While acknowledging that the price increase in the gold securities may not be sustainable in the short term, Dundee says many will “take out their 52-week highs” over the next year.ARKO DATTA/Reuters
Market Blog's roundup of some of today's key analyst actions
It's looking more like the bear market for gold stocks is over.
Investors should use any market weakness to take positions in gold stocks because there is a strong case for the price of gold bullion blowing through $2,000 (U.S) an ounce over the next 12 months, suggests the head of research at Dundee Securities Ltd.
"While the odds of picking a market bottom are undoubtedly poor, it seems likely to us that August might well have been a turning point for gold equities," Ron Stewart said Wednesday.
Gold bullion and equities have moved "dramatically higher" after the Aug. 23rd release of the minutes of the U.S. Federal Open Market Committee (FOMC) meeting that took place some three weeks earlier, and indicated another round of quantitative easing [bond-buying program] was imminent, he wrote.
The trend of gold outperforming equities was likely broken by events in August, and "signals the possibility of a change in market sentiment towards gold companies, which were previously stuck in a secular bear market when compared to the bullion price since 2006," Mr. Stewart wrote in a report.
While acknowledging that the price increase in the gold securities may not be sustainable in the short term, he expect many of the equities in the Dundee coverage universe will "take out their 52-week highs" over the next year.
"In the near term, as we approach the U.S. election on Nov. 6, we wouldn't be surprised if the market pauses or even gives back some of the recent gains," he said. "Under our best guess of an Obama victory, momentum should pick up thereafter and end the year strong ...We recommend that investors use this period to take a full position in high-quality precious metals companies."
On Wednesday, Dundee Securities boosted the one-year targets on buy-rated names like Goldcorp (new target of $55 a share); Osisko ($14), Alamos ($25), Allied Nevada ($45), Perseus ($4.40) and San Gold ($2.20). Targets were also raised on neutral-rated stocks like Yamana ($22), Eldorado ($16) and Aurizon ($5.80).
"In the case of Yamana, we suggest there is still room on the upside as investors appear satisfied with the company's ability to execute, whereas in the case of Eldorado we remain guarded by the permitting risks in Greece and Romania. For Aurizon, the lack of near-term growth opportunities may limit the torque on its share price."
Upside: Dundee Securities boosted one-year targets on buy-rated names such as Goldcorp (new target of $55 (Canadian) a share); Osisko ($14), Alamos ($25), Allied Nevada ($45), Perseus ($4.40) and San Gold ($2.20). Targets were also raised on neutral-rated stocks like Yamana ($22), Eldorado ($16) and Aurizon ($5.80).
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TD Securities analyst Scott Penner raised his target on Constellation Software Inc. to reflect the increase in earnings expected from the recent purchase of Computer Software Innovations for $15-million. This deals shows that larger acquisitions are available at a decent price, he added.
Upside: The analyst, who maintains a "buy" rating, raised his one-year target to $115 a share from $105.
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Fertilizer producer Mosaic Co. posted a lower-than-expected first-quarter profit and has guided to weaker potash volumes due to supply problems from a key mine, said CIBC World Markets analyst Jacob Bout.
Downside: The analyst, who maintains a sector outperformer rating, cut his one-year target to $72 (U.S.) a share from $73.
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Canaccord Genuity analyst Derek Dley raised his target on clothing manufacturer Gildan Activewear Inc. now that the headwinds of rising cotton costs have subsided. He also expects the recent acquisition of sport-shirts maker Anvil Holdings Inc. to help gain market share.
Upside: He maintains a "buy" rating, but raised his one-year target to $36 (U.S) a share from $33.
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Canadian Satellite Radio Holdings Inc. operates in an attractive niche with growth prospects for the next couple of years that are well above other media and telecommunications companies in Canada, said TD Securities analyst Vince Valentini.
Upside: The analyst, who has "buy" rating, raised his one-year target to $5.50 a share from $4.50.