A Miner Case of Depression

Avert your eyes, if necessary. This is not for the faint of heart.

I figured that today would be a good day to check in on some of our favorite miners again. 2012 was a rough year for many of the companies in the sector and the charts below tell the tale. A couple of items to note:

  • I've used 2-year charts because so much of the fun in the metals began two years ago and 5-year charts contain all the shenanigans of 2008, which simply distorts total returns.
  • Note that, for most equities, a major disconnect occurred at the silver price peak of May 2011.
  • I compared the GLD and the SLV to the S&P.
  • For the miners, though, I compared them to either the GLD or the SLV, in order to gauge performance relative to the actual metal. Not that GLD or SLV are actual metal, mind you. The simply serve as a proxy for price on these charts.
  • The candlesticks are the shares themselves. The lines are the comparisons, either S&P, GLD or SLV.
  • I chose these stocks because we've mentioned/followed them before here at TFMR. Feel free to post your own charts in the comments if you feel I've left out a few.

Let's start with GLD and SLV. Since 1/1/11, gold is slightly ahead of the S&P but silver is slightly behind.

The old question is: Do you want the good news first or the bad news? In this case, do you want to see the winners first or the losers? Hmmm...I don't know. Let's start with the losers...those stocks that, for the past two years, have horribly underperformed versus physical metal. First, here's the HUI (Amex Gold Bugs Index). As you can see, the index tracked physical pretty closely through the first four months of 2011 and then it went straight to hell in a handbasket.

And look at these nasty, little devils. MrT pities the fool that be stuck owning these.

Perhaps you thought it would be "safe" to "diversify" into an ETF like the "GDXJ"? Nope.

Or maybe a nice, open-ended fund (so that your advisor cold make a commission - hey, he's gotta eat, too.) Uhhh...not so much.

So, are there any stocks that are, at least, tracking along with physical? Well, there's CDE. Sometimes it beats SLV, sometimes it doesn't but, in the end, it's been hanging in there.

And Silver Wheaton has been tracking silver pretty closely, about as you would expect.

And Randgold is fun. It tends to outperform bullion when price is rising and underperform when price is falling. For equity options players, this is a good one to follow and trade.

So that's all the bad news. How about the good news? I found two actual winners!! Two stocks that have actually outperformed physical metal over the past two years. One junior gold miner and one junior silver. Remember, though, that past performance is definitely not a predictor of future returns. Caution is always warranted.

So, what's the point of all this? Why even jack around with these damn things? Just buy physical metal, take delivery and forget about it. And don't tell me about your IRA. There are plenty of companies out there that can help you to buy bullion within that thing, too.

Stack, stack, stack and BTFD. Your only winning move.

TF

About the Author

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tfmetalsreport [at] gmail [dot] com ()

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