Newmont Mining: Pull-back is buy opportunity

Posted Dec 8th 2009 3:30PM by Joseph Lazzaro
Filed under: Newmont Mining (NEM), Stocks to Buy

A generation or so ago, a key word for the future was 'plastic.' Well, plastic remains a big part of modern daily life, but a key word for the current investing generation may be 'copper, which is one reason I'm reiterating my buy rating for copper and gold miner Newmont Mining (NEM), first recommended on June 3, 2009 at a price of $46.42.

As expected, Newmont's stock price is trending up, propelled higher by a likely 10-13% revenue increase in 2010.

A growing Chinese economy (copper pipes and electrical wires for housing and commercial buildings), the increased purchase of gold as an alternative investment, and the underproduction of gold, bode well for NEM. Gold's price also will be supported by inflation-hedgers, if inflation re-heats and/or the dollar continues to weaken in 2010 versus the world's other, major currencies.

The First Call FY2009/FY2010 EPS estimates for NEM are $2.28 to $2.77. That FY2010 EPS estimate will likely prove to be low.

Technically, Newmont finally broke out of a $37-48 trading range in November, and bolted higher, clearing $50 psychological resistance, then $55, before pulling back on a drop in gold's price. View the pull-back to about $50 as a Buy opportunity.

Stock Analysis: Newmont Mining is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in NEM now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your NEM position before February 2010. 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.

Tags: NEM