Gold Stocks With Most Upside (ABX, GRS, GG, IAG, JAG, RGLD, AUY, GDX, GDXJ)

Whether we are in a bubble or not is still an outstanding issue, but many of the gold miners and producers are seeing their stocks now trading above what is the consensus analyst price target objective from Thomson Reuters.   What we wanted to check was which gold stocks still trade at discounts to their consensus analyst target prices, which are not at 52-week highs, and which still can earn investors money ahead.

Our screen of our 40+ gold issues in our US-listed gold stocks universe brought up Barrick Gold Corporation (NYSE: ABX), Gammon Gold, Inc. (NYSE: GRS), Goldcorp Inc. (NYSE: GG), IAMGOLD Corp. (NYSE: IAG), Jaguar Mining Inc. (NYSE: JAG), Royal Gold, Inc. (NASDAQ: RGLD), and Yamana Gold, Inc. (NYSE: AUY).  This is stating the obvious, but investors who prefer not to take on individual company risk can also look at Market Vectors Gold Miners ETF (NYSE: GDX) and then the Market Vectors Junior Gold Miners ETF (NYSE: GDXJ).

Our cut-off in the screening process was those which have markets caps of close to $500 million and higher, which are actively traded, and preferably which have 5 or more analysts that cover the shares.  There are many caveats to consider above and beyond regular stock picking targets when it comes to gold.  Most are foreign or are making their money from foreign operations, there are labor issues and safety issues that can come up, geopolitics is mining risk because companies generally have to work in many hostile or unfriendly local environments.  There is also an ongoing currency risk due to international operations, although gold is at least generally translated in dollars.

The greatest risk is also the easiest to guess and the hardest to pick: the price of gold today versus a year and two years out.  If gold rises to $2,000 per ounce as Jim Rogers suggests, then it probably won’t matter about stock picking skills for undervalued or underperforming names.  Conversely, if gold ends up being a huge asset bubble and rapidly falls to $1,000.00 per ounce then the effort of stock picking here is unlikely to make a difference as well.  Rising tides lift all ships, receding tides beach all ships.

Barrick Gold Corporation (NYSE: ABX) is the biggest by market cap in our universe and it seems odd that the biggest is also still at a discount when the gold market is still on so much fire for investors.  At $47.32, its 52-week trading range is $33.65 to $48.02.  With a $46.6 billion market cap, this Canadian giant is listed as having an average price target of $55.13.  The implied upside here is about 16% and we might have left this off, except that this would imply a whopping additional $7.5+ billion in market cap.

Gammon Gold, Inc. (NYSE: GRS) has also been in trouble, partly over a mine strike and shares are trading at $6.99 versus a 52-week trading range of $5.09 to $12.63.  The consensus target is $8.34 on the stock, although that used to be higher.  The market cap here is $967 million and 7 analysts have price targets.  The implied percentage gain here is more than 19% if the target objective is hit.

Goldcorp Inc. (NYSE: GG) is the giant and at $44.09 it has a $32+ billion market cap.  Its 52-week trading range is also $32.84 to $47.41.  The Canadian-based international gold miner and producer has an average analyst price target of $52.32 from more than 15 analysts, but it is worth noting that there are some old leftover targets that have not updated (one is listed as being as low as $25.00).  The median target is $54.14, but the implied upside in the shares to $52.32 leaves more than 18% upside to the mean target (and 22% to the median target).

IAMGOLD Corp. (NYSE: IAG) is one of the larger gold companies at a discount to analyst price targets with its $6.6 billion market cap.  At $17.75, the 52-week range is $12.19 to $21.00 and the consensus price target from more than 10 analysts is listed as $23.27.  The lowest target is still $18.00, but the consensus target implies upside of about 31%.

Jaguar Mining Inc. (NYSE: JAG) has been in trouble and it has fewer analysts than we prefer covering it.  The consensus price target is still north of $12.50, although we would caution that there may be more of a lag on this figure versus a $6.90 share price today.  The upside may be also tied to a lack of analyst reduction to price targets.

Royal Gold, Inc. (NASDAQ: RGLD) is another one of the gold stocks which has lagged peers this year.  The company also invests in mining interests and royalties rather than acting as a miner and producer on its own.  At $50.57 with a $2.8 billion market cap (and only about 20 employees), the average price target from the 7 analysts that have targets is listed as nearly $59.00 and the lowest target is $55.00.  Either way, that implies 10% to 17% gains.

Yamana Gold, Inc. (NYSE: AUY) is another larger player with close to an $8.7 billion market cap, and at $11.73 its 52-week trading range is $9.16 to $14.37.  The average target is $14.03 from more than 15 analysts with price target objectives, and the lowest estimate is $11.50.  This comes in just shy of 20% upside to the price target objective.

Market Vectors Gold Miners ETF (NYSE: GDX) hit a new 52-week high on Tuesday, and at $57.26 the 52-week range is $39.48 to $57.83 and then the Market Vectors Junior Gold Miners ETF (NYSE: GDXJ) closed at $34.66 and the 52-week range is $21.18 to $34.82.

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JON C. OGG