Earlier this week we wanted to look for some sort of implied value in shares of gold stocks that had either underperformed the sector and those which were actually at substantial discounts to their analyst price objectives.  Now that gold has been choppy after hitting new highs, we made a screen of another sort: OVERVALUED GOLD STOCKS.  We wanted to look for stocks which have performed well over the last year, which were actively traded, had a large market cap in general, had a long operating history, and which are trading at a premium to a consensus analyst price target objective from Thomson Reuters.  Our screen yielded names such as AngloGold Ashanti Ltd. (NYSE: AU), Gold Fields Ltd. (NYSE: GFI), Agnico-Eagle Mines Limited (NYSE: AEM), and Novagold Resources Inc. (NYSE: NG).  We then compared these to the key ETFs of SPDR Gold Trust (NYSE: GLD), Market Vectors Gold Miners ETF (NYSE: GDX), and Market Vectors Junior Gold Mine (NYSE: GDXJ).

Prices have been provided and we have provided some basic data on each along with color for an outlook or what has been a driving force.  Those which were within 1% of the objective price targets were also included in the screen, but we left off the highly speculative Canadian names that trade in Vancouver or Toronto with small market caps and which have limited operations.

AngloGold Ashanti Ltd. (NYSE: AU) is one of the biggest companies in our investing gold universe that we track.  It is also based in South Africa and it operates in many friendly and many hostile environments.  Operations are in Congo, the Middle East and North Africa, Sub-Saharan Africa, Southeast Asia, Russia, Guinea, and the U.S. At $46.62 it has a market cap of $17.1 billion.  Analysts have a consensus price target objective of $42.12 and it has traded in a range of $34.11 to $47.75 over the last 52-weeks.  The company trades ate nearly 19-times forward earnings and the screen shows that it trades at about 5.4-times an implied book value.  Shares are up 36.68% from a year low and down only 2.37% from a year high.

Gold Fields Ltd. (NYSE: GFI) is also one of the largest gold players in our investing in gold universe.  It too is a South African-based company and it operates in South Africa, Australia, Peru, and Ghana.  At $15.55 it has a market cap of nearly $11 billion and a consensus analyst price target objective is $15.39.  The 52-week trading range is $10.88 to $15.99 and the screen listed that it trades at about 1.7-times an implied book value.  Shares are up 42.9% from the lows of the year and are only down 2.75% from the highs.

Agnico-Eagle Mines Limited (NYSE: AEM) is based in Canada and has operations in Canada, Mexico, U.S., and Finland.  At $72.21 it has a market cap of $11.3 billion and analysts hav a price target objective of $72.77.  the 52-week trading range is $49.64 to $74.43 and it trades at an implied forward ratio of about 26-times earnings.  The screen also showed that it trades at about 3.8-times an implied book value and shares are up 45% from lows and down only 3% from highs over the last year.

Novagold Resources Inc. (NYSE: NG) is based in Vancouver, Canada and it explores for and develops properties mostly in Alaska and British Columbia in Canada.  It is also one of the newer companies that has only been around since the 1980’s.  At $9.23 it has a market cap just above $2 billion.  We have an analyst price target objective of only $3.90, although it needs to be stressed here that there is such a small sampling that this ‘overvalued’ stance may need an asterisk.  The 52-week range is $4.09 to $9.76 and it is listed as being worth about 4.3-times implied book value.  Over the last year shares are up 125% from lows and are down about 5.4% from highs.

SPDR Gold Trust (NYSE: GLD) now trades around $131.00 and has a 52-week trading range of $100.65 to $132.6, so shares are up about 30% from lows of the last year and the ETF is down barely 1% from highs as it tracks the price of gold.  The value of the trust is listed today at $55.7 billion.

As far as the miners ETFs… Market Vectors Gold Miners ETF (NYSE: GDX) trades at $57.03 and has a 52-week range of $39.48 to $58.58, so shares are up 44% from lows and down only about 2.6% from highs of the last year.  Its second cousin is the smaller and less liquid Market Vectors Junior Gold Miners ETF (NYSE: GDXJ).  At $34.52, its 52-week range is $21.18 to $35.80, so its shares are up almost 63% and down about 3.5% from the 52-week highs.

As a reminder, these commodity stocks are no different from other commodity stocks.  If gold continues to run like oil did in 2007 to 2008, then these analyst price objectives won’t matter and those targets will get raised.  A rising tide will lift all ships.  Being overvalued also does not imply that anything is wrong with the company.  Stocks usually become overvalued because they have performed better than many peers.

If you want to see the “Gold stocks with the most implied upside” from this week that is here.

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JON C. OGG

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