One of the best things you can do as a serious equity investor is to review big stock market winners, even if you didn’t own them. It’s the same thing that professional athletes do. A golfer will review past golf tournaments. A race car driver will watch old races. The goal of the process is to improve your own game by seeing what has worked the best in the past. In the case of stocks, reviewing past winners helps an investor to hone his or her stock picking skills by helping him/her become familiar with what a big winner looks like and discover how it all came to be. It takes time and it takes effort, but then again, money doesn’t grow on trees.
Here’s a standout stock market performer: Silver Wheaton Corp. (NYSE/SLW). This is a silver company that’s benefitted from the huge price move in the underlying commodity. The stock is up well over tenfold since the market’s low set in March 2009 and the company continues to report record financial results.
Or, consider Allied Nevada Gold Corp. (AMEX/ANV). This stock has appreciated from just under $15.00 a share in early 2010 to its current level of just over $40.00 a share. The company’s earnings growth has been consistent. If you pull up a stock chart, you’ll also notice a strong consistency to its share price appreciation.
Then there’s Extorre Gold Mines Limited (TSX/XG). This stock has almost tripled since the beginning of this year. This junior gold miner has been increasing its estimated gold find at its main property in Argentina. The stock’s been on a tear while the broader market has slowly come apart.
These three stocks represent only a handful of excellent wealth creators in the stock market in recent history. You’ll notice that all three operate in the precious metals business, and this is no coincidence. Gold investments remain the most attractive for equity speculators and this trend is here to stay for the near future.
Most precious metal producers are happy with a spot price of gold of just over $1,000. This level is kind of like a threshold in terms of making good money extracting gold from the ground. But, imagine how the business model improves with the spot price of gold trading over $1,800 an ounce. That extra $800.00 is pure gravy. All of a sudden, your bottom line just got better by 80%.
Gold stocks are hot right now on a relative basis. They would be a lot hotter if the broader market weren’t stuck in the doldrums. Over the next 18 months, I think it’s fair to assume there will be a major consolidation within the gold mining industry, as producers bulk up on production in a world with very few new discoveries. There will be good money to be made speculating in gold shares. There’s going to be mergers and acquisitions and there’s going to be all kinds of companies reporting record financial results going forward.
It really is a great time to be in this industry. No other industry is drowning in cash like gold mining.