Welcome!

News Feed Item

Zacks Investment Ideas feature highlights: SPDR Gold Shares, iShares Silver Trust, Rio Tinto, Stillwater Mining and Franco Nevada

CHICAGO, Feb. 11, 2014 /PRNewswire/ -- Today, Zacks Investment Ideas feature highlights Features: SPDR Gold Shares (AMEX:GLD-Free Report), iShares Silver Trust (AMEX:SLV-Free Report), Rio Tinto PLC (NYSE:RIO-Free Report), Stillwater Mining Co (NYSE:SWC-Free Report) and Franco Nevada Corp (NYSE:FNV-Free Report).

(Logo: http://photos.prnewswire.com/prnh/20101027/ZIRLOGO)

Pay Mind to the Miners

Sorry King Midas, but nobody cares about what you touch anymore. That shimmery stuff you melt down to make rings and things has lost its luster. Gold was the talk of the town around $1,900 an ounce but since the collapse in prices now it's an afterthought. Which to me is baffling. I think that the real reason gold prices are not that high is the same reason people think that gold should be high. It's all the "worthless" fiat currencies of the world. Globally we are printing money and devaluing currency. So the only thing on Earth that should be worth any money is a hard asset like gold, right? Sounds good in theory. But who are the major players in the gold market? Who buys the most gold? Central banks do. So now if your currency has depreciated then guess what you can't do? Buy as much gold as you used to. And the cycle continues...

Downward Channels

I am not bold nor crazy enough to come out and say that the tough times are behind us for the precious metals. I do, however, offer up a couple of charts that may change a few minds. First take a look at the gold chart using the exchange traded fund SPDR Gold Shares (AMEX:GLD-Free Report). From the October 2012 relative high near $175 we can draw a trend line channel across the first few tops. This trend was broken to the downside in April 2013, rendering these trend lines obsolete for the time being. Just for giggles though, let's extend these through today. More on this later.

Now let's fast forward to price action since September 2013.  We can draw another channel coming down across the tops through January 2014 only to be violated at the beginning of February by continued bullish price action. This technical picture looks a lot different given this new set of circumstances. The chart changes from a downward death spiral to dead cat bounce with a side of optimism. Price sits above the 25x5 SMA and, more importantly, above the most recent downward price channel. To quote the great Jim Carey, "So you're saying there's a chance!" The next resistance sits at the extension of the downward trend line from the October 2012 high.

You can't talk gold without mentioning its hard-working, industrious, albeit less glamorous and attractive brother silver. On the charts silver and gold have a very high correlation. Economically this never really made sense to me as they have to very different sets of supply and demand determinants. Silver has industrial uses far above and beyond what gold has. Gold pretty much gets mined, shined, and showed off or buried. Silver is used to make all sorts parts from light switches to soldering applications to water purification. Regardless of what theory suggests, the chart moves pretty much in step with gold. As such, the silver chart has nearly the same pattern as gold but has not had the breakout yet from the major trend line resistance. Here we use the iShares Silver Trust (AMEX:SLV-Free Report) and can see it trading in the $19 handle down from an October 2012 high in the low $30s and a far cry from the all-time highs seen in April of 2011 in the $48 range.

Gold has a relatively high correlation with many metals, not just silver. My thinking is that if we see a recovery in gold prices it will spill over to silver, platinum, copper, aluminum and a host of other metals to a certain degree.

What if?

Entertain my wild ideas for a minute here. What if the pundits screaming "Gold is dead" are wrong? What if gold has seen the worst of its decline? What if the recent price action is the beginning of a gradual recovery in prices and not a dead cat bounce? What if there was a way to profit from this crazy notion other than buying GLD or SLV?

If you have never paid any mind to the miners then you might like what you're about to hear. By investing in a diversified mining operation we stand to make profits on a recovery in gold and silver prices but will still be insulated by exposure to other metals so it is not a "make or break" proposition. Further, we can use the Zacks Rank to uncover mining companies that have had the most positive earnings estimate revisions. Given the fact that miners have been relatively beat up during last year's market rally we have the chance to find a few real bargains.

Rio Tinto PLC (NYSE:RIO-Free Report) is an international mining company with interests in mining for gold, silver, copper, coal, iron ore, uranium, zinc and a host of other metals. Fundamentally it's a Zacks #2 Rank. A quick look at the price and consensus chart gives me hope for the future. You can see the price tracked the consensus estimates and revisions relatively closely for the past four years. Estimates have slid along with prices for gold and silver since Q2 2011 and the stock sold off as a result. The recent consensus estimates have seen a bounce off the bottom as prices appear to be stabilizing. Should this trend continue it is very bullish for shares of RIO.

