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Goldcorp (G)

177K views 505 replies 79 participants last post by  Ag Driver 
#1 ·
Was surprised there was no previous thread.

I'm thinking about buying some G tomorrow (100 shares).

Thoughts?
 
#78 ·
This is a great company and this is a great price to acquire. They are the lowest cost producer and operate in mining friendly countries with little geopolitical risks. They are also poised to open new mines in the next few years and dramatically increase production of gold and silver. There is not an equivalent company on the planet. I only wish it paid a higher dividend but that will probably come in time once more of their projects are up and running.

I sold a 40 put for 1.70 for May and will probably now get assigned but I can't say that I'm too worried about it. I never expected it to get this low with gold at this price but the market has turned irrationally negative on precious metal stocks even while they are still very bullish on the precious metals themselves. It is a very odd form of psychology to value the stuff above ground at so many more multiples than the stuff under the ground when they can be mined efficiently with modern technology at little risk as is the case with Goldcorp.
 
#80 ·
Yes, I think this is a definite possibility and I'd argue the stocks are priced for gold around $1000/oz. I know the gold bulls think gold is still undervalued and of course guys like Buffett think gold is ridiculously overvalued as it produces nothing and generates no interest income.

So long as there is sovereign risk fears and so long as so many nations have near ZIRP gold will continue to flourish so I can see many years with very strong gold prices.

I'd argue that the silver story is on firmer legs as it is also quite scarce, it is tough to find good silver deposits that can be mined at low cost, silver is necessary in many industrial, technological and medical processes. Unlike gold, the silver is basically consumed in these industrial processes and then not available for storage purposes where gold has mostly been kept as a store of value.

The big reason I think the miner's are getting hurt is they are not seen as protection against sovereign risk like the PMs are. They are also seen as stocks and are viewed as being more risky than the average stock and thus penalized on that front. Furthermore, I think many have been penalized for soaring costs of production due to a variety of issues such as royalties paid, cost of energy, cost of chemical supplies and labour disputes pushing up salaries. Finally, despite the fact many are gushing in profits most are keeping that money to try and replace reserves which is becoming harder and harder to do. The companies may be viewed more favorably if they focused on returning value to shareholders through dividends and only pursuing growth of production when it is sound economically to do so.

Overall, I think quality gold stocks should be a part of most people's portfolios (a small part) as it will trade with the commodity, doesn't have storage costs and most are paying a rising dividend so it will offer some diversification. I would just encourage investing in companies with good leadership, sound financials, low debt and low cost of production in areas with little geopolitical risk. Goldcorp passes all of these tests. It is the only gold major I hold right now (I bought some NSU when it got really beat up recently) although I have occasionally given some thought to Yamana, Barrick and Iamgold. I would not touch Kinross except as a short-term contrarian trade.
 
#82 ·
right, goldcorp is looking pretty cheap ... i am going to roll the dice and bet it will get cheaper ... bernanke seems to be playing a game of chicken and he seems to be winning and the europeans are using razzle dazzle so i think gold might correct down even more though at some point it will come back ... i really do think that the big money guys just don't trust gold at 1600-1900 and that makes the equities just look a little dicey ... anyway, i have lost my crystal ball so whadda i know
 
#84 ·
Mr. Market will do what its going to do.

Goldcorp isn't anchored by a dividend and its next technical support isn't until around $20.

My guess would be that it shouldn't go down too much more before shorts will cover and bulls will jump in hand over fist. This is still a very strong profitable country with major increases in gold production upcoming and gold is selling for 1650 an ounce. They are the lowest cost and thus safest producer to buy for those interested in gold stocks.

I wouldn't be too worried about holding this one long term but in the short term anything can happen including a re-testing of 2009 lows (but gold was 700 then and there was a possible depression in the air so I doubt that happens).
 
#86 ·
Barrick reported and costs are rising to the point that people are questioning that maybe it is time to shelf some of these mega projects for all the big producers because the gold is still there in the ground and it can wait. So there is good reason people are selling but at what point are they selling beyond this sort of news and I think we have past this point but as we know the pendulum will always swing to far the other way before it comes back.
 
#91 ·
I don't want to sound like the conspiracy theorist, but there is a huge disconnect between gold producer and gold price right now, to a point where it is just absurdly irrational. What is worrysome is that i haven't been able to find anything in the news or analyst reports regarding this disconnect other than 'expenses' are increasing, which is a weak argument given the fact that stocks have declined between 20%-40% since Jan 2012 (kinross is down 27% and Goldcorp 21%).

