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goldminingXpert (99.98)

GMX issues Strong Sell Rating for KGC. Target $9

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January 20, 2009 – Comments (12) | RELATED TICKERS: KGC , DUCK , RUN

I just bought March 20 puts on Kinross Gold. (KGC 19.24 +1.36). Kinross is up 4 dollars since Thursday and has reached positively ludicrious valuation. This company is overvalued by at least 50% and will suffer a sharp decline later this year when people resume trading on profits and future growth rather than blind optimism and uniformed lunacy. With a P/E of 35, Forward P/E of 31, P/S of 8, and a 150% increase in the share price off the fall 08 lows, this stock is going to get crushed.

I'll issue a full report later on why KGC is the best short of all the miners now, even better than the perenially hated Goldcrap (GG).

12 Comments – Post Your Own

#1) On January 20, 2009 at 3:07 PM, BigFatBEAR (99.27) wrote:

Happy inauguration day. :)

I believe that TMF stated that the next bull market begins today - shouldn't you be borrowing tons to buy all the calls you can?

I'll keep my eye on this one. I think gold (and anything related) may be mid-term irrationally exuberant.

Thanks for the heads-up, as always!

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#2) On January 20, 2009 at 3:27 PM, jamasony2 (33.20) wrote:

It looks like a lot of stocks in this industry have recently followed the same pattern - what makes you choose this one instead of, say, AEM (P/E = 60)?   

KGC looks like it's been bumping up against 19 for a while now without breaking through - the big volume on the last couple days and continued stalling at 18.5-19 is probably a good sign for shorters.

 Also, another pharm pick similar to RPRX might be SVNT.  Big runup like RPRX with an impending lawsuit, but perhaps the management team is better and they may actually get a drug out. 

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#3) On January 20, 2009 at 3:38 PM, goldminingXpert (99.98) wrote:

I'll send you an e-mail soon jamasony2, been busy with classes and getting books and stuff. Anyway, KGC has strong technical resistance and the 25% run-up of the past 4 days appeared to have ended (which indeed I think I was correct in calling.) Even a mere 50% retrace of that move from last week puts us back to 17, which is a nice trade (I think, however, KGC is going much lower than that.)

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#4) On January 20, 2009 at 4:00 PM, goldminingXpert (99.98) wrote:

Absolutely dumped on the close. So far down a buck from the time of this entry. A buck a day and we'll hit my price target in no time ;)

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#5) On January 20, 2009 at 6:56 PM, UltraContrarian (99.84) wrote:

Agree with jamason, AEM looks more overpriced on the fundamentals - particularly PE and lackluster growth compared to Kinross.  It does look like a nice trade.  I have kind of a mental block against shorting 4 and 5 star stocks and buying 1 and 2 star stocks in real life though.

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#6) On January 20, 2009 at 8:43 PM, FleaBagger (99.16) wrote:

Selling gold miners on the "fundamentals" of P/E and forward P/E is a lot like buying oil on the fundamentals this summer. You're buying exposure to an underlying commodity, much like using stocks to trade futures. I know what GMX thinks about the future of gold prices, but seriously, stop talking about the future P/E like it has any meaning whatsoever. If gold goes up anything like what the inflation cadre (myself included) think it will, all the gold miners will blow away the conservative forward earnings estimates.

If Obama and Geitner and whoever can't find the printing presses in time, the forward P/E will be just as meaningless, but in the other direction.

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#7) On January 20, 2009 at 9:05 PM, SideShowMel0329 (96.67) wrote:

So glad there's someone at the top of the CAPS community who realizes that gold is severely overbought. There's a huge bubble here and it's obvious, but gold bugs continue to lie to themselves, hoping for more monstrous returns.

Guess what. Just like the internet, just like housing, just like the airlines of old times. You can't continue the huge gains forever.

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#8) On January 20, 2009 at 10:40 PM, goldminingXpert (99.98) wrote:

correct Sideshow. Everyone is crowing about treasuries as the bubble, but the real bubble was in commodities. Most of it popped, but the hopeful herd stuck to a small corner of their bubble: gold. Soon, they will be popped too.

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#9) On January 20, 2009 at 11:34 PM, UltraContrarian (99.84) wrote:

Fleabagger - Selling gold on sky-high trailing PEs is a lot more like selling coal on sky-high trailing PEs this summer.  I.e. very profitable.

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#10) On January 21, 2009 at 10:17 AM, TMFSinchiruna (98.15) wrote:

UltraContrarian

Calling AEM's growth lackluster is like calling the Fed's approach to the financial crisis conservative. :)

300% organic production growth over the next 2 years.

goldminingXpert

I too saw KGC as looking a little 'toppy' compared to its peers recently, and for no good reason that I could ascertain. On the heels of an acquisition, I expected the market to tread more cautiously.

Then this morning, we see the huge share offering from KGC, which is sure to annoy recent buyers of the stock.

In my opinion, though, there is no way KGC sees $9 again unless gold drops back to $700 or lower, and that just will not happen. :) Observe the relatve strength of gold as it holds near $850 even as the dollar surges on near-term weakness in Euroland.

I try not to play the price prediction game, but if this dollar surge were to somehow gain near-term traction on Obama fever for a few weeks, I guess I could see $14 KGC after today's dilution, but no way will we see $9!

We should also renew our debate on GG one of these days ... the company looks sweet!

I suppose you're still calling for $500 gold? Not until sometime after $2,000 my friend. :P

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#11) On January 21, 2009 at 10:25 AM, goldminingXpert (99.98) wrote:

Once we hit 2,000, we'll never see 500 again, you and I both know that. However, we will hit 500 first imo. Only time will tell I guess.

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#12) On January 21, 2009 at 11:15 AM, abitare (99.61) wrote:

Mostly aligned, although I am a physical gold buyer 4 life...

I was looking to short some paper gold. I am shadowing you on this call, I went with May Puts on KGC.

I think GG is also sort of ripe for a short.

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