One of the worst parts about the “Boom-Bust” cycle isn’t the part where the last guys holding the back get beat up. To me, it’s the people that are still talking about those glory days like Al Bundy and his five touchdowns in a single game. I’m not going to lie, I’m guilty of that too. Not just the Al Bundy thing but looking at a stock or a commodity that had been trading much higher in the past and telling myself that I’m getting in on the ground floor before it rallies again. “Now it’s going to come back, you just watch.”
During this major dollar bull market we’ve seen some rough times for gold. Gold was the talk of the town just a few short years ago when investors were rushing into the base metal on an “uncertainly” trade. Using gold as an inflationary hedge and a way to bet against all the fiat currency central bank money printing. While the theory makes sense, the fact is that the market has not been playing along. And in the meantime, while waiting for markets to become rational you may become insolvent. In other words, the timing just isn’t right.
That’s the way I feel right now about today’s Bear of the Day, Royal Gold (RGLD). Royal Gold is engaged in the acquisition and management of precious metals royalties. They seek to acquire existing royalties or to finance projects that are in production or near production in exchange for royalty interests. They also explore and develop properties thought to contain precious metals and seek to obtain royalty and other carried ownership interests in these properties through the subsequent transfer of operating interest to other mining companies. That’s a fancy way of saying they are a gold mining company.
While gold has made a little bit of a comeback as dollar strength has relented, that hasn’t translated to earnings estimate revisions to the upside for the stock. On the contrary, several analysts have come out and dropped their estimates to the downside over the last 60 days. In fact, four analysts have dropped their numbers for the current year while five have revised lower for next year.
The bearish analyst behavior has had a negative effect on our Zacks Consensus estimates. Current year consensus has dropped from $1.31 all the way down to $1.16 while consensus for the next year has dropped from $1.61 to $1.51.
The recent bearish attitude has led to a rough 2015 so far for the stock. After spiking from below $62 to nearly $78 to start the year, RGLD has continually sold off since then. The YTD low sits below $58, over $5 away from the current price. Bearish on the technical side you have the stock trading below the 21 day moving average as well as a Commodity Channel Index that reversed at the zero line and now stays firmly below it at -7.78.
There are a few other mining companies that are put in a better light using the Zacks Rank. Among these are Zacks Rank #1 (Strong Buy) Pretium Resources (PVG) and Zacks Rank #2 (Buy) Asanko Gold (AKG).
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