By Kris Sayce, editor, Casey Daily Dispatch
How are you feeling?
Or, to be precise…
How is your portfolio feeling?
After all, it’s September.
Historically, this is the worst month of the year for stocks.
And so far, it’s going true to form.
Stocks are down.
Investors are on edge. So… how to play it?
We’ll show you by sharing one of our top ideas today. Read on…
If this is your first time reading the Dispatch, welcome. If you’ve been here before, welcome back.
At the Dispatch we have two goals:
To introduce you to the most important investing themes of the day, and
To show you how to profit from them.
We do this by showcasing ideas from our in-house investing experts: Dave Forest and Nick Giambruno. And from the founder of our business, Doug Casey.
Today, we continue to look at this month’s market action, and we’ll share more ideas on the best place to invest during the market’s worst-performing month…
Why You Should Look Past the Warning Signs
Month-to-date, the S&P 500 is down 1.22%.
The Nasdaq is down 1.33%.
The Dow Jones Industrial Average is down 1.25%.
You can see this laid out on the chart below:
When taken in the context of the long term, those numbers don’t really seem like much. Nothing to worry about at all.
But still, a few down days and some worrying headlines are all it takes to scare investors out of the market.
As we say, it’s all enough to either scare anyone out of the market, or make them think twice about putting more money into the market.
But rather than scaring you, we’d like to think our role is to help you spot opportunities. That’s really the basis of everything Casey Research has done for many years.
That’s not to say that we cheer the market on regardless – like the chumps in the mainstream. Or that we ignore the dangerous warning signs when they appear. And boy, there are plenty of dangerous warning signs.
But that doesn’t always mean the market will crash. The fact that the market has more than doubled in the past 18 months… and is up eight-fold in the last 13 years, proves that.
You don’t think there have been a lot of warning signs over that time? Of course there have been. But rather than focusing all our attention on those warning signs, we make you aware of them… and then show you how to profit from them or despite them.
We’ll show you one example of that today…
A Beaten Down Sector Ready to Rebound
Although we’ve focused mostly on the poor historical record of stocks in September, one of our favorite investing ideas has taken a beating for most of the past year – gold stocks.
Specifically, junior gold stocks. Check out the chart below:
Since this time last year, the VanEck Vectors Junior Gold Miners ETF (GDXJ) is down 30%.
Over the same timeframe, the S&P 500 is up 32%.
Now, there are arguably a whole bunch of reasons for that. The gold price has eased back from the highs it hit earlier this year.
You could also argue that while there are risks in the market, most investors don’t consider gold and gold stocks as a hedge against those risks.
In fact, you could argue that for many, gold and gold stocks are an ancient investment idea. Who wants gold when you can trade cryptos and so-called “meme stocks?”
Whether those arguments are fair or not… and whether those attitudes play out in the short term or not… is something we’ll only know in the months ahead.
But as long-term investors and speculators… and as investors and speculators who look for beaten-down opportunities when no one else cares about them… there’s a lot to like about buying junior gold stocks now – despite what most investors think about them.
“It’s the Perfect Time to Buy on the Cheap”
As Dave Forest wrote in a recent issue of his premium service, International Speculator (paid-up subscribers can catch up here):
Today, the S&P/TSX Composite Index of gold stocks is at the same level as it was in February 2020. Back then, gold was just above $1,600 per ounce. Today, it’s significantly higher – around $1,800.
More importantly, gold miners have had a full year of high gold prices. As I said, they’ve built up big cash reserves.
That’s making gold companies very attractive investments right now. Newmont is paying a 3.7% dividend yield. That’s nearly triple the current S&P 500 dividend yield, which stands at just 1.3%.
Gold miners’ big war chests also set us up for a trickle-down boom. Gold companies will likely spend some of their record earnings to acquire new mines and development projects.
That’s especially true now, when prices for most gold stocks are down. If you’re a gold major looking to make acquisitions, it’s the perfect time to buy on the cheap.
That makes junior gold miners especially appealing for speculators. And with gold stocks down 30% in the past four months, that makes it the perfect time to buy.
So if you don’t already have junior gold miners as part of your Casey “10 x 10” Approach to investing, we would suggest adding a carefully chosen selection of stocks now.
The “lazy” way to do it is buying the GDXJ. It contains 96 junior gold miners: 65% of them are Canada-listed, 15% are Australia-listed, and 5.6% are U.S.-listed.
But as always, our preference is to buy individual stocks. Besides, an exposure to 96 gold stocks is diversifying too much for our liking, potentially limiting your gains.
The better option is to buy the best of the juniors (something Dave Forest strives for in his International Speculator service). That way, rather than getting “just” the index average, you can outperform it to make even better returns.
Of course, we can’t guarantee that gold stocks will go straight up from here. This is the stock market, after all… and we’re in September, historically the worst month for stocks.
But based on Dave’s research, and based on the valuations of gold stocks today, we believe now represents a great time to buy… and great potential for big gold stock gains over the medium to long term.
Editor, Casey Daily Dispatch
P.S. You can also supercharge your gold returns with our favorite of Dave Forest’s strategies – warrants. You can get Dave’s best research on explosive gold warrants right here.