It often pays to buy stocks when nobody seems interested, and sell when everyone seems to think that the sky is the limit. That is hard to do, because you need to go against the grain and think independently. When everyone seemed to love gold stocks, it was time to sell, but a major reversal has caused many gold mining stocks to drop to new 52-week lows. This could be the best buying opportunity in years for many gold stocks. While the price of gold is off the highs, it still remains at levels that is solidly profitable for many producers.
The stock market and gold has dropped a bit in recent days and that has put even more pressure on stocks like Barrick Gold (ABX). This stock recently hit a new 52-week low and it is now oversold with a relative strength index of about 32. It also looks deeply undervalued when considering a number of metrics.
Also Read: 50 Ways To Invest In Gold
First of all, analysts expect Barrick to earn about $4.40 per share in 2013, and around $4.80 in 2014. This puts the price to earnings ratio at below 7, and that is about half the average PE ratio for the S&P 500 Index (SPY). It also trades way below $50.02, which is the 52-week high and it offers a solid dividend yield of 2.5%. This leads me to believe that the markets have “overdone” the selloff in Barrick shares and that could mean the stock is due for a sharp rebound as soon as cooler heads prevail.