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$4.69 saracen mineral holdings limited

I guess you can prove anything with statistics and charts. This...

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Idle Wanderer

2,361 Posts.

482

03/02/18

10:18

Post #: 30790498
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Originally posted by Lynxie ↑

I found the following comments really useful and they have given me cause to think about holding gold stocks at this time.

How best to position a portfolio for rising bond yields (and falling bond prices)?
As discussed here before, the Australian bond market is basically the high-yield section of the sharemarket. Especially, but not only, the banks. In simple terms, rising yields mean falling prices unless earnings go up to compensate.
There’s more. Stocks with a high payout ratio will do worst because there is less scope to raise the dividend, and high price earnings (PE) ratio stocks will do less well because a low discount rate (based on the bond yield) is embedded in the valuation.
Also, companies that are just chugging along with little or no earnings growth will fall further behind because their only attraction is stable yield. And finally gold stocks do worse because the relative attraction of gold deteriorates when interest rates rise (because gold doesn’t pay any interest at all, which means the gap to those that do increases).
So specifically which stocks?
Well, according to Credit Suisse, the 10 stocks that have done worst, relative to the ASX 200 index since July 2016, whenever the US 10-year bond yield has risen by 10 basis points or more, are: Resolute Mining, Northern Star, Regis Resources, Newcrest, Saracen Minerals, Mayne Pharma, Vocus, Iron Mountin, Sydney Airport, Transurban.
In other words – gold and high PE stocks.

I was overweight in goldies until recently but have reduced my holding in this sector to just one stock now.

GLTAH, and avagoodweekend!

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I guess you can prove anything with statistics and charts.
This is the SAR chart versus the ASX200 since 1st July 2016. Yes, SAR did underperform the XJO in that timeframe.

And this is SAR versus the ASX200 from 1st January 2017 to today. I just picked this second start date pretty much at random. This second graph shows a totally different relationship!

About all that can be said with certainty is that SAR is much more of a rollercoaster ride than the ASX200. But I guess we know that already. There seems to be no meaningful relationship between the two based on bond rates. Same with the other gold stocks mentioned.

Last edited by Idle Wanderer: 03/02/18

SAR Price at posting: $1.51 Sentiment: Hold Disclosure: Held
2 Upvote

0 Great analysis

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