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The Gold Stock Strategist analyzes leading junior gold producers and major gold mining companies.

Comments are welcomed!

Wednesday, February 25, 2009

UPDATE - GSSX Index© Outperforms Other Indices

I have updated my list of stocks included in the Gold Stock Strategist Index and comparison with other gold-related asset classes.

As indicated when I began this website last year, the “theory” behind the Gold Stock Strategist investment style is that emerging junior gold producers should outperform other gold-related investment styles because they are leveraged plays on the price of gold.

So far this year, the GSSX Index© is fulfilling the role of a leveraged play on gold with a 31.0% YTD return compared to the price of gold which has risen 9.9% YTD in 2009.


(click for larger chart)

The easiest--though probably not the best--way to test the GSS hypothesis is to compare the Year to Date (YTD) return of alternative precious metal or junior mining indexes.

Indexes Used for Comparison

Other indexes used to compare with the GSSX Index© include the XAU index, the HUI, index, the TSX Venture Exchange index, and the price of gold index represented by the ETF symbol GLD.

The XAU is an index comprised of 10 large cap precious metals mining companies traded on the Philadelphia exchange. Companies in the index include: Agnico Eagle Mines (AEM), Anglogold Ashanti (AU), Barrick Gold (ABX), Freeport-McMoran Copper and Gold (FCX), Gold Fields(GF), Goldcorp (GG), Harmony Gold Mining (HMY), Kinross Gold (KGC), Newmont Mining (NEM), and Pan American Silver Corp. (PAAS).

The HUI—AMEX Gold BUGS (Basket of Unhedged Gold Stocks) index is comprised of 13 major gold mining companies including Agnico Eagle Mines (AEM), Coeur D Alene Mines (CDE), Eldorado Gold (EGO), Gold Fields ((GFI), Goldcorp (GG), Golden Star Resources (GSS), Harmony Gold Mining (HMY), Hecla Mining (HL), Iamgold (IAG), Kinross Gold (KGC), Newmont Mining (NEM), and Randgold Resources (GOLD).

The TSX Venture Exchange index represents the 2,300 companies listed on the TSX Venture Exchange. The TSX Venture Exchange is a public venture capital marketplace for emerging companies who have not yet met the requirements for listing on the TSX, which deals mostly with well established companies. The TSX Venture index is a much broader index than the others and includes companies other than gold miners such as junior natural gas explorers and other companies—primarily in the natural resource sector.

Finally, GLD is an ETF that tracks the price of gold.

Composition of the GSSX Index©

The composition of the GSSX is subjective as are all indices. Nevertheless, the GSSX is a fair representation of the universe of emerging junior gold producers. The 20 stocks included in the index represent about 40% of all emerging junior gold producers and about 1.3 million projected ounces of gold produced in 2009. Each company represents 1/20 of the total index. It is not weighted by market capitalization. The top performers so far this year in the GSSEPX index are La Mancha, Castle Gold, Gold Resource, Richmont, and New Gold.

Here is a list of the companies included in the GSSX Index© , followed by a chart with their relative performance YTD.

Alamos Gold (TSX:AGI; OTC:AGIGF)
Alexis Minerals Corp. (TSX:AMC; OTC:AXSMF)
ATW Ventures (TSX:ATW: OTC:ATWVF)
Aurizon Mines Ltd. (TSX:ARZ; AMEX:AZK)
Castle Gold (TSX:CSG; OTC:CSGLF)
Capital Gold Corp. (TSX:CGC; OTC:CGLD)
Gold Resource Corp. ((OTC: GORO)
Gold-Ore Resources (TSX:GOZ; OTC:GREXF)
Jaguar Mining (TSX:JAG; NYSE:JAG)
Jinshan Gold Mines (TSX:JIN; OTC:JINFF)
La Mancha Resources (TSX:LMA; OTC:LACHF)
Metanor Resources (TSX:MTO; OTC:MEAOF)
Minefinders (TSX:MFL; AMEX:MFN)
MDN Inc. (TSX:MDN; OTC:MDNNF)
New Gold Inc. (TSX:NGD; AMEX:NGD)
New Guinea Gold (TSX: NGG: OTC:NGUGF)
Richmont Mining (TSX:RIC; AMEX:RIC)
San Gold Corp. (TSX:SGR; OTC:SGRCF)
Timmins Gold (TSX:TMM; OTC:TMGOF)
W. Goldfields (TSX:WGI; AMEX:WGW)

(click for larger chart)

With this post, I have added several companies to the GSSX Index© (New Gold, Richmont, Castle Gold, La Mancha, and New Guinea Gold).

Two others have dropped out for various reasons including Kinbauri and Apollo Gold.

This update has been a long time coming. Hopefully, the emerging junior gold producers will be able to weather this years financial storms better than last year.

Best,

Gold Stock Strategist

=============================
Full disclosure: I own shares in many of the companies listed above. The information provided in this post is believed to be correct, but not guaranteed. Investing in junior gold miners entails risks. Readers are responsible for their own investment decisions. Do your own due diligence.

1 comment:

G said...

EXCELLENT Work here! You are a gold bug after my own heart!

I have been thinking about putting together an index that better represents the juniors, but now I have found yours - GREAT!

Now I just have to figure out how to get it into chart form. I may be able to create a custom study with the trading software. It would be wonderful if you (we?) could convince Stockcharts to create the Index as a chart on their system. Right now I use a comparison better the HUI and the GDX as an indication of movement in the juniors relative to the majors. But as I am sure you have noticed those "standard" indecies are dominated by several (3-4) stocks that make up 60+% of the total. I suppose from a statistical stand point that makes sense?

I am interested that your index gives equal weight to each stock. I guess one could add a weighting based on market cap, share price or average shares traded?

Also find your work on the cash flow multiples to be of use and interest! Thanks for all of the good work!

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