CHICAGO, July 15, 2011 /PRNewswire/ -- Today, Zacks Investment Ideas feature highlights Features: Hecla Mining Co (NYSE: HL), Coeu d'Alene Corp (NYSE: CDE), Pan American Silver (Nasdaq: PAAS) and Aurico Gold (NYSE: AUQ).
Junior Mining Stocks are Cheap
In case anyone hasn't noticed, gold and silver are once again on a tear. The long-term bullish trend in gold that is now going on its tenth year has been driven by the ongoing devaluation of the Dollar due to growing fiscal imbalances and the Fed's easy money policies of the last few years.
But here's the thing; neither of these trends is showing any sign of slowing. In fact, they are actually accelerating. We just heard from Ben Bernanke and the Fed yesterday, saying that the Central Bank is once again prepared to intervene and support the market on any additional signs of weakness in the economy. And what did gold and silver do on the news? Gold hits an all-time high and silver jumps 5% in one day. Further stimulation means spending money that the Federal government doesn't have, which of course leads to further currency devaluation.
And even more immediately, we have a huge battle raging in Congress where Republicans and Democrats are duking it out over raising the debt ceiling. This has two very important implications. The first is the credit worthiness of the US, whose pristine AAA rating is now clearly in jeopardy after ratings agency Moody's placed the country's debt on negative watch. The second implication of the political standoff is tidal wave of uncertainty it's causing in the market, a factor that has investors seeking out "flight to safety" assets like gold and silver.
Gold is a Dollar Trade
The bottom line on gold is that it's a Dollar trade. And when you look at the massive deficit and total debt load of the Federal government, it's pretty obvious that there is only one way out. And that path is to "monetize" the debt, which is basically a covert way for economists and politicians to say print more money.
But playing gold can be confusing, you have many options. If you want to track underlying gold prices you can buy a gold ETF that will give you straight 1-to-1 exposure to the price of gold. But keep in mind, even if gold goes parabolic and hits $3,000, best case scenario has you doubling your money. You can juice your ETF trade a little bit by going with a double gold ETF, which will give you 2X the daily movement of gold. Beyond the ETF's, you can go with miners, buying stock in companies that own and extract gold/silver from beneath the ground in exotic locations all over the world. While this is a more aggressive play on gold, there is one more strategy that offers both unparalleled risk and upside.
Junior Miners to Play Precious Metals
Enter the junior miners, a very high-beta play with the ability to produce big gains in a bull market. Although the junior miners will be volatile, there is no other instrument that gives you more upside to bullish prices in gold and silver.
So if you're looking for a few satellite holdings for your portfolio to provide more exposure to gold and silver, be sure to check out the junior miners. Here are a few top picks in the category.
Top 4 Junior Miners
Hecla Mining Co (NYSE: HL) is a silver and gold miner with a market cap of $2.28 billion. In spite of gold and silver's meteoric rise over the last six months, HL has actually pulled back sharply from its 52-week high. That means estimates have been on the rise, creating some very serious relative value. HL is a Zacks #2 Rank stock.
Coeu d'Alene Corp (NYSE: CDE) is a silver and gold miner with a market cap of $2.35 billion. CDE has also been under pressure over the last six months in spite of the bullish gold and silver market. We have seen some very strong movement in estimates, with the next-year estimate up 47 cents in the last three months to $3.29. With a forward P/E of 10X and bullish growth projection.
Pan American Silver (Nasdaq: PAAS) is a Zacks #1 Rank stock, and you guessed it, shares are down over the last six months while estimates have been moving higher. That means this gold and silver miner with a market cap of $3.55 billion has serious value.
And finally, we have Aurico Gold (NYSE: AUQ), the only name of the lot that has seen gains over the last six months, currently trading at a multi-year high. The company recently changed its name from Gammon Gold, but either way, this is a very unique combination of growth and value to spice up your precious metals portfolio.
Junior Miners are Cheap
So as you can see, there is some serious value in the junior miners right now, where an anomalously weak correlation to underlying gold and silver prices has created a long-term buying opportunity.
**Disclosure: The author own shares of CDE and AUQ**
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