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Investing for the VERY Patient

A few weeks ago I mentioned how difficult it is to be a contrarian investor these days. The mainstream picture painted for the economy and the market by most professional prognosticators is a big blah — slow growth and middling gains. So to be a contrarian you’d either have to be anticipating a market boom (nice, but the market’s already pretty pricey), or a market collapse (entirely possible, but a bust usually comes only when few expect one).

If you’re congenitally contrarian, however, and see a recession lurking in every boom, as well as good times waiting around the corner from the unemployment line, then have I got some investments for you. Actually, David Iben, Chief Investment Officer of Tampa, Florida-based Kopernik Global Investors, has some contrarian investments for you — that is, if in addition to being a contrarian, you are also extremely patient.

Wait, Wait Don't Sell Me

Writing in the current issue of Institutional Investor magazine, Iben says that certain sectors and stocks are currently very depressed but have great value that may be realized if a buyer is patient enough to hold on for the long run. Of course, the long run can be very, very long. Not only would a patient buyer have to sit out a period of outright revulsion among virtually all other market participants, he or she would also have to wait until the lukewarm “we-don’t-hate-it-anymore-but-we-ain’t-buyin’-either” period ends too. Only then, when all the former haters and non-buyers become enthusiastic again, could a patient investor hope to cash in on his or her contrarianism.

Among Iben’s really out-of-the-money favorites are gold mining stocks. Gold has been sinking from a high of around $1,300 in February to its current $1,085. At the moment, it’s the commodity everyone loves to bash. But eventually — even though we don’t know how long it will take — gold will come back into favor, as it has periodically since Kay Jewelers opened its first store in Mesopotamia in 1241 BC.

Why Gold Miners?

As Iben sees it, you have to be nuts to open a new gold mine. It takes lots of money, time, and patience to find the stuff, which is why hardly anybody has constructed a new mine in decades. But there are plenty of existing mining companies already in business, and because most investors currently believe gold is for losers, the shares of the gold miners are cheap.

The names Iben likes are Barrick Gold Corp. (ABX) (2.8% yield), Centerra Gold (CAGDF), Dundee Precious Metals (DPMLF), Gabriel Resources (GBRRF), Goldcorp (GG, 4.5%), Kinross Gold Corp. (KGC ), Kirkland Lake Gold (KGI.TO, and no, it’s not Costco’s house brand of gold), Lundin Gold (LUG.TO), Newcrest Mining (NCMGY), Northern Dynasty Minerals (NAK), NovaGold Resources (NG), and Turquoise Hill Resources (TRQ).

As you can see, most don’t pay dividends, many are thinly traded OTC stocks, and all are under price pressure because commodity prices in general, and gold prices in particular, continue to sink.

The Bottom Line

So if you have extra money you can afford to sideline for a long, long time, and if you like showing others how brilliant you are even if you have to wait a decade or more to say, “Nah-nah, nah nah-nah” to everyone who thought you were nuts, then investing in a gold mine may just be your ticket to, er, a gold mine.