Market Overview

Short Interest Swings In Gold Stocks (AU, EGO, RGLD)

Short Interest Swings In Gold Stocks AU, EGO, RGLD

Among leading gold stocks, AngloGold Ashanti (NYSE: AU), Eldorado Gold (NYSE: EGO) and Royal Gold (NASDAQ: RGLD) saw significant upswings in short interest between the July 31 and August 15 settlement dates.

However, Agnico-Eagle Mines (NYSE: AEM), Barrick Gold (NYSE: ABX), GoldCorp (NYSE: GG), IAMGOLD (NYSE: IAG), Newmont Mining (NYSE: NEM) and Yamana Gold (NYSE: AUY) saw the number of their shares sold short tumble by double-digit percentages in the period.

Short sellers also retreated somewhat from Harmony Gold Mining (NYSE: HMY) in early August, while short interest was essentially flat in Gold Fields (NYSE: GFI), Kinross Gold (NYSE: KGC) and Randgold Resources (NASDAQ: GOLD).

In addition, the number of shares sold short in silver companies Coeur Mining (NYSE: CDE), First Majestic Silver (NYSE: AG), Hecla Mining (NYSE: HL) and Silver Wheaton (NYSE: SLW) also shrank during the period, while short interest in Pan American Silver (NASDAQ: PAAS) grew.

Below is a quick look at how AngloGold Ashanti , Eldorado Gold and Royal Gold have fared and what analysts expect from them.

See also: Short Sellers Shy Away From Coal Stocks

AngloGold Ashanti

This South African gold producer saw short interest grow more than 16 percent to about 12.94 million shares. That was the greatest number of shares sold short in at least a year, and double the number of such shares at the mid-June settlement date. The days to cover was about three.

AngloGold Ashanti posted a quarterly net loss during the period and warned of job cuts and other cost cutting ahead. The company currently has a market capitalization of more than $5 billion and a dividend yield near 1.5 percent. The long-term earnings per share (EPS) growth forecast is more than 11 percent.

Only one of the five analysts who follow the stock and were surveyed by Thomson/First Call recommends buying shares. The mean price target, or where analysts expect the share price to go, implies upside potential of about 33 percent. Note though that their target is much less than the 52-week high.

The share price has not risen much from a recent multiyear low. It is more than 44 percent lower than six months ago. In that time, the stock has underperformed larger competitors Barrick Gold and Newmont Mining, as well as the broader markets.

Eldorado Gold

This Canadian miner of gold and other metals saw short interest swell more than 17 percent to about 7.36 million shares. That was the greatest number of shares sold short so far this year, but only about one percent of the total float. The short interest has risen in every period since the end of April.

Eldorado Gold's second-quarter results fell short of consensus expectations. The company has a market cap near $6 billion and a dividend yield of about 1.1 percent. The long-term EPS growth forecast is about 20 percent, but the return on equity is less than four percent.

The consensus recommendation of analysts polled is to buy shares, and it has been for the past three months. The upside potential signaled by their mean price target is more than 13 percent, though that target is much less than the 52-week high reached almost a year ago.

The share price has risen more than 14 percent since the beginning of August, though it is still more than 35 percent lower than at the beginning of the year. The stock has underperformed the broader markets but outperformed competitors Newmont Mining and AngloGold Ashanti over the past six months.

Royal Gold

Short interest in this manager of precious metals royalties rose more about nine percent in the first weeks of August to more than 3.73 million shares. That was the highest number of shares sold short so far this year and represents about six percent of the float. The days to cover remained at more than three.

The company reported lower but better-than-expected revenues for the most recent quarter. The market cap is near $4 billion and the dividend yield is about 1.3 percent. The long-term EPS growth forecast is around 10 percent, but the return on equity is only about three percent.

Seven of the 10 surveyed analysts recommend buying shares, but none rate the stock at Underperform. They feel the stock has some room to run, as their mean price target more than 12 percent higher than the current share price. Here again, that the target is much less than the 52-week high.

The share price is more than 18 percent higher than a month ago, despite pulling back more than seven percent in the past few days. The stock has outperformed peers Barrick Gold and Gold Fields, though it had underperformed the broader markets, over the past six months.

See also: Short Sellers Pull Back From Delta, Republic Airways

At the time of this writing, the author had no position in the mentioned equities.


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