 | COMMODITIES CORNER We recently closed out some positions and are preparing for the rally after Labor Day. Some past performers like Silver Wheaton Corp. are just too cheap to ignore. We have actually increased our equity positions on proven performers and dividend payers. Hold tight for the indicators and hedge with an option chain. |
Month by month, commodity stocks are getting more hated by the market... getting to be greater values... and getting set up for at least 100% gains. In fact, for some companies, we're seeing 2009 levels of cheapness.
That sentence should make any trader take notice. Those levels preceded spectacular gains in commodity stocks. Regular Growth Stock Wire readers know that commodity stocks have plummeted this year. The big gold stock fund, GDX, is down 64% from its 2011 high. The S&P/TSX Venture Index, which we nickname "the Dow Industrials of small resource stocks," is 63% off its 2011 high. These large declines have created extremely bearish sentiment toward the sector. Bearish sentiments create great values. And great values create great trade setups.
One way to see where these setups are cropping up is to compare today's valuations to where these stocks were at the "end of the world" in 2009. In the table below, you'll find 10 major commodity producers that are selling at a lower price-to-earnings ratio now than they were in 2009.
That sentence should make any trader take notice. Those levels preceded spectacular gains in commodity stocks. Regular Growth Stock Wire readers know that commodity stocks have plummeted this year. The big gold stock fund, GDX, is down 64% from its 2011 high. The S&P/TSX Venture Index, which we nickname "the Dow Industrials of small resource stocks," is 63% off its 2011 high. These large declines have created extremely bearish sentiment toward the sector. Bearish sentiments create great values. And great values create great trade setups.
One way to see where these setups are cropping up is to compare today's valuations to where these stocks were at the "end of the world" in 2009. In the table below, you'll find 10 major commodity producers that are selling at a lower price-to-earnings ratio now than they were in 2009.
To create the table, I used each company's actual 2009 earnings (before interest, tax, depreciation, and amortization – called EBITDA) and March 2009 share prices. That was near the bottom about as cheap as these things got. So any stock that's actually cheaper now is becoming a GREAT value.
But we aren't ready to buy yet. To borrow a wise market saying, a bear market in resource stocks can continue longer than traders can stay solvent. We don't want to speculate in this sector until we see an uptrend. With many resource stocks as cheap as they are right now, a new uptrend could send them hundreds of percent higher.
But we aren't ready to buy yet. To borrow a wise market saying, a bear market in resource stocks can continue longer than traders can stay solvent. We don't want to speculate in this sector until we see an uptrend. With many resource stocks as cheap as they are right now, a new uptrend could send them hundreds of percent higher.
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