Lombardi: Stock Market Commentary & Forecasts, Financial & Economic Analysis Since 1986

Newmont

Founded in 1921 and located near Denver, Colorado, Newmont Mining Corporation (NYSE/NEM) is one of the world’s largest gold mining and producing companies with operations in the United States, Australia, Peru, Indonesia, Ghana, Canada, New Zealand, and Mexico. The company employs 34,000 people. Newmont is included in the S&P 500 Index. In 2007, Newmont became the first gold company selected to be part of the Dow Jones Sustainability World Index.

Is Gold’s Near-Death Crisis Over-Exaggerated? Concerns of a Market Meltdown May Not Be

By for Profit Confidential

Is Gold’s Near-Death Crisis Over-ExaggeratedCommodity prices have been heading lower on the charts.

In fact, it has been an awful few days for gold as prices plummeted, failing to hold $1,500 an ounce.

Prices dove right through support at $1,400 to $1,385.62 on Monday—the lowest level since 2011.

The shiny yellow ore is in a bear market. Down 27% from its magical peak of $1,920 in September 2011, it has been nothing but turmoil for investors in the yellow metal.

As I said in a recent commentary, I have lost confidence in the metal as a safe haven investment at this point. I’m not even sure I would enter on the current weakness.

The price chart says “sell.” Follow the trend, and you may be able to squeeze out some profits on an oversold bounce trade; but extending the trend forward, things don’t look good for gold.

Now we will need to see if the precious metal can hold $1,400.

As we move lower, there are now concerns of a meltdown in the gold sector, especially if prices continue to trend lower toward the $1,200 level.

Goldman Sachs, which recently turned bearish and advised shorting the metal, is fearful of gold prices dropping to the $1,200-an-ounce level—as this level also represents the cash cost to produce gold at this point. (Source; Cosgrave, J., “The Scary Number for Gold Investors: $1200,” CNBC, April 15, 2013.)

The $1,200-an-ounce cost of production is clearly an issue, especially for the smaller mining companies that are not as cost-effective or able to survive a cash crunch, compared to the mid- to large-tier producers, like Newmont Mining Corporation (NYSE/NEM). (Read … Read More

Mining for Riches with Junior Miners

By for Profit Confidential

Mining for Riches with Junior MinersGold and silver are currently taking a breather on the charts, but if the global risk holds, I wouldn’t be surprised to see a rally in the precious metals this year.

I can see gold breaking to $1,800 an ounce, something that nearly materialized on October 5, 2012, when the price of cash gold traded at $1,795.78 prior to slipping. In fact, the previous time the precious metal was trading above $1,800 was on November 8, 2011. We could see a move above, given the eurozone mess, U.S. debt and fiscal cliff, and the mixed results in China.

Silver is holding at around $30.00 an ounce, but I’m not as bullish on the white metal, as the price is largely driven by the direction of the global economy.

I continue to like gold going forward, given the financial crisis in the eurozone; trust me, it is not going to get better anytime soon…it could even take years. Moreover, with a recession holding in the eurozone, the crisis could deepen and impact the global economy.

Across the Pacific, there are some encouraging signs in China; but prolonged weakness in the eurozone and Europe will negatively impact China along with the other Asian countries, like South Korea, Japan, and the smaller emerging Asian markets.

For those of you who took my advice to hold on and accumulate gold on weakness down to $1,600, it has been a nice ride. In my view, major price weakness should be viewed as an opportunity to accumulate the yellow metal in 2013, unless $1,600 can’t hold.

I favor the metal plays and continue to see opportunities, … Read More

Looking Ahead: Economy Remains a Drag on Corporate America

By for Profit Confidential

Economy Remains  a Drag on Corporate AmericaWhile the stock market rallies on optimism towards a resolution to the fiscal cliff, I feel traders are ignoring the problems of slowing growth in corporate America. The reality is that the fiscal cliff will be resolved or the deadline may be extended, but President Obama will need to fix the massive national debt, while also getting people to work and driving the economy.

