Gold miner ETFs are the proverbial falling knife and a lot of fingers have been lopped off the past year. Miner stocks have fallen harder than gold prices during the recent swoon, but the hated sector may finally get its chance to shine.
Gold miners are trading near multi-year lows and and companies are starting to act more shareholder friendly, reports Andrew Bary for Barron’s.
“In my career, I’ve rarely seen a group less well-liked than the gold miners,” David Steinberg of DLS Capital said in the article, pointing out that the widely followed Philadelphia Stock Exchange Gold & Silver Sector index (XAU) trades where it was in the late 1980s. “Relative to history, these stocks are extraordinarily undervalued, but I don’t know when sentiment will turn.”
For instance, the Market Vectors Gold Miners ETF (NYSEArca: GDX) shows an underlying price-to-earnings ratio of 11 and the Market Vectors Junior Gold Miners ETF (NYSEArca: GDXJ) has a 9 price-to-earnings ratio. [Gold Rout Pushes Gold Miner ETF to Lowest Since January 2009]
The miner funds have been underperforming gold, with GDX down 38.4% year-to-date and GDXJ 39.3% so far this year. In comparison, the SPDR Gold Shares (NYSEArca: GLD) has declined 16.4% this year. [Gold Slump Weighs Heavily on Precious Metal Miner ETFs]