Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Junior Gold Mining Stocks Setting Up For Another Rally - 22nd Jan 20
Debt the Only 'Bubble' That Counts, Buy Gold and Silver! - 22nd Jan 20
AMAZON (AMZN) - Primary AI Tech Stock Investing 2020 and Beyond - Video - 21st Jan 20
What Do Fresh U.S. Economic Reports Imply for Gold? - 21st Jan 20
Corporate Earnings Setup Rally To Stock Market Peak - 21st Jan 20
Gold Price Trend Forecast 2020 - Part1 - 21st Jan 20
How to Write a Good Finance College Essay  - 21st Jan 20
Risks to Global Economy is Balanced: Stock Market upside limited short term - 20th Jan 20
How Digital Technology is Changing the Sports Betting Industry - 20th Jan 20
Is CEOs Reputation Management Essential? All You Must Know - 20th Jan 20
APPLE (AAPL) AI Tech Stocks Investing 2020 - 20th Jan 20
FOMO or FOPA or Au? - 20th Jan 20
Stock Market SP500 Kitchin Cycle Review - 20th Jan 20
Why Intel i7-4790k Devils Canyon CPU is STILL GOOD in 2020! - 20th Jan 20
Stock Market Final Thrust Review - 19th Jan 20
Gold Trade Usage & Price Effect - 19th Jan 20
Stock Market Trend Forecast 2020 - Trend Analysis - Video - 19th Jan 20
Stock Trade-of-the-Week: Dorchester Minerals (DMLP) - 19th Jan 20
INTEL (INTC) Stock Investing in AI Machine Intelligence Mega-trend 2020 and Beyond - 18th Jan 20
Gold Stocks Wavering - 18th Jan 20
Best Amazon iPhone Case Fits 6s, 7, 8 by Toovren Review - 18th Jan 20
1. GOOGLE (Alphabet) - Primary AI Tech Stock For Investing 2020 - 17th Jan 20
ERY Energy Bear Continues Basing Setup – Breakout Expected Near January 24th - 17th Jan 20
What Expiring Stock and Commodity Market Bubbles Look Like - 17th Jan 20
Platinum Breaks $1000 On Big Rally - What's Next Forecast - 17th Jan 20
Precious Metals Set to Keep Powering Ahead - 17th Jan 20
Stock Market and the US Presidential Election Cycle  - 16th Jan 20
Shifting Undercurrents In The US Stock Market - 16th Jan 20
America 2020 – YEAR OF LIVING DANGEROUSLY (PART TWO) - 16th Jan 20
Yes, China Is a Currency Manipulator – And the U.S. Banking System Is a Metals Manipulator - 16th Jan 20
MICROSOFT Stock Investing in AI Machine Intelligence Mega-trend 2020 and Beyond - 15th Jan 20
Silver Traders Big Trend Analysis – Part II - 15th Jan 20
Silver Short-Term Pullback Before Acceleration Higher - 15th Jan 20
Gold Overall Outlook Is 'Strongly Bullish' - 15th Jan 20
AMD is Killing Intel - Best CPU's For 2020! Ryzen 3900x, 3950x, 3960x Budget, to High End Systems - 15th Jan 20
The Importance Of Keeping Invoices Up To Date - 15th Jan 20
Stock Market Elliott Wave Analysis 2020 - 14th Jan 20
Walmart Has Made a Genius Move to Beat Amazon - 14th Jan 20
Deep State 2020 – A Year Of Living Dangerously! - 14th Jan 20
The End of College Is Near - 14th Jan 20
AI Stocks Investing 2020 to Profit from the Machine Intelligence Mega-trend - Video - 14th Jan 20
Stock Market Final Thrust - 14th Jan 20
British Pound GBP Trend Forecast Review - 13th Jan 20
Trumpism Stock Market and the crisis in American social equality - 13th Jan 20
Silver Investors Big Trend Analysis for – Part I - 13th Jan 20
Craig Hemke Gold & Silver 2020 Prediction, Slams Biased Gold Naysayers - 13th Jan 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Will 140% Return on Warrants of Gold and Silver Miners Repeat in 2010?

Commodities / Gold and Silver 2010 Jan 14, 2010 - 07:57 AM GMT

By: Lorimer_Wilson

Commodities

Best Financial Markets Analysis ArticleA comparison of the returns of the various gold investment alternatives achieved in 2009 clearly shows that gold bugs were misguided in focusing on gold bullion alone. Why? Because gold was NOT where the major profits were realized - not by a long shot! 


