Yamana Gold, Inc. (USA) (AUY)

JakilaTheHun (99.93) Submitted: 12/5/2008 9:55:34 AM : Start Price: $5.16 AUY Score: +60.49

You can find a gazillion commentaries on the Interwebz about why gold prices are going to rise. Given the way the US and other world governments are throwing around money to "combat" the credit crisis, I think rising gold and silver prices are all but inevitable. The only question for me is "when"? Has it already started? Does it have a few more months? I can't say for sure, but I'm going thumbs up on most silver and gold stocks right now.

Many of these gold stocks have declined with the market despite the fact that the demand for gold has actually increased. Yamana (AUY), for instance, traded at the $19 level during its peak in March. I don't know that it will reach that point once again, but it's possible. Suffice it to say, that AUY's book value at the end of Sep '08 was $8.93 per share. The stock now sells at close to a 45% discount to that. AUY has relatively low debt at 32.3% of total value, they have stayed in the black on their income statements, and their cash flows from operations have been decent this year despite the fact that gold prices have dropped a bit. Their free cash flows have been negative, but that's not necessarily a bad thing if they are buying more productive assets.

All in all, this is a bet on gold prices rising and this company's assets being worth significantly more than the market believes them to be. I'd set a target price for this around $12.