Gold Miners: One Of The Market’s Best Pure Value Plays
But Is Now The Time To Buy In?
Famed investor Stanley Druckenmiller jumped into the headlines this week when SEC filings showed that he sold shares of Alphabet, Amazon and Broadcom, while picking up shares of Barrick Gold and Newmont. Under normal circumstances, legal filings are modestly interesting because they give us an idea of what the industry heavyweights are doing with their own money. This one, however, was particularly interesting because it was such a 180 degree turn from what the rest of the street is doing.
In this market, where the “magnificent 7” have been driving returns for more than a year, who in their right mind is selling mega-cap tech and picking up gold miner stocks?
The answer would be someone who thinks something bad is about to happen in the financial markets and is positioning themselves much more defensively. Moving from tech into gold miners might be the ultimate growth-to-value pivot.
Outside of Treasuries, physical gold would probably be the most logical defensive play, but the miners have become undervalued to the point where they could legitimately be considered an alternative to precious metals themselves. Gold miners, however, are not the same as gold. Gold miners are stocks and behave like stocks, first and foremost, and the historical correlation between the two, while decidedly positive long-term, can diverge at times.
But the biggest potential benefit of using gold miners right now, outside of their indirect exposure to gold itself, is its relative value. Gold miners are cheap, they’re profitable and they’re generating a lot of cash. But they haven’t really participated in the stock market’s gains, either when measured against the S&P 500 or against the value of gold.
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