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It's been a frustrating year for owners of gold stocks. The price of bullion has jumped about 20 percent in the past 12 months. But the iShares S&P/TSX Global Gold ETF (XGD-T), which tracks the stocks of gold miners, is hovering near its 52-week low.
Barry Allan, senior mining analyst at Mackie Research Capital Corp., says investors have abandoned gold stocks, instead opting for direct exposure to gold through ETFs. But he also tells BNN investors have punished the industry for poor performance.
WEAK BIG CAP COMPANIES
Kinross Gold: 1-Year return of -34.53%
Allan says Kinross Gold (K-T) has been on an aggressive acquisition spree that hasn't worked, particularly its 2010 takeover of Red Back Mining for $7 billion.
"All these acquisitions have to come to the bottom line and we just have not seen that."
Agnico-Eagle: 1-year return of -46.98%
Agnico-Eagle Mines (AEM-T) operates three mines in Canada, one mine in Finland and one mine in Mexico. Allan says developing a number of mines simultaneously hindered the company's performance.
"Agnico-Eagle brought in a lot of assets to their portfolio," Allan says. "They quite frankly had too many balls in the air at the same time. They didn't all end up where they ought to have. As a result, their fundamental performance has just not been there on the bottom line"
Allan says his top pick is Aurico Gold (AUQ-T) based on the company's growth prospects and below-average cost structure.