What other reason could explain the decline ? Well, may sound far fetch, but there's the possibility of market manipulation.
 
#97 ·
Since when has P/E become such a big deal?

I don't understand. There are many companies trading at more than 20x earnings and still increasing.

I've said it before, and I'll say it again. P/E is a bullshit metric.

Many stocks have P/E's of 40 and continue to increase, so there is money to be made.
 
#98 ·
Are you saying EnCana is a bad buy because the P/E is 120?

Are you saying that Enbridge is a bad buy, because it used to have a P/E of 40? (still has a P/E of 30, and the stock price is still increasing)

Are you saying that Crescent Point Energy is a bad buy because it has a P/E of 60?

If this is the case..... then are you saying TransAlta is a good buy, because it has a P/E of 12? :rolleyes2:
 
#101 ·
Those stocks are all a bad buy, and primarily because their predicted revenue and earnings growth is nowhere near their P/E. I like to add an estimate of earnings growth to the P/E, because as you say its not all about a single number. Is Encana likely to sustain 120% earnings growth for the next 10 years? No, so I wouldn't buy it. Transalta is clearly at risk of decreasing revenue and earnings, so a P/E of 12 is not low enough. If CPE has a P/E of 60 I'd be running because its not nearly covering its dividend (and doing some serious shareholder dilution), and I haven't bought Enbridge since before the last stock split when it was $27 (or $54 at the time), and had a much more realistic P/E to realistic earnings of around 20. It's gone to a P/e closer to 30 with only a 10-15% growth in earnings, so I'm not buying more.

Back to Goldcorp, if it has a realistic earnings growth of 15-20% per year for the next 10 years, then maybe its a decent buy, but a far cry from a screaming buy. Given its exposure to a single commodity, I'd expect some risk premium. Not for me, but maybe for someone else. If it had a P/E of 10 then it might be a screaming buy, or maybe a little lower. Just my opinion, YMMV. Benjamin Graham cautioned against buying anything at a P/E of higher than 15, and thats the standard I measure against.
 
#103 ·
If oil can keep getting hammered like today and gold holds where it is then this will be very bullish for gold miners as costs will come down. You would think there are some smart big buyers buying into this weakness that later in the year we can say the famous saying, that the easy money has already been made.
 
#104 ·
IMO low PE is more relevant for a stock that also has high FCF yield, high quality earnings, high forecast earnings in the future (at least keeping pace with inflation + GDP growth) and pays a reasonable dividend.

The reasons I put these provisos down is if you want to play value, don't buy value traps which is stocks that may lose their earning power in the future (i.e. RIM). Buying them on the basis of a low trailing PE is foolish.

The other thing is some accountants to a lot of gimmickry to make PE appear low - you want to see high quality earnings.

As per the point above, in a good company FCF should be close to earnings. Sometimes you have to make account for capex for expansion versus capex for maintenance of equipment but most low PE stocks aren't aggressively expanding anyway so capex should be reasonably low in a low-growth company.

Lastly, stocks can stay cheap for a long time. If they are going to be cheap for awhile I want a sustainable and reasonable dividend while I wait. I preferably want at least 30% of earnings in a company that is expanding and 50-60% for a company in a low growth mode. This hedges me somewhat against the market just permanently deciding to pay a low multiple of earnings on a low growth stock which then has little potential for capital appreciation as there is little earnings growth to propel the PPS.
 
#109 ·
What is the old saying, be fearful when others are greedy and greedy when others are fearful. Others are certainly fearful when it comes to gold stocks and if you want to test that theory then gold mining stocks today are a great place to start. The only wrinkle here is the actual price of gold may not yet have found its bottom as many people bullish on gold are still calling for between $1300 to $1500 as a final bottom for gold which means the pain for the miners could go on for awhile until gold does actually bottom.
 
#111 ·
Goldcorp is a very strong gold and silver miner both financially and in terms of managment and operations. They have new ventures that will come online soon that will give bottom and top line growth. This is a great company trading at a discount and I bet that will soon go into acquisition mode with all the beaten up juniors out there.

I have very little fear of permanent capital loss with this company and today is a very, very attractive entry point. I will get put 200 shares from a put I sold for 1.50 with a strike of 40 about a month ago but that is okay. I don't mind getting assigned but just wished my crystal ball had worked better when GG was selling at 42 and obeying its long-term resistance levels.
 
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