Earnings season is just around the corner. Alcoa Inc. (NYSE/AA) will be the first Dow stock to report in the fourth-quarter earnings season, as it kicks off with its results on January 9, 2013. The company is one of the world’s top aluminum makers and a good indicator for the global economy, as aluminum is used in many industrial applications, including aircraft, automobiles, commercial transportation, packaging, building and construction, oil and gas, defense, and consumer electronics applications. In the precious metals area, I like Newmont, which you can read about more in “Newmont—the ‘Best of Breed’ of All Gold Stocks.”

In the third-quarter earnings season, Alcoa beat on Thomson Financial consensus earnings, but revenues are an issue, which will likely be the situation with many U.S. companies. For Alcoa, revenues are estimated to fall 6.3% in the fourth-quarter earnings season, followed by a 1.3% rise in the 2013 first-quarter earnings season, according to Thomson Financial.

For the fourth-quarter earnings season, the overall revenue growth is estimated to be three percent, according to FactSet. (Source: “Earnings Insight: S&P 500,” FactSet, December 14, 2012.) This is simply not what you would expect if the economy was healthy. And while there is some hope and optimism for … Read More

Newmont—the “Best of Breed” of All Gold Stocks

By for Profit Confidential

Gold ProducersThere’s been plenty of talk around here regarding gold and whether the precious metal is heading for $2,000. In my view, the current global risk will support and drive gold higher. (Read “The Stock Market Event You Need to Guard Against Right Now.”)

For any gold investor, the question is whether to buy the physical bullion or gold mining stocks. If you like the idea of holding the actual gold, you can always fly to Dubai and buy the metal from the vending machines, like Michael outlined yesterday in his article. But for the average investor, I favor gold stocks over the higher risk of other commodity options.

An investment strategy would be to buy a mixture of exploration-stage gold mining stocks along with small to large gold producers. Under this scenario, you can play both the potential aggressive gains of exploration stocks and the steady returns of the large gold producers.

For investors interested in exchange-traded funds (ETFs), the SPDR Gold Trust ETF (GLD) is worth a look and is currently trading in a sideways channel, above the 50- and 200-day moving averages (MAs).

SPDR Gold Trust Chart

 Chart courtesy of www.StockCharts.com

At the top of my list of gold stocks is Newmont Mining Corporation (NYSE/NEM); in my view, Newmont is one of the best stocks in gold, because this stock will generate value for your portfolio for years to come. I’ll go even so far as to say that this stock is the only one you will need to own for the next decade, with its good price appreciation potential and dividend.

Missing its earnings-per-share (EPS) estimates in three … Read More

Stock Market Outlook Solid Based on Earnings and Valuation

By for Profit Confidential

Stock Market Outlook Solid Based The stock market certainly isn’t going up because of stronger expectations for corporate earnings. But I think all the conservative forecasts by corporations will lead to another quarter of mostly outperformance this upcoming earnings season. Companies have consistently been able to generate good earnings, even with lackluster revenue growth. Cost cutting is paying off in terms of solid earnings results, and this is the reason why balance sheets are so strong.

With companies in such a good financial condition, a new upward business cycle should produce a major acceleration in corporate earnings. The key, of course, is jump-starting a new business cycle, and it will be awfully difficult to do this if policymakers aren’t able to address all the issues regarding sovereign debt and the fiscal cliff. Country finances are going to be a major issue next year.

The best thing the stock market has going for it right now is its reasonable valuation. (See “Equities Market Doing Fine—Just Look at the Long-term Charts.”) That gives the stock market a lot of leeway, with all the uncertainty on the horizon. We know the stock market went up recently on the hope of new monetary stimulus from the Federal Reserve. Contributing to positive investor sentiment has been quiet on the eurozone’s sovereign debt crisis, somewhat improved U.S. economic news and a weaker U.S. dollar. Whether this lasts is all up to the Federal Reserve.

There really isn’t anything more the central bank can do to stimulate the U.S. economy. Further action from the Federal Reserve will only be to appease Wall Street investors. If the central bank disappoints the … Read More

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