The Best Penny Gold Mining Stocks are in high demand these days. That’s because gold mining and other precious metal and commodity stocks are continuing to do well in 2014. And the best penny gold mining stocks present an affordable way to play the potential upside.
In the blog post we’ll share some of the best penny gold mining stocks out there. I’ll also share some ideas on how you can find the best penny gold mining stocks on your own. And by the way, if you aren’t convinced penny gold mining stocks are worth investing in, you may want to familiarize yourself with our outlook for gold mining stocks in 2014.
On the other hand, if you just want to trade any old penny stock, then check out a popular penny stock service like The Penny Stock Egghead.
What To Look For In The Best Penny Gold Mining Stocks:
When you’re evaluating the best penny gold mining stocks there are a couple of criteria you’ll want to keep in mind. The last thing you want to do is tumble down an empty mine-shaft when you’re trying to dig for gold. So what should you look for in the best penny gold mining stocks?
- Under-Valued: The best penny gold stocks are trading at reasonable values. This means the price to book value is probably under 1. You also want to look for conservative earnings valuation. While paying attention to value is always of concern to intelligent investors, it’s even more critical in the volatile world of penny gold mining stocks. Even with the best penny gold mining stocks you want to ensure you have a margin of safety.
- Short Term Liquidity: A big part of the argument for investing in gold mining stocks is that eventually the price of gold will go up. Even if it’s only for a few months, you can bet that if gold does go up in price it could be a quick and vicious bounce higher. Despite this excitement, it’s important to keep an eye on short-term liquidity measures (like current or quick ratio) to
- All-In Gold Production Cost: When you’re trading in gold mining stocks, it pays to know the all in production cost to get an ounce of gold out of the ground. This is important because it tells you what the price of gold needs to be for your gold mining stock to make a profit. The best gold mining stocks are doing a good job managing declining gold prices. But as an investor it pays to know where your penny gold mining stocks stand in terms of production costs and capabilities.
- Political Risk: A lot of the trouble gold mining companies run in to has to do with political risk and instability. If your gold mining stock is operating in a far-off country with an unstable government, there is a risk the assets could be lost. Admittedly political risk is hard to predict. But the best penny gold mining stocks treat local natives as partners and stakeholders, and they avoid product in dangerous regions around the globe. Looking for gold mining stocks that are headquartered in Western Europe or North America is also a good start.
- Safety Record: This is a boring one. But the best gold mining stocks are always focused on safety. And while a good safety record doesn’t guarantee future impunity to accidents, it does improve your odds. Plus, if something does go wrong wit the company they will be able to deal with it quickly and effectively. A strong safety record is often an indicator for how effective the company is operating.
- Disciplined Capital Allocation: By reading a few quarterly earnings press releases you can really get a feeling for how disciplined senior management is about capital allocation. In the competitive world of gold mining, you want management that is careful about how it spends it’s cash. Look for successful cost-cutting initiatives, focus on return on invested capital and emphasis on shareholder value. You can also dig deeper into annual reports and read Seeking Alpha articles to get a better feel for how investors perceive management.
While the above factors are by no means an exhaustive list, keeping these characteristics in mind should help you focus in on the best gold mining penny stocks. It’s tempting to look for cheap gold stocks trading for a couple of dollars a share. But you need to focus first and foremost on risk management.
Here is a List of Penny Gold Mining Stocks. You can look through these small-cap gold mining stocks yourself to find the best one!
So what do I think the best penny gold mining stocks are?
My Favorite Penny Gold (and Silver) Mining Stocks:
IAG is probably my favourite penny gold mining stock. The cost of production is a little bit high. But the company does well on all of the other criteria listed above. By focusing on well-run companies that are trading well below book value, you’re able to improve. In this case, I’m paying a little less attention to the higher PE ratio because the company has slowed down production in the face of declining gold prices.
Other interesting gold (and silver) mining stocks that are worth a closer look are NGD and EXK. While these aren’t officially penny stocks the share price is pretty inexpensive and have plenty of room for capital appreciation. If you’re looking for more information check out my articles on gold investing and silver trading for the year ahead.
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