Newmont Mining (NYSE: NEM) is one of plays that was perhaps bid-up prematurely by Wall Street, and as a result the party has already begun. Nevertheless, the view from view argues that the mining company's upside and the stock's recent pull-back warrant adding shares at this stage. Here's why:In general, analysts expect a 5-7% sales gain in FY2009, aided by higher average prices for gold, which should offset lower prices for copper.
Longer term, a stabilizing Chinese economy (copper pipes and electrical wires for homes and commercial buildings), and the increased purchase of gold as an alternative investment, and underproduction of gold globally, bode well for NEM.
Further, lower raw material prices should assist margin expansion. The First Call FY2009/FY2010 EPS estimates for NEM are $2.06 to $2.49.
The risks include a failure of gold demand to maintain its current growth trend, which would hurt gold prices.
Stock Analysis: Newmont Mining is a moderate-risk stock. Consider buying a 25% position in NEM now; then buy another 25% in three months, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your NEM position in the first half of 2009. Sell/Stop Loss if you were to buy shares in this company: $22.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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