Contrarian Investing Includes Ways to Profit from Gold 

Paul Dykewicz

Contrarian investing includes ways to profit from gold for investors willing to consider an asset that has been out of favor in recent times. One hotspot for investment ideas is the annual FreedomFest conference.

FreedomFest and the Global Financial Summit were held in South Dakota for the first time this year, and the event was a big hit. Nearly 2,800 people came, a record turnout. We also had 180 exhibits — there was quite a buzz in the “trade show for liberty.”

Contrarian Investing Features Gold Mining Stocks

Gold stocks offer a ripe opportunity for investors seeking to buy contrarian investments, said Adrian Day, president of Adrian Day Asset Management, of San Juan, Puerto Rico. The gold price currently is modest, and its outlook appears strong, he added.

Gold miners are making strong free cash flow and the companies have stronger balance sheets than a decade ago, Day said. On nearly every valuation metric, the gold stocks are selling in their historically lowest 25 percentile, he continued.

When gold moves up and generalist investors take an interest again, the stocks should have outsized returns, Day said.

Contrarian Investing Reveals Hidden Value in B2Gold 

B2Gold Corporation (NYSE:BTG), a gold mining company headquartered in Vancouver, British Columbia, operates mines in Nicaragua, Namibia, Mali and the Philippines, as well as owns properties for exploration of precious metals. Mark Skousen, PhD, the editor of the monthly investment newsletter, Forecasts & Strategies, calls the stock “speculative” but still gave it his recommendation.

However, the stock is down 27.1% so far this year through the close of trading on Monday, July 27. It also is down 39.18% in the past 12 months, but Skousen told FreedomFest attendees he expects the share price to rebound.


Chart courtesy of www.StockCharts.com

Skousen, who said he still regards the stock as an undervalued buy, is not alone in his outlook. The Raymond James investment firm still rates it “outperform,” partly due to its expected record gold production in the second half of 2021 and its profit margins topping 36%.

B2Gold has total assets worth $3.5 billion, with $550 million in cash and only about $67 million in debt. The gold stock currently is selling for below seven times earnings in an industry with an average price/earnings ratio of 20, counseled Skousen, who also heads the Home Run Trader, Five Star Trader, TNT Trader and Fast Money Alert trading services

Mark Skousen, PhD, a descendent of Benjamin Franklin, meets with Paul Dykewicz in Philadelphia.

Revival Gold Emerges as Another Contrarian Investing Choice

Jeff Phillips, a junior mining specialist who is President of Global Mining Development, recommended Revival Gold Inc. (OTC:RVLGF) during his appearance at FreedomFest during a discussion of gold stocks on Friday, July 23. The stock has the potential to double or even triple in the next year, Phillips told the attendees.

“I think Revival can do that without gold going up much,” Phillips said. “If gold moves higher, then investment potential only gets better.”

Chart courtesy of www.StockCharts.com

Contrarian Investing Features Previously Productive Idaho Gold Mine

The junior gold mining company recently announced new drilling at its Beartrack-Arnett Project in Idaho. A key advantage is that Revival Gold is seeking to evaluate the restart of a previously productive mine that already has significant infrastructure in place.

This move follows a recent resource update that lifted the gold resource for the project to 3 million ounces, Phillips continued. Revival Gold also is in the middle of a 5,000-meter drill campaign. The expected presence of 3 million ounces of gold may lead Revival Gold to officially announce the planned restart of the Beartrack Gold Mine.

Beartrack is a past-producing open pit heap leach mine that was operated by Meridian Gold [now Yamana Gold (NYSE:AUY)] and produced roughly 600,000 gold ounces. The mine was closed in 2000 as a result of low gold prices, below $300 an ounce, Philips said.

Contrarian Investing Detects Junior Mining Stock in an Advanced-Stage Project

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But the yellow metal is now at more than six times those prices, Philips continued. The Beartrack/Arnett opportunity for Revival Gold and its investors seeks to gain exposure to an emerging gold area play in one of the safest mining jurisdictions in the world — the United States, he added.

Beartrack is advanced-stage, “brownfield” gold project that holds important advantages compared to typical “greenfield” mineral exploration projects. Those pluses include reduced risk, huge discounts on capital costs and a shorter time horizon from exploration to production, Phillips said.

