Since July 1, the S&P 500 has gained just 3.1 percent, while the S&P 500 Metals & Mining sector is up 14.1 percent. Even as the stock market is losing steam, mining shares are gaining momentum. Investors see bargains in these stocks and money is starting to flow back into the sector.

Once that correction is over, metals and mining shares could be one sector that emerges as a new market leader. For a sector that's on my watch list of potential buy candidates, please visitMoney and Markets' Facebook page. Please share that information with your friends and make sure to leave me a comment.

Source: moneyandmarkets.com


Sell your house faster for more. auction-style-property-sale
| More
 

Current Headlines - Finance

  • Wall Street puts finishing touch on best week since March 27 May 2016 | 3:32 pm

    Federal Reserve Chair Janet Yellen speaks at the Radcliffe Institute for Advanced Study at Harvard University in Cambridge, MassachusettsWall Street rose on Friday and capped off its strongest week since March after U.S. Federal Reserve Chair Janet Yellen said an interest-rate hike would likely be appropriate "in the coming months." Yellen's is the most important voice in a chorus of policymakers recently suggesting that the U.S. economy has improved enough to warrant tighter borrowing costs, with a growing number of investors now expecting a hike in June or July. "As we look at our place in the global economy, things just seem to be improving to a point where it certainly looks likely that June or July will be the next launching point," said Paul Springmeyer, portfolio manager at the Private Client Reserve of U.S. Bank. "With the increased strength, we should get up off of those historically low levels where we are." After Yellen's speech, traders raised their expectations of a June rate hike to 34 percent from 30 percent, according to CME Group.


  • Yellen remark 'doesn't suggest' June hike - DoubleLine's Gundlach 27 May 2016 | 2:51 pm

    (Reuters) - Jeffrey Gundlach, the CEO of DoubleLine Capital, said Friday that Federal Reserve chair Janet Yellen's remarks that a rate hike would be appropriate in coming months "doesn't suggest" a hike in June. Wall Street trimmed gains in early afternoon trading on Friday after Yellen said it would likely be appropriate to raise rates "in the coming months." But Gundlach said he still believes Yellen was more dovish in her comments Friday than her Fed colleagues.

  • Senate sleuths focus on ex-State Department aide in Clinton email ‘cover-up’ 27 May 2016 | 1:32 pm

    Senate sleuths focus on ex-State Department aide in Clinton email ‘cover-up’As Hillary Clinton seeks to rebound from a highly critical report from the State Department’s inspector general, Senate investigators and a conservative group are zeroing in on newly revealed evidence about the activities of a now retired State Department computer specialist in orchestrating what they charge was a “cover-up” of the former secretary of state’s email practices. The role of John Bentel, whose identity as a key figure in the email probes was first reported by Yahoo News on Wednesday, is expected to be one focus of questioning today when Clinton’s former chief of staff, Cheryl Mills, is deposed in a lawsuit brought by Judicial Watch over the State Department’s handling of Freedom of Information Act requests relating to Clinton’s emails, according to a source close to the case.


  • G7 told to act on antibiotics as dreaded superbug hits U.S. 27 May 2016 | 10:39 am

    Colonies of E. coli bacteria are seen in a microscopic image courtesy of the CDCBy Kylie MacLellan and Ben Hirschler ISE-SHIMA, Japan/LONDON (Reuters) - Britain told the G7 industrial powers on Friday to do more to fight killer superbugs as the United States reported the first case in the country of a patient with bacteria resistant to a last-resort antibiotic. U.S. scientists said the infection in a 49-year-old Pennsylvania woman "heralds the emergence of truly pan-drug resistant bacteria" because it could not be controlled even by colistin, an antibiotic reserved for "nightmare" bugs. In Japan, British Prime Minister David Cameron said leading countries needed to tackle resistance by reducing the use of antibiotics and rewarding drug companies for developing new medicines.


  • Statue of Liberty, other world sites threatened by climate change, says U.N. 27 May 2016 | 10:29 am

    Statue of Liberty, other world sites threatened by climate change, says U.N.The Statue of Liberty is seen in New York harbor. Climate change might dampen Lady Liberty’s glow, according to experts. The United Nations released a report Thursday saying 31 natural and cultural World Heritage sites in 29 countries are vulnerable to the effects of climate change: rising temperatures, rising sea levels, intensifying storms, longer droughts and so on.


  • China's central bank condemns foreign media reports on yuan 27 May 2016 | 7:21 am

    China's central bank on Friday condemned two news reports from foreign media outlets published this week about currency reforms and monetary policy. The People's Bank of China (PBOC) said in a statement on its official Weibo account the reports "fabricated facts, misled readers, misled markets", and that it reserved the right to take legal action. The headlines appeared on articles published this week by the Wall Street Journal and Bloomberg.

  • Saudi Aramco boosting market share as it prepares for listing: CEO 27 May 2016 | 7:15 am

    Amin H. Nasser, President and CEO of Saudi Arabian Oil Company Saudi Aramco, attends the Oil and Gas Climate Initiative summit ParisBy Reem Shamseddine KHOBAR, Saudi Arabia (Reuters) - Saudi oil giant Aramco is gaining market share and pushing for greater efficiency, chief executive Amin Nasser said in an interview, as it acts as a "bridge" to a future when the nation relies less on energy exports. Nasser also told Reuters that the state-owned group was pressing on with preparations for its partial privatization via a stock market listing, which he said lay at the heart of Riyadh's "Vision 2030", a long-term economic plan headed by Deputy Crown Prince Mohammed bin Salman. Riyadh has been the driving force behind OPEC's decision in November 2014 to refuse to cut supply to boost prices.


  • Malaysian PM says police to investigate Wall Street Journal over leaked document 27 May 2016 | 6:23 am

    File photo of Malaysia's Prime Minister Najib Razak at an event in Kuala LumpurMalaysian Prime Minister Najib Razak said on Friday the central bank governor has asked the police to investigate the Wall Street Journal for leaking a confidential document related to an inquiry into scandal-hit government fund. Publishing confidential documents under OSA (Official Secrets Act) is a very serious action on (their) part. Earlier on Friday, the Wall Street Journal published a copy of a letter said to be from Malaysia's central bank and addressed to Hasan Arifin, the chairman of a parliamentary committee investigating the state investment fund, 1Malaysia Development Bhd. When asked if the letter was authentic, Najib said: "I don't know.


  • Sanders tells Kimmel he has offers to host Trump debate 26 May 2016 | 10:35 pm

    Sanders tells Kimmel he has offers to host Trump debateHOLLYWOOD, Calif. – It was Bernie Sanders’ turn to take the chair on “Jimmy Kimmel Live” Thursday, one day after Donald Trump appeared on the show and said he would be willing to debate Sanders before the June 7 primary in six states, including California. Unlike Trump’s visit, there were no protesters gathered outside the El Capitan Theater on Hollywood Boulevard tonight. Inside, Kimmel took full credit for raising the idea of a Trump-Sanders debate in the first place — and he volunteered to moderate the event.


  • 19 people rescued from Kentucky cave 31 Dec 1969 | 6:00 pm


The fastest and best way to sell real estate.
auction-style-property-sale