With a penchant for following insider buying, Jack Adamo takes a fundamental long-term approach to investing. In his Insider Plus newsletter, he has been a fan of mining companies, and sees recent price weakness as a reason to add to positions in Meridian Gold (NYSE:MDG) and Compania de Minas Buenaventura (NYSE:BVN).
His proprietary indicators, which follow patterns of insider buying and selling, had been forecasting a setback for metals; as such, he did not view the recent pullback as a surprise. And with the "speculative fever" in the gold sector having cooled, he is now more comfortable recommending mining positions.
One favorite is Meridian Gold, which he notes pulled back nearly 16% on what he cites as no news except a broker downgrade from Market Outperform to Market Perform. He notes, "This is hardly cause for panic."
"Meridian is back within our buy range now," he says. "If you don't own the stock, I'd ease in by buying a half position at this time, and waiting to see what the market does. Still, it's a good long-term buy at this price, with the stock down 33% from its 52-week high."
Another top pick from Adamo in the sector is Compania de Minas Buenaventura. He notes the firm had a weak fourth quarter, with earnings down 19%, due, he explains, mostly to lower yields and output at its Yanacocha joint venture with Newmont Mining (NYSE: NEM). This news, he adds, overshadowed the 48% increase in EPS for the year.
Adamo explains, "The drop in earnings from Yanacocha is definitely a concern. There were work disruptions at the mine in addition to lower grade ore. In any case, at $3.36 in earnings per diluted share, the stock is dirt cheap, trading at less than eight times earnings. The risk-to-reward ratio here is still excellent."
For more stock picks from the leading financial newsletter advisors, visit Steven Halpern's free website, TheStockAdvisors.com.
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