[ This post come from Simeon B, our oldest Spiker and a request contributor to this blog. Simeon writes: In this post I’ll concentrate on the present commodity bull market, its resemblance to 2008 and list the Gold stocks I now own and recommend. ]

I never bought a Gold mining stock until now. Gold was always too expensive, Silver was my choice that I did OK with during the precious metal boom of 1980s. When Silver fell to under $5/oz I started buying Silver Dollars, Morgan Dollars and other Domestic and Foreign silver coins and still have this large collection today but have not added to it since precious metals started their slow rise in 2000.

Now I am interested in Commodities, Silver and Gold as a hedge against the depreciation of the Dollar that has been under way since 1933 and now could be accelerating. Today, just like in the 2008 recession, we see an expansion of M2 money, Fed bond buying, expanded budget deficits, a falling Dollar and rising commodity prices, not just Gold and Silver.

I also trade Agricultural commodities such as Wheat, Corn and the Soybean complex, using historical seasonal trends as my trading model. Corn and Soybeans plant in spring and are harvested in fall so percentages are for a winter rise to a summer high and a drop from there to a harvest low when supplies are plentiful.

Winter Wheat plants in fall and harvests in summer, opposite to Corn and Soybeans but now they all are rising together. Checking Barchart I see it is not only the grain complex but all commodities are rising just like they did in 2008. Consumer goods like Electronics and furniture are made by machines in factories and are always plentiful, but it is hard work to bring out crops and minerals and there are limits to supplies of each.

We now seem to have little price change in consumer goods but large increases in all commodities that are extracted from the earth. The producers are telling us they want more of the Dollars that are being printed for their products whose supplies are limited. Too much paper currency chasing limited supplies of goods. This trend is just starting and Biden’s comments on more stimulus may mean it may not end soon.

Not knowing anything about Gold Mining stocks I had to take a crash course in how they work and what makes them rise in price. I found that mining is a very dangerous and costly project that causes environmental damage, needing expensive cleanup. Toxic Mercury is used to separate the ore. Cyanide chemicals leach the ore mix to extract the gold and improve purity. There are many risks in Gold mining, and that is why there are very few profitable mines. As I noted in my prior PART 1 post, miners have what is called “All in Sustaining Costs” or AISC. These costs go up very little year after year but increases in the Gold price leverages up the mines’ profits. If Gold rises you will get a bigger bang for the buck by buying the miners rather than bullion.

Here I list eight Gold and Silver Mining stocks that I think are the best of the large number of listed and traded Miners. The ones checked I have a position in and will add to it if they go up. As time moves on, I may also take a position in some of the other listed stocks. Miners face enormous risks and each one must be evaluated. Here are some reasons I excluded many stocks from my list:

1, High price. I excluded any stock over 25. The lower the price the better percentage return.

2. Geopolitical, confiscation and regulatory risk excluded South Africa, Russia and Chinese mines.

3. Many good older Mines, as their reserves were depleting.

Here’s the criteria I used to select these Miners:

• Most are priced at or below Keltner Channel Value.
• All have impressive 5 quarter increases in CFO, Cash Flow from Operations, high book value, price/sales and especially no debt or very little debt, with cash on their balance sheet.
• An EV/EBITDA of 10 is considered great value but many of these stocks have values below 5. Two of the older miners checked are GOLD and KGC but they have large reserves and the financial power to buy out promising smaller miners.
• The others checked are younger with increasing reserves and are candidates to be bought out by larger miners looking to increase their operations and reserves.

There is a chart of GORO in my previous post, and I will include here charts of GOLD and BTG. The other stocks can be easily found on StockCharts.com

These are the Miners I like but there are many others of good value including indexes and you should do you own research and chart studies before buying any. Some of these miners are making a lot of money today and will increase in value if the prices of Gold and Silver rise and the Dollar falls. The financial terms are spelled out in my fundamental blog of 4/17/2019 under Tactics but will restate them here:

• P/S is price divided by sales the lower the better.
• EV/EBITDA, EV is enterprising value or Market Cap+ Debt-Cash. The lower the better. EBITDA is earnings before taxes, interest, depreciation and amortization the higher the better. Many stocks are bought with EV/EBITDA at 10, many of these stocks are below 5.
• CASH FLOW is income + depreciation. Earnings can be manipulated but cash on the balance is a real number. Cash Flow from operations is an expanded version of cash flow and is similar to it.
• RESERVES are what is in the ground ready to be mined in future years. 5 QTR increase in reserves are assay certified increases in the Miners metal reserves during the last 5 Quarters. Notice EQT, a young miner has increased its reserves 114% the last 5 Quarters

My advice is to incorporate fundamentals with chart studies to pick stocks. The next time you see a promising buy on your charts look up what the company does. Do they have positive earnings and cash flow? Have their sales and income increased over the last 5 Quarters? Do you understand their business and would you buy what they are selling? If it has a high debt, P/S ratio and its price is based on hype and hope like some miracle drug why buy it? To me markets are for buying pieces of growing companies with secure cash flows and decent dividends that one can keep for years and sell only when their business model is no longer valid and then sell for long term capital gains.  Accumulate wealth over the years so when you retire you will have enough money to live and do the things you want to do, while leaving enough to your loved ones when you go.