Bear of the Day: Randgold (GOLD) - Bear of the Day - Barrick Gold (NYSE:GOLD)

With today's market, investors and traders have access to a greater variety of financial instruments than ever before. The availability of ETFs and closed-end funds have added liquidity to otherwise illiquid assets and given unprecedented flexibility. As a result there are a lot more ways to make money today, but also a lot of ways to lose money. One of the worst ways to lose money, in my opinion, is what I like to call “Falling on your own sword.”

In the literal case I'm sure you can visualize the meaning of that sentence, but in the world of investing I relate it to stubbornly refusing to admit you're wrong. It's that investing sin of holding on to a losing trade for too long. The market can stay irrational longer than you can remain solvent. Over the long run you may be right about your stance on oil or that tech stock or real estate, whatever it is. But at what cost? There are so many other opportunities to make money in this market, it's just not worth it to fall on that sword.

I was wrong about gold. After doing research on the Qingdoa probe in China and the unwinding of the shadow banking system I was sure that gold prices would be on the rise this year. What I didn't take into account in my model was a surge of U.S. dollar strength in the face of a deteriorating Euro and a weakening Yen. As a result, gold had nowhere to go but down in U.S. dollar terms.

So I've avoided all things gold. Spot gold, gold futures, and gold miners. I've got one more thing to add to this list and that's the ticker GOLD. Randgold Resources is a Zacks Rank #5 (Strong Sell) and has been a victim of lower gold prices and a stronger dollar. Randgold is an international gold mining and exploration business that owns goldmines in Mali and the Ivory Coast. The company has a portfolio of prospective exploration projects across Africa in Senegal, Burkina Faso, Ghana and Tanzania.

Over the last 60 days, estimates for the current year have dropped from $3.35 down to $2.94. Next year's numbers have been revised by six analysts, lowering consensus from $4.28 to $3.99. These latest downward revisions follow several disappointing changes to FY2015 numbers. Consensus has been as high as twice where it is now for both FY2014 and FY2015 as analysts made their initial projections during 2013.

Investors in this stock have seen the negative impact of downward revisions recently. After reaching a fresh new 52-week high of $89.89 in July, Randgold has seen weakness. The intermediate term uptrend the stock was in to start the summer was dissolved when the stock plunged below its 40-day moving average in early August.

Since then, a feeble attempt to regain ground was thwarted shy of the 40-day at $84.35 on the last trading day of August. September hasn't been any nicer as the stock has continued to shed value nearly on a daily basis. Currently GOLD is searching for support just above the $75 level.
Investors looking to gain exposure to this sector may want to consider Pretium Resources PVG. Pretium is a Zacks Rank #2 (Buy).

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