Re-entry short here in GG. The rally on Bernanke comments about ready-and-willing QE stimulus put a pop in GG shares. If you read the previous chart comments, you can see my thoughts on the decline and now that we have had a good rally on news, it will likely be a decent risk:reward entry for the continuation of the downtrend in GG shares and gold mining shares in general. GG is very similar to the other major gold stocks. Note that I put GG as a pairs-trade with ABX before. Either way, the main point about mining shares is that they have historically had very low returns on capital (source: Yahoo finance) and over time, capital tends to flow in the direction of higher relative returns.
Risk 3 average ranges. Reward: new lows for this move.
2:27PM EST 3/27/12
Comments
timwest
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GG's very low returns on invested capital are finally being reflected in stock prices. The longer term forecasts for GG have come to pass and I guess I have homework to do now to see if there is a place to go long GG down here. I shifted over some of my attention to ABX due to their commercial metals exposure, but it looks like it is time to begin to look for places to enter into GG at opportunistic prices.
lercarto
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Agreed.
38
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Agreed.
charttrader
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Followed.
charttrader
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Agreed.
timwest
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GG has made it down to the longer term price target, but even faster than anticipated. For anyone that owns shares, this may be a decent level for the stock to stop falling. It looks like it has washed out a lot of traders. Sometimes it just takes awhile for people to realize that an investment isn't a great performer.
charttrader
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Bullseye!
timwest
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I read the earnings report announcement and they made 51 cents per share. That is only 1.3% earnings "yield" for the quarter or 5.2% annualized "earnings yield". That isn't a great return for owning a mine, in my opinion. But if you have your money sitting in T-Bills earning next to zero, then by all means, sell some of your T-Bills and own some mining shares. That is what makes a market --- different investors with different expectations buying and selling.
timwest
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Time to cover the short in GG... New lows have been reached here. Good enough :-) Cheers everyone. Tim 11:46AM EST Wed, April 4, 2012