The technical chart on RIO reads bullish as well. The recent range from $51 to $57 looks to me like a consolidation after a big move from the low $40s. A break above $57 with volume would be a very bullish breakout. Failure to breakout would not be a sell signal but rather a chance to get in near the bottom of the recent consolidation range from $51-$53. A breakdown below $51 means you look for another stock to buy.

There is something about the name of this stock that soothes my nerves. Stillwater Mining Co (NYSE:SWC-Free Report) is engaged in mining operations in the Stillwater Complex in southern Montana. The area contains gold, copper, nickel, chromium, platinum and palladium. SWC is a Zacks #1 Rank and its last earning surprise was a whopping 425%. I want to show the price and consensus chart because it shares an important characteristic with RIO. Recent earnings revisions have seen upwards momentum for the first time since gold and silver began their decline. I think that a pattern is beginning to develop amongst analysts which only further supports the idea that gold may have already bottomed.

The price chart is temporarily bearish but that could change in a few days. I like the fact that the stochastics are oversold and awaiting a buy signal. I like the pull back and support at $12. What I don't like is the speed of the fall from mid-January to today and I don't like seeing the stock below the 25x5. This trade set up could take a couple weeks. I would need to see the stock get above the 25x5, pull back to it, then see a stochastic buy before I got on board. This is a perfect case of great fundamentals but I'll pass on the technicals right now. In mid-December the stock set up perfectly for a buy around $11 which took the stock near $14. But it is not mid-December, it's February so I would be patient for better technical timing.

If the first two examples were dipping your toes in the water on a possible gold rebound then this next stock is a cannonball from the high board. Franco Nevada Corp (NYSE:FNV-Free Report) is a gold focused royalty and stream company with some interests in platinum group metals. While this does not make it a 100% pure gold play, it does give it added risk to price movements in the base metal. The price and consensus chart looks the way you think it would given the other two examples. However, FNV has only been around since late 2011 so the chart is not as impactful. Being a newer operation, the analysts haven't quite figured things out and the estimates have been all over the place historically. Recently, upwards revisions of some magnitude have helped push FNV into a Zacks #2 Rank.

On my chart I like what I see. The stock pushed above resistance at $48 and had been consolidating. It rested firmly above the 25x5 while the 25x5 had a very positive slope. Stochastics were beginning to come down from overbought levels as the stock consolidated between $48 and $50. I would buy today's break out above $50. If you missed it, that's alright too, a better opportunity will come with a pull back to the 25x5 coupled by confirmation from the stochastics.

The bottom line is if you believe in a possible recovery in gold prices these three stocks are all good ideas. With a little bit of patience you can find favorable entry points that will offer up the best risk versus reward scenarios. If gold continues to unwind, hopefully the diversification in the first two stocks will cushion any downside and a wisely set stop loss will protect you on FNV. With the chart set up on gold and the earnings revisions by analysts I think there is a relatively strong case for at least a consolidation in gold prices if not a reversal of the long term down trend. 

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros.  In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Click here for your free subscription to Profit from the Pros.

Get the full Report on GLD – FREE 
Get the full Report on SLV – FREE 
Get the full Report on RIO – FREE 
Get the full Report on SWC – FREE 
Get the full Report on FNV – FREE

Follow us on Twitter:  http://twitter.com/ZacksResearch

Join us on Facebook:  http://www.facebook.com/ZacksInvestmentResearch

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
[email protected]
http://www.zacks.com

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

SOURCE Zacks Investment Research, Inc.

