Got Gold?

Red is in for 2008.

So far, the S&P 500 index has said Happy New Year to investors with a 10% drop since the start of the year. Meanwhile, pessimism regarding the dollar continues, thanks to anticipated interest rate cuts from the Federal Reserve. And though oil prices have shown a softer side in the past few days, we're probably not looking at cheap oil any time soon.

Meanwhile, gold found its way to more than $900 per ounce earlier in the week, continuing an absolute bull run. Gold always seems to have a pretty committed fan base, but it can tend to get pushed to the forefront during periods of market turmoil.

With that in mind, I tuned into the "gold" tag on The Motley Fool's CAPS service, to see which gold-related stocks CAPS players thought were the best bets. All of the following score a maximum five-star CAPS rating.

Company

Market Cap

1-Year Performance

Compania de Minas Buenaventura (NYSE:BVN)

$7.8 billion

124%

Kinross Gold (NYSE:KGC)

$13 billion

75%

Yamana Gold (NYSE:AUY)

$5.5 billion

31%

Golden Star Resources (NYSE:GSS)

$888 million

24%

Anglo American (NASDAQ:AAUK)

$64 billion

14%

Data from CAPS and Yahoo! Finance.

CAPS players obviously think that all of these companies will be winners, but to get some more color, I decided to drill down on a couple to see what investors have been saying.

Gold and the two Anglos
For investors interested in a massive, diversified gorilla, Anglo American may be the answer. The company is based in the U.K., but it has a global presence as well, and it's one of the world's largest mining companies. In addition to its gold exposure through its ownership stake in AngloGold Ashanti (NYSE: AU  ) , the company is also involved in mining platinum, coal, copper, zinc, nickel, industrial minerals, iron ore, and carbon steel -- to name a few. The company also owns a big chunk of the world's largest diamond producer, De Beers.

Since we're discussing gold here, it's important to note that over the past few years, Anglo American has been reducing its ownership stake in AngloGold, reasoning that stand-alone gold companies are fetching higher valuations. So investors have the choice of jumping on Anglo American's diversified business and remaining 17% stake in AngloGold, or going with the pure play of AngloGold. (Note, though, that Anglo American plans to divest itself of the rest of its stake in AngloGold.)

One of CAPS' top players, Robert Aronen (aka saunafool), a big fan of gold, is bullish on Anglo American. He noted that it is: "another profitable resource company with a solid asset base. It will either make more money or be bought out by [Companhia Vale do Rio Doce (NYSE: RIO  ) , Rio Tinto], or one of the other big players."

Robert also had this to say about AngloGold:

Gold is at record high prices. There are many reasons for this, but the foremost is that the dollar is going down the tubes because the Fed has been running the printing presses at full speed for quite some time ... All the big gold miners will win.

Taking a flier on Golden Star
For those looking to ratchet up the risk and return profile a little more, Golden Star Resources may be a more interesting story. Smaller gold players like Golden Star haven't match the performances of their larger brethren over the past few years, but this pattern won't necessarily continue. A number of top CAPS investors have been bullish on Golden Star:

  • FoolforSilver took a break from silver to give Golden Star a thumbs-up, saying: "[Golden Star is] a great small cap gold miner. Explosive upside potential in this gold rally," almost a year ago.
  • Fellow All-Star mirwin52 sees the company "significantly increasing gold production in 2008."

All that glitters
This all assumes, of course, that gold will continue its outperformance -- which, frankly, is highly questionable. The moment when a gold investment seems to make the most sense may actually be the exact wrong time to jump headfirst into gold and gold stocks. I've steered my portfolio clear of gold so far, but I certainly can't say that the concerns of gold bulls are totally unfounded.

Have some thoughts of your own on the gold industry? Head over to CAPS and join the 82,000 investors that are already rating thousands of stocks.

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  • Report this Comment On December 19, 2009, at 4:22 AM, jc2811 wrote:

    Paul Cohen, who featured American Sierra Gold back on 11/05/09 has just issued a research recommendation for VHGI Gold. For the full report please visit Cohen Independent Research Group's Website www.grassrootsrd.com , or visit VHGI Gold's website, www.vhgigold.com.

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