The trading has been quite violent lately and today was no exception. There was one standout — red lights in Goldville (the gold market).
Red Lights In Goldville
By Bill Fleckenstein President Of Fleckenstein Capital
October 25 (King World News) – Between last night and this morning Barrick, Newmont, Goldcorp, Agnico Eagle, and New Gold all reported. I thought Barrick’s results were just fine, as the company paid down a huge chunk of debt, lowered its costs, and boosted cash flow, but none of that helped the stock price. AEM had a better-than-expected quarter and raised guidance for next year, and initially the stock price was up about 7%, but that gain was completely wiped out in almost no time. (As an aside, there were just two questions from the dead fish on the conference call.)…
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Fleckenstein continues: Goldcorp was hammered for about 20% on a quarter that was expected to be weak, but I didn’t see any reason for it to be punished as hard as it was. I think Goldcorp is set to do better prospectively, and management indicated the same as well. Nonetheless, it didn’t matter. (I bought some January 2020 $10 Leaps today because I was waiting to take advantage of this quarter.) I only glanced at the Newmont report, since I’m not involved, but it looked OK, and New Gold actually rallied, though I am not sure why, given the rest of the carnage.
What Else Is New?
I don’t really think that the decline in the sector was any indication of company-specific problems or concerns as much as it was just indiscriminate selling for whatever reason. Perhaps some big fund decided to eliminate its mining exposure, or some variation of that theme, because the news just wasn’t that bad. In fact, I could argue that it was pretty decent, and you don’t have to look any further than Pan American Silver, which was also clobbered in the wake of the news announcement it made yesterday.
Not that massive, indiscriminate selling is something to be ignored, but I think it is important to know whether it might imply serious bad news for every company that got sold. I don’t think that was the case. It was more an instance of an epic pukefest. That doesn’t change the P&L, but sometimes things happen that you can’t do anything about. Today was one of the most bizarre beatings relative to valuations and fundamentals that I have ever seen.
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