More Stories By PR Newswire

Copyright © 2007 PR Newswire. All rights reserved. Republication or redistribution of PRNewswire content is expressly prohibited without the prior written consent of PRNewswire. PRNewswire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Latest Stories
DevOps at Cloud Expo – being held October 31 - November 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA – announces that its Call for Papers is open. Born out of proven success in agile development, cloud computing, and process automation, DevOps is a macro trend you cannot afford to miss. From showcase success stories from early adopters and web-scale businesses, DevOps is expanding to organizations of all sizes, including the world's largest enterprises – and delivering real r...
Cloud applications are seeing a deluge of requests to support the exploding advanced analytics market. “Open analytics” is the emerging strategy to deliver that data through an open data access layer, in the cloud, to be directly consumed by external analytics tools and popular programming languages. An increasing number of data engineers and data scientists use a variety of platforms and advanced analytics languages such as SAS, R, Python and Java, as well as frameworks such as Hadoop and Spark...
Cloud promises the agility required by today’s digital businesses. As organizations adopt cloud based infrastructures and services, their IT resources become increasingly dynamic and hybrid in nature. Managing these require modern IT operations and tools. In his session at 20th Cloud Expo, Raj Sundaram, Senior Principal Product Manager at CA Technologies, will discuss how to modernize your IT operations in order to proactively manage your hybrid cloud and IT environments. He will be sharing bes...
Interested in leveling up on your Cloud Foundry skills? Join IBM for Cloud Foundry Days on June 7 at Cloud Expo New York at the Javits Center in New York City. Cloud Foundry Days is a free half day educational conference and networking event. Come find out why Cloud Foundry is the industry's fastest-growing and most adopted cloud application platform.
Five years ago development was seen as a dead-end career, now it’s anything but – with an explosion in mobile and IoT initiatives increasing the demand for skilled engineers. But apart from having a ready supply of great coders, what constitutes true ‘DevOps Royalty’? It’ll be the ability to craft resilient architectures, supportability, security everywhere across the software lifecycle. In his keynote at @DevOpsSummit at 20th Cloud Expo, Jeffrey Scheaffer, GM and SVP, Continuous Delivery Busine...
In order to meet the rapidly changing demands of today’s customers, companies are continually forced to redefine their business strategies in order to meet these needs, stay relevant and continue to see profitable growth. IoT deployment and development is integral in this transformation, and today businesses are increasingly seeing the value of investing their resources into IoT deployments. These technologies are able increase ROI through projects such as connecting supply chains or enabling sm...
SYS-CON Events announced today that Twistlock, the leading provider of cloud container security solutions, will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Twistlock is the industry's first enterprise security suite for container security. Twistlock's technology addresses risks on the host and within the application of the container, enabling enterprises to consistently enforce security policies, monitor...
SYS-CON Events announced today that CollabNet, a global leader in enterprise software development, release automation and DevOps solutions, will be a Bronze Sponsor of SYS-CON's 20th International Cloud Expo®, taking place from June 6-8, 2017, at the Javits Center in New York City, NY. CollabNet offers a broad range of solutions with the mission of helping modern organizations deliver quality software at speed. The company’s latest innovation, the DevOps Lifecycle Manager (DLM), supports Value S...
SYS-CON Events announced today that Outscale, a global pure play Infrastructure as a Service provider and strategic partner of Dassault Systèmes, will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Founded in 2010, Outscale simplifies infrastructure complexities and boosts the business agility of its customers. Outscale delivers a secure, reliable and industrial strength solution for its customers, which in...
SYS-CON Events announced today that Peak 10, Inc., a national IT infrastructure and cloud services provider, will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Peak 10 provides reliable, tailored data center and network services, cloud and managed services. Its solutions are designed to scale and adapt to customers’ changing business needs, enabling them to lower costs, improve performance and focus intern...
Everywhere we turn in our industry we can find strong opinions about the direction, type and nature of cloud’s impact on computing and business. Another word that is used in every context in our industry is “hybrid.” In his session at 20th Cloud Expo, Alvaro Gonzalez, Director of Technical, Partner and Field Marketing at Peak 10, will use a combination of a few conceptual props and some research recently commissioned by Peak 10 to offer a real-world consideration of how the various categories of...
A strange thing is happening along the way to the Internet of Things, namely far too many devices to work with and manage. It has become clear that we'll need much higher efficiency user experiences that can allow us to more easily and scalably work with the thousands of devices that will soon be in each of our lives. Enter the conversational interface revolution, combining bots we can literally talk with, gesture to, and even direct with our thoughts, with embedded artificial intelligence, whic...
IBM helps FinTechs and financial services companies build and monetize cognitive-enabled financial services apps quickly and at scale. Hosted on IBM Bluemix, IBM’s platform builds in customer insights, regulatory compliance analytics and security to help reduce development time and testing. In his session at 20th Cloud Expo, Tom Eck, Industry Platforms CTO at IBM Cloud, will discuss how these tools simplify the time-consuming tasks of selection, mapping and data integration, allowing developers ...
DevOps is often described as a combination of technology and culture. Without both, DevOps isn't complete. However, applying the culture to outdated technology is a recipe for disaster; as response times grow and connections between teams are delayed by technology, the culture will die. A Nutanix Enterprise Cloud has many benefits that provide the needed base for a true DevOps paradigm. In his Day 3 Keynote at 20th Cloud Expo, Chris Brown, a Solutions Marketing Manager at Nutanix, will explore t...
SYS-CON Events announced today that Super Micro Computer, Inc., a global leader in compute, storage and networking technologies, will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Supermicro (NASDAQ: SMCI), the leading innovator in high-performance, high-efficiency server technology, is a premier provider of advanced server Building Block Solutions® for Data Center, Cloud Computing, Enterprise IT, Hadoop/...