There is growth out there, but it’s becoming awfully difficult to find. We’ve seen strength in U.S. micro-cap technology companies in the latest quarter, and that’s very positive, but large-cap technology stocks are definitely hurting.
Sector-wise, there is no consistency in this stock market, but if I were to pick one group to highlight, it would be precious metals; gold and silver mining companies specifically. Even though the spot prices of gold and silver aren’t really advancing currently, they are holding up consistently, and that’s a huge bonus for gold and silver producers.
One company that just announced significant growth in its revenues and earnings is Argonaut Gold Inc. (TSX/AR), which trades in Canadian dollars on the Toronto Stock Exchange. This company was created in 2009, and operates mostly in Mexico, with producing and exploration assets. Reporting in U.S. dollars, Argonaut generated third-quarter revenues of $72.9 million, representing growth of 221% over the same quarter last year. Earnings growth for this gold producer was even more pronounced, rising 360% in the latest quarter to $27.2 million. The company produced 31,074 ounces of gold in the third quarter, but actually sold 42,534 ounces of gold from stockpiles, taking advantage of stronger spot prices. Argonaut’s stock chart is below:
Chart courtesy of www.StockCharts.com
About a year ago, a lot of silver mining companies said that they would purposefully not sell all their silver ounces into the marketplace, in anticipation of higher silver prices. This strategy worked, and with spot silver prices well over $30.00 an ounce, you can bet that earnings growth from many silver producers will be significant over the next few quarters.
As I’ve been saying, it is difficult for companies in most industries to generate revenue and earnings growth if the demand isn’t there. This, in my view, makes the case for gold and silver stocks that much more attractive for speculators.
We’re in a stock market today that’s without trend, and has declining fundamentals, but valuations are reasonable. Weakness in large-cap technology stocks is holding the main stock market averages down, and they won’t be able to accelerate without this group.
I’m very cautious on the stock market these days, and one of the only sectors in which I’d say speculators could still be buying is gold and silver stocks. With spot prices holding up very well, and the prospect of a weaker U.S. dollar in 2013, gold and silver fundamentals remain excellent.
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