Gold Bullion up 24%

While gold bullion was ‘only’ up 24%* (and silver up 49.3%*) it did nothing more than match the performance of the S&P 500 and the Reuters/Jefferies CRB indices at 23.5%* for both. Why all the hype regarding gold bullion over the past few months when most other commodities and their related stocks and long-term warrants did so much better?

HUI up 42%

A basket of large-cap gold and silver stocks, as represented by the HUI, was up 42.2%* in (the Gold Miners Index and its ETF proxy were up 36.4%*).

S&P/TSX up 52%

An investment in Canada’s heavily commodity based S&P/TSX a year ago would have generated a 52.3%* return in U.S. dollars.

Commodity Companies Index (CCI) up 126%

Those investors who invested in a basket of stocks consisting of all 36 companies involved in commodities that have long-term (i.e. 24 months duration) warrants trading, as included in my proprietary CCI consisting of

  1. 29 companies involved in the mining, developing or exploring of gold and/or silver ( 22), uranium (1), cobalt (1), molybdenum (1), lead (1), coal (2) and iron ore (1)
  2. 3 companies involved in buying secondary gold or silver production, i.e. royalty streamers
  3. 2 companies involved in oil and gas production and exploration and
  4. 2 merchant banks involved in financing commodity-related projects,

would have experienced an impressive gain of 125.8%* in 2009.

Commodity Company Warrants Index (CCWI) up 242% in 2009

The very, very few in the know who invested in the basket of 47 long-term warrants associated with the above commodity categories (6 companies offer two or three long-term warrant hence the larger number) that trade on the Canadian or U.S. stock exchanges, as per my proprietary CCWI, experienced an amazing increase of 242.3%* in 2009. Yes, that is correct: 242.3%!!

For those many who are not familiar with warrants they give the holder the right, but not the obligation, to purchase the common shares of the company at a specific price within a specific time period after which, if not exercised, they expire worthless although they can be traded throughout the period just as with the associated stock.

In previous articles I have gone on and on about the leverage advantage (i.e. enhanced returns) of warrants and here is a perfect case in point. The warrants in the CCWI generated twice the returns of their associated stock in the CCI with the same degree of risk. That’s the major advantage of warrants vis-a-vis their associated stocks. I will address the specific leverage the warrants achieved in next week’s article.

Gold and Silver Companies Index (GSCI) up 85%

To be totally objective in this analysis, however, the average increase in the stock of the 22 companies with long term warrants trading that were exclusively involved in the mining, developing or exploring of gold and/or silver or in royalty operations were up, according to my proprietary GSCI, an impressive +84.5%* for the year.

Precious Metals Warrants Index (PMWI) up 140%

It gets even better! The long-term warrants of the 22 companies involved in the mining, developing or exploring of gold and/or silver or in royalty operations appreciated, according to my proprietary PMWI, by 139.7%*.

Royalty Company Stock up 93%

Had you had just invested in the stock of the 3 companies with long-term warrants that buy the secondary gold and silver production from base metal miners at fixed prices you would have had a 92.6%* return in 2009.

Royalty Company Warrants up 213%

And best yet the long term warrants of these 3 companies were up 213.0%* in 2009. How’s that for enhanced returns!

Where Should You Invest in 2010?

As you will recall I recently wrote an article entitled “Gold:Silver Ratio Screams Buy all Things Silver!” whose conclusions, coupled with the conclusions in this article, strongly suggest that the buy of this decade will be the warrants of gold and silver mining companies and, more particularly, the warrants of gold and silver royalty companies and specifically the warrants of silver royalty companies.

Conclusion

Don’t follow the herd when it comes to investing in gold (and silver) in 2010. Remember, gold was ‘only’ up 24%* in 2009 and the HUI ‘only’ 42%* yet the long-term warrants of the gold and silver mining companies were up 140%* and the long-term warrants of the gold and silver royalty companies were up 213%*. If the current bull market in commodities continues in 2010 it behoves you to seriously consider investing some money accordingly. The next time you read an article hyping gold consider the better returns available invest in the alternatives to gold bullion.

(*All performance return calculations in this article have been on the basis of realizing profits in U.S. dollar terms. Posting criteria does not permit me to name the companies in the GSCI/PMWI or CCI/CCWI so please visit my site and look under the "Warrants/LEAPS/Options" section for articles on "GSCI/PMWI Constituent Companies" and “CCI/CCWI Constituent Companies” for such lists.)

Lorimer Wilson is Editor of www.FinancialArticleSummariesToday.com (F.A.S.T.) and www.MunKnee.com (Money, Monnee, Munknee!) and an economic analyst and financial writer. He is also a frequent contributor to this site and can be reached at editor@munknee.com."

© 2010 Copyright Lorimer Wilson- All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Lorimer Wilson Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules