According to a filing with the SEC, a trust connected to Newmont Mining Corp (NYSE:NEM) CEO Gary Goldberg acquired 3,000 shares of stock on May 2nd at an average price of $32.81 per share. Goldberg had been the $17 billion market cap gold and copper miner’s chief operating officer for a little over a year before being named the new CEO in early March of this year. We track insider purchases because studies show that on average there is a small outperformance effect for stocks bought by insiders (read our analysis of studies on insider trading). The theoretical explanation for this is that insiders should only buy shares when they are confident in the stock’s prospects, otherwise preferring to diversify. We would note that our database of insider trading filings shows Goldberg purchasing 1,000 shares in March 2012 and then another 1,000 shares in July; the stock is down considerably from its levels at those times, so he does not have the best track record in identifying periods of strong upside.
Specifically, Newmont Mining Corp (NYSE:NEM) is down 30% year to date as the gold market has not been strong and the company has reported some numbers below analyst expectations. In the first quarter of 2013, revenue fell by 19% versus a year earlier. With the company’s expenses not changing much in absolute terms, this had an even stronger impact on margins with the result being a 41% decline in earnings. The decline in the stock price, however, has at least made Newmont Mining Corp (NYSE:NEM) somewhat cheap at a trailing P/E of 10, though of course any value case would depend on the business stabilizing its performance at current levels or growing slightly. Newmont Mining Corp (NYSE:NEM) did recently increase its quarterly dividend payment, and now carries a yield of 4.3%.
Other gold miners include Barrick Gold Corporation (USA) (NYSE:ABX), Goldcorp Inc. (USA) (NYSE:GG), Yamana Gold Inc. (USA) (NYSE:AUY), and Kinross Gold Corporation (USA) (NYSE:KGC). Barrick and Kinross are actually unprofitable on a trailