Gold stock to sell #3: Yamana Gold (AUY)

Posted Sep 13th 2009 9:00AM by Jamie Dlugosch
Filed under: Yamana Gold (AUY), Stocks to Sell

One of the hottest gold stocks is Yamana Gold Inc. (NYSE: AUY).

With a share price that is affordable to the retail customer, smaller investors have been gobbling up shares in 2009.

But like AngloGold, the credit crisis knocked the wind out of the Yamana trade.

Shares actually were fairly valued when they bottomed below $5 per share. Now, with more than 100% recovery of that value, AUY trades above $10 per share. As a result, the valuation is way ahead of itself. Shares of AUY trade for more than 17 times trailing earnings and 18 times forward earnings. Gold prices would have to continue increasing by 15% to 20% per annum in order to justify these prices.

Do you really think gold is going to $1,200 per ounce in the near future, in this economy? I think not.

I would sell AUY and lock in one-year profits that have been ridiculous.

Next: Gold Stock to Sell #4

Tags: AUY, gold stocks, jamie dlugosch, stocks to sell, yamana gold