More often than not when speculating you are going to have to eat the frog. You will need to buy a stock that is looks bad from every angle. There will be nothing good about it. No good news, no good products, no good prospects, nothing. It will be an awful, ugly, foul-tasting frog but that is where your best gains will come from.
A good example of this popped up all over the Internet this week concerning gold mining companies. The article listed the biggest gold mining companies with their per ounce cost of mining gold and stated that the producers that have their cost well below the current market price of gold are the strongest, most stable stocks to own now and when gold increases in value. This is a true statement. It is a logical and sensible way to choose gold mining stocks like Newmont, Barrick, and Goldfields.
But if you want to make a lot of money you should look towards the bottom of the list for the gold miners that spend more per ounce to pull gold out of the ground than they can sell it for on the market. They are losing money every single day with every single ounce they mine. These stocks, like Harmony Gold, will show the best stock price gains when gold starts moving back up in price. Why? Because now instead of losing lots of money every day they start to make money. It is a dramatic shift from negative earnings to positive earnings that catches the market by surprise and everyone now wants to own that stock which sends the price higher and higher.
What about the other stronger, healthier, low cost gold miners? They will still make money like they always had been but a $100 gain in the price of gold does not register as big a boost in earnings when compared to the current money-losers. Their stock price will move higher, too, but the gains will lag behind the new high-flyers like Harmony Gold, HMY.
A good example of this popped up all over the Internet this week concerning gold mining companies. The article listed the biggest gold mining companies with their per ounce cost of mining gold and stated that the producers that have their cost well below the current market price of gold are the strongest, most stable stocks to own now and when gold increases in value. This is a true statement. It is a logical and sensible way to choose gold mining stocks like Newmont, Barrick, and Goldfields.
But if you want to make a lot of money you should look towards the bottom of the list for the gold miners that spend more per ounce to pull gold out of the ground than they can sell it for on the market. They are losing money every single day with every single ounce they mine. These stocks, like Harmony Gold, will show the best stock price gains when gold starts moving back up in price. Why? Because now instead of losing lots of money every day they start to make money. It is a dramatic shift from negative earnings to positive earnings that catches the market by surprise and everyone now wants to own that stock which sends the price higher and higher.
What about the other stronger, healthier, low cost gold miners? They will still make money like they always had been but a $100 gain in the price of gold does not register as big a boost in earnings when compared to the current money-losers. Their stock price will move higher, too, but the gains will lag behind the new high-flyers like Harmony Gold, HMY.