Brownfield projects offer economic advantages to both the company and its shareholders. The brownfield projects also involve a known resource and a proven producer. In contrast, a greenfield exploration project carries the risk of operating literally in uncharted territory, typically with limited geophysical data and drilling. 

Rob Arnott, chairman of Research Affiliates, LLC, which advises on over $195 billion in investment assets, told FreedomFest attendees that money flows matter. As a result, he advised that they look around and see what is “not expensive,” he added.

“Emerging markets value stocks seem to trade at relatively low multiples and pay 5% dividend yields,” Arnott said. 

Inflation appears to be on the rise and becoming a growing factor for investors to consider, Arnott said. Whether inflation will stay between 2-3% or rise to 5-10% seems difficult to forecast, he added.

Contrarian Investors May Want to Consider PAUIX

One of the three largest personal holdings of Arnott is PIMCO All Asset All Authority Fund (PAUIX). It seeks maximum real return, while preserving real capital and prudent investment management.

With the fund focuses on out-of-mainstream asset classes and a value-oriented, contrarian investment process, it can help investors enhance their long-term return potential, while improving portfolio diversification, reducing volatility and adding an explicit inflation buffer.

The fund is up 14.3% so far this year and 24.8% for the past 12 months, as of July 27. It also has a hefty dividend yield of 9.9%.

Another one of the fund’s that composes Arnott’s top three personal investing positions is PIMCO EM Fundamental IndexPlus TR Strategy Fund (PEFIX).

Chart courtesy of www.StockCharts.com

This fund offers a one-stop-shopping way to allocate money to (1) diversify markets away from mainstream stocks and bonds, (2) protect against renewed inflation and (3) seek a solid real return over and above inflation, even if U.S. markets falter, Phillips said.

Emerging Markets PIMCO Fund Offers Contrarian Investing Opportunity

PEFIX provides value allocation to emerging markets, while seeking to boost real returns and preserve capital through prudent management. This fund focuses on out-of-mainstream asset classes and uses a value-oriented, contrarian investment process to help investors enhance their long-term return potential, while improving portfolio diversification, reducing volatility and adding an explicit inflation buffer, according to PIMCO.

The fund has jumped 18.8% so far in 2021 and 53.2% for the past 12 months, as of July 27. It also has a hefty dividend yield of 24.3%.

The fund emphasizes holding assets that are fundamentally attractive, while shifting away from popular asset classes when they are overvalued. The fund is managed to achieve high real returns (above inflation) that are consistent with its secondary benchmark of the Consumer Price Index (CPI) +6.5% over a full market cycle.

FRDM Is Another Fund to Buy for Contrarian Investing Strategies

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Freedom 100 Emerging Markets ETF (FRDM) is a freedom-weighted emerging markets fund. It also is one of Arnott’s top three personal holdings, he told me, and is designed to invest in in emerging markets that respect freedom and use equal weighting of the fund’s assets.

The fund is up 7.8% so far this year and 46.1% for the past 12 months. It also offers a current dividend yield of 1.2%, as of July 28. 

The stock selection process of FRDM identifies a portfolio that generally holds 100 emerging market stocks. The Index stock selection algorithm is fully automated, while the index seeks to invest in countries with higher human and economic freedom scores.

Chart Courtesy of www.StockCharts.com

Pension Fund Chairman Discusses Contrarian Investing

Retirement Watch leader Bob Carlson said he likes the emerging markets and prefers to invest in actively managed funds that specialize in particular regions.

“The emerging region I favor most now is Asia,” Carlson said. “It has higher growth potential, more diversified economies and is more politically stable than other emerging regions. The governments are in better shape fiscally than most others.”

The risk in Asia is that the region is heavily influenced by what’s happening in China, Carlson cautioned. China’s government recently has been asserting more control over major businesses and is combing increasingly restrictive, he added.

The question now is whether it will exert enough control to decrease growth and corporate earnings, Carlson told me. 

“I think that’s unlikely, but investors aren’t so sure,” Carlson said. “Most Asian markets and mutual funds are flat for the year to date and down over more recent periods.”

Pension fund and Retirement Watch chief Bob Carlson answers questions from columnist Paul Dykewicz.

Carlson said his preferred fund at this time is Matthews Pacific Tiger (MAPTX). It focuses on larger growth companies in the region and is actively managed. It is up 2.38% for the year to date but is down 1.11% over three months and 1.95% over four weeks, Carlson said.

Chart Courtesy of www.StockCharts.com

Money Manager Offers Her View of Contrarian Investing

“The perfect contrarian trade is like shorting subprime mortgages going into the 2008 crash: it isn’t enough to go against consensus, you also need a way to cash in big when you’re right,” said Hilary Kramer, who leads the GameChangers and Value Authority advisory services. “Right now, that’s a tricky proposition because the Fed’s easy money has lifted just about every boat on Wall Street.”

Most of the funds that are bleeding money are on the short side, going down as the market goes up and theoretically paying off when the market ultimately falls, Kramer counseled. Unless investors have institutional amounts of capital to keep feeding bearish views, that’s a precarious proposition, she added.

“You might think the market is behaving irrationally but it truly can remain irrational longer than you can remain solvent where these funds are concerned,” Kramer said.

Columnist Paul Dykewicz interviews money manager Hilary Kramer, whose premium advisory services include IPO Edge2-Day TraderTurbo Trader and Inner Circle.

Contrarian Investing Currently Is Limited to A Few Big Themes 

The contrarian universe right now is limited to a few big themes, Kramer continued. There is China, which she does not recommend in the wake of Alibaba Group Holding Ltd. (NASDAQ:BABA) CEO Jack Ma’s downfall. If Beijing can pressure the founder of Alibaba, it is clear that shareholder value is not a priority over there right now, she added.

“Then there’s green energy, which is a lot more interesting,” Kramer said. “Consider a diversified fund like the Invesco Solar ETF (NYSE:FAN) or TPI Composites Inc. (NASDAQ:TPIC), a small, relatively obscure company that happens to be the biggest global manufacturer of wind turbines. If you believe oil is coming back, sooner or later high crude prices will make renewables more competitive alternatives… and any sustainability push in Congress will accelerate the process.

Chart Courtesy of www.StockCharts.com

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Chart courtesy of www.StockCharts.com

Worsening COVID-19 Cases Should Boost Interest in Contrarian Investing

COVID-19’s increasingly transmissible Delta variant is causing heightened concern among health experts about the spread of the virus across the United States. The variant is blamed for new surges in case numbers and deaths. Genetic variants of SARS-CoV-2 have been emerging and circulating worldwide throughout the COVID-19 pandemic, according to the Centers for Disease Control and Prevention (CDC). 

The CDC and the U.S. State Department each raised their warnings to the highest levels on July 19 for travel to the United Kingdom. The CDC cautioned to “avoid” traveling there, while the State Department issued a “do not travel” warning for the United Kingdom.

A variant has one or more mutations that differentiate it from other COVID-19 varieties in circulation. The Delta variant is expected to become the dominant coronavirus strain in the United States, according to the CDC. With more than half the U.S. population not fully vaccinated, public health officials warn that a resurgence of COVID-19 cases can occur, especially this fall when many unvaccinated children return to school.

Progress in increasing the number of people vaccinated from COVID-19 lifts hope that new cases and deaths will fall again after the current surge caused by the Delta variant. As of July 27, 188,996,475 people, or 56.9% of the U.S. population, have received at least one dose of a COVID-19 vaccine. The fully vaccinated total 163,312,474 people, or 49.2%, of the U.S. population, according to the CDC.

COVID-19 cases worldwide have reached 195,334,487 and caused 4,177,466 deaths, as of July 28, according to Johns Hopkins University. U.S. COVID-19 cases reached 34,604,005 and caused 611,288 deaths. America has the dreaded distinction as the country with the most COVID-19 cases and deaths.

Despite COVID-19 vaccine availability, improving economic data and a recent $1.9 trillion federal stimulus package, contrarian investing is gaining interest among investors and certain money managers, too.

Paul Dykewicz, www.pauldykewicz.com, is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street JournalInvestor’s Business DailyUSA Today, the Journal of Commerce, Seeking Alpha, GuruFocus and other publications and websites. Paul, who can be followed on Twitter @PaulDykewicz, is the editor of  StockInvestor.com and DividendInvestor.com,  a writer for both websites and a columnist. He further is editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free e-letters and other investment reports. Paul previously served as business editor of Baltimore’s Daily Record newspaper. Paul also is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The book is great as a gift and is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many othersCall 202-677-4457 for special pricing!

 

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