3 Gold Stocks to Take a Shine To

If history is any guide, Barrick Gold Corporation (USA) (NYSE:ABX), Goldcorp Inc. (USA) (NYSE:GG), and Newmont Mining Corp (NYSE:NEM) could rally into year's end

by Karee Venema

Published on Mar 16, 2016 at 2:41 PM
Updated on Mar 16, 2016 at 2:46 PM

It's been a rough start to 2016, and despite a recent rebound, the S&P 500 Index (SPX) is still down 1.2% year-to-date. As Schaeffer's Senior Quantitative Analyst Rocky White recently noted, this could be a bearish indicator of things to come; however, not all hope is lost. In fact, stocks that have outperformed in the first 50 trading days of the year have historically continued this momentum through year's end. Gold stocks, specifically, have outperformed in 2016, including Barrick Gold Corporation (USA) (NYSE:ABX), Goldcorp Inc. (USA) (NYSE:GG), and Newmont Mining Corp (NYSE:NEM).

ABX, for instance, has more than doubled in 2016 and is at it again today, up 4.9% at a new annual high of $14.88, after the Federal Reserve lowered its rate-increase forecast for 2016. Earlier, the stock bounced off its 10-day moving average -- a trendline that has provided near-unwavering support since late January.

Sentiment is skewed toward the skeptical side on this outperformer, though. While option traders have taken a decidedly bearish route, analysts maintain nine "hold" or worse suggestions toward Barrick Gold Corporation, compared to five "strong buys." A capitulation from put players and/or a round of bullish brokerage notes could help fuel ABX's fire.

GG, meanwhile, has seen a surge in put buying, despite the stock being up more than 74% since hitting a 12-year low of $9.46 in late January, to trade at $16.47. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), GG's 10-day put/call volume ratio of 0.82 sits higher than 87% of all comparable readings taken in the past year.

Elsewhere, more than two-fifths of covering analysts maintain a "hold" or worse suggestion, while the average 12-month price target of $17.30 stands at a lukewarm 5% premium to current trading levels. Goldcorp Inc. could extend its uptrend, should bearish bettors jump ship and/or analysts upwardly revise their ratings. Just this morning, Raymond James boosted its price target on GG to $22 from $17 -- territory not charted since early March 2015.

Lastly, NEM has rallied more than 64% off its Jan. 21 year-to-date low of $16.05 -- and notched a fresh two-year high of $27.98 on March 4. Bearish betting has been all the rage, though, according to the stock's 10-day ISE/CBOE/PHLX put/call volume ratio of 0.95 -- in the 81st percentile of its annual range. What's more, short interest surged more than 23% in the two most recent reporting periods. An unwinding of these skeptical positions could propel the shares higher.

Additionally, the security could get a boost, should analysts continue to upwardly revise their ratings. Currently, seven out of 12 maintain a tepid "hold" recommendation toward Newmont Mining Corp, while the consensus 12-month price target of $26.72 is within a chip-shot of the stock's present price of $26.38.

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