On April 10, the New York Times reported the vault of the Federal Reserve Bank of New York, which holds the largest gold cache in the world, had lost $75 billion in value. Robbers were not to blame -- a 17% drop in the price of gold from late 2011 was.
Less than a week later, on Monday, gold's price melted another 9%, the sharpest fall in 30 years. Goldman Sachs recently lowered its projected average gold price for this year from $1,610 an ounce to $1,545 an ounce. From a high of $1,888 an ounce in August 2011, the price of gold recently fell south of $1,400 an ounce.
Investing in gold is not for the faint of heart. I rarely recommend investments like speculative gold, but currently my guru strategies -- which are computerized strategies I modeled after the strategies of well-regarded Wall Street gurus-- have identified three companies engaged in gold production worth buying today. Buyer beware: these are all promising investments but are all highly risky.
With operations in South Africa and Papua New Guinea, South African-based Harmony Gold Mining Company (HMY) is in the gold mining and production business. My Joseph Piotroski-based strategy likes this company's prospects. To earn a high rating, the company must be in the top 20% of the market based on the book-to-market ratio, which is the inverse of the price-to-book ratio. Harmony's B/M of 2.8 places it in this top-20. In addition, the company has positive returns on assets, positive cash flows from operations, almost no long-term debt and an expanding gross profit margin.
Toronto-based Agnico-Eagle Mines Limited (AEM) owns gold mines in Canada, Finland and Mexico. The strategy I based on the writings of Peter Lynch likes this company because of its price-to-earnings relative to growth, and is a measure of how much the investor is paying for growth. Agnico-Eagle's P/E/G is a very strong 0.52, well below the 1.0 maximum allowed. Also in the company's favor is a moderate amount of debt.
Compania de Minas Buenaventura (BVN), Peru's largest publicly traded precious metals company, produces silver and byproduct metals such as zinc and lead, in addition to gold. My Benjamin Graham-modeled strategy is recommending Buenaventura because: it has significant sales revenues ($1.6 billion), a current ratio in excess of 2.0:1 (Buenaventura's is 2.3:1), modest debt and a relatively low P/E (7.55:1).
If you are a gold bug or believe gold is destined to rise again, these stocks are worth owning.
