Five gold producers enjoying analyst upgrades

Friday, Oct 19 2012 by
Five gold producers enjoying analyst upgrades

Earlier this year we reported on the impressive returns that were being produced from a stock screen that allows you to see which companies are attracting favourable upgrades from brokers. The Earnings Upgrade Momentum screen has continued to outperform the FTSE so far this year and one of the interesting current patterns is that half of the 10 qualifying companies are gold mining stocks. So called "earnings upgrades" – when analysts revise their expectations about a company’s performance – can be a significant indicator for individual investors. Indeed, while relying too heavily on the opinions of analysts can be a risky business, these upgrades have been shown to be a fairly influential guide to the future. 

How the screen works 

As a reminder, this screen works by seeking out stocks that are covered by more than three analysts. Thereafter, each company’s earnings per share estimates for the following year should have been increased by more than 5% during the previous month. In addition, there must have been at least one upgrade during the previous month, and the number of upgrades must be higher than the number of downgrades. 

At the height of the financial reporting season in March this year (when the market hit a 2012 high of 5,966 points), the screen was the best performing Stockopedia strategy. Among the companies qualifying at the time were paper and packaging group Mondi (LON:MNDI) and media company Itv (LON:ITV). Both were hit by the market-wide volatility that struck in early summer but have subsequently recovered and are now trading close to their 1-year highs. By contrast, Max Petroleum, a small-cap oil and gas stock on the screen back then, went on to see its price collapse under the weight of poor news from its operations in Kazakhstan. That illustrates the importance of doing further analysis and/or using diversification when screening, rather than just pickling one name blindly from a list. 

In the year-to-date, the Earnings Upgrade Momentum screen has produced a return of 15.9%. The list of stocks qualifiying changes every day although we rebalance our model portfolio each quarter. Interestingly, out of the 10 now qualifying companies, six of them are mining stocks – and five of those have a strong emphasis on gold production. 


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As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested. ?>

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Centamin plc is a mineral exploration, development and mining company. The Company is engaged in the business of exploration and production of precious metals. It operates in Australia, Jersey, Egypt, Burkina Faso and Cote d'Ivoire. Its principal asset, the Sukari Gold Mine (SGM), is located in the Eastern Desert, approximately 900 kilometers from Cairo and 25 kilometers from the Red Sea. SGM is jointly owned by Pharaoh Gold Mines NL (PGM) and Egyptian Mineral Resource Authority (EMRA). It has a license holding over an area of approximately 100-kilometer trend of gold mineralization in Burkina Faso. The Company holds a tenement package over an approximately 2,200 square kilometer area in southern Burkina Faso, adjacent to the border with Cote d'Ivoire. It has seven permits in Cote d'Ivoire covering an area of over 2,330 square kilometers. Six of these are part of the Doropo Project across the border from Batie West in Burkina Faso and the other is in the west of the country. more »

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Fresnillo plc is a holding company. Through its subsidiaries, the Company is engaged in the mining and beneficiation of non-ferrous minerals, and the sale of related production. The primary contents of this production include silver, gold, lead and zinc. The Company has six operating mines: Fresnillo, located in the State of Zacatecas, which is primary silver mine; Saucito, located in the State of Zacatecas, an underground silver mine; Cienega, located in the State of Durango, an underground gold mine, including the San Ramon satellite mine; Herradura, located in the State of Sonora, a surface gold mine; Soledad-Dipolos mine, located in the State of Sonora, a surface gold mine, and Noche Buena, located in State of Sonora, a surface gold mine. The Company has two development projects, which include Saucito II and San Julian. The Company's subsidiaries include Minera Fresnillo, S.A. de C.V., Minera Penmont, S. de R.L. de C.V., Minera Saucito, S.A. de C.V. and Fresbal Investments, Ltd. more »

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About Ben Hobson

Ben Hobson

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