Filed Under:
Tickers in this Article: ANV, AZK, HMY, IVN, RGLD
During periods of crisis, investors usually flee risky asset classes and invest in assets or commodities that they feel will hold value. Gold is a prime example.

Gold is relatively rare and it is respected across borders. Currencies may come and go, but gold will live on. So what's the best way to invest in gold? (To learn of gold's rise and fall, read The Gold Standard Revisited.)

While collecting jewelry with a high gold content or gold coins is the preferred method by some, there are downsides to consider. For example, there is the issue of finding a safe place to store such merchandise. Finding a buyer for a particular piece may also be difficult. Plus there is sometimes a very big markup on certain pieces.

There is an alternative for investors to gain exposure to gold: the stock market. Below is a list of five gold plays easily accessible to the individual investor.

Company/ETF
Market Cap
Allied Nevada Gold
(AMEX:ANV)
$316.5 million
Aurizon Mines
(AMEX:AZK)
$575.1 million
Harmony Gold Mining
(NYSE:HMY)
$3.3 billion
Ivanhoe Mines
(NYSE:IVN)
$4.0 billion
Royal Gold
(Nasdaq:RGLD)
$1.2 billion
Data as of market close August 14, 2008

Aurizon a Small Cap with Big Plans
Based in Vancouver Canada, Aurizon is a producer. Its two-pronged strategy focuses on developing its existing projects in the Abitibi region of north-western Quebec, while also increasing its asset base through accretive transactions.

Aurizon is coming off a decent second quarter. In the period the company reported adjusted earnings of $1.1 million, or one penny per share, which was a slight improvement over the $0.3 million or flat EPS it reported (on an adjusted basis) in the comparable period last year. Another thing that piqued my interest was that cash flow from operating activities came in at $19 million, which is a big jump from the $4.7 million it witnessed in the same period last year. (To learn how to analyze company spending, read Analyze Cash Flow The Easy Way.)

At present the company is expected to earn 16 cents a share in 2008 and 35 cents a share in 2009. It's hard to say if those numbers are actually achievable, but they are certainly eye catching given that the stock trades for about $3.65 per share.

The Downside
Aurizon is a small company with a market cap of just over a half a billion dollars, it's also a sub $5 stock, which is a risk as well. I would prefer to research this story a bit more and wait for a few more quarters to see the stock trade and to see more earnings results before thinking about jumping in.

While gold has fared well in the past, there is no guarantee that it will do so in the future. The price of gold can fluctuate widely. In 1980 the price of gold had risen to about $850 an ounce, a huge increase given that just a couple of years prior it was trading under $200. But, not too long after that spike, gold lost a bit of its luster. Long story short, the price floundered until 2005 when interest started to pick up again.

Investors who purchased at or near the top of the market in the 1980 time frame had to wait about 25 years to recoup their investments. (To learn how to combine technicals and fundamentals to confirm trends in this commodity, read A Holistic Approach To Trading Gold.)

Bottom Line
Over time many investors have flocked to gold particularly during times of crisis. I expect that its widespread international acceptance and recognition will cause this trend to continue. A little exposure to gold may help to mitigate the overall risk of your portfolio.

For further reading, check out Does It Still Pay To Invest In Gold? and Getting Into The Gold Market.

comments powered by Disqus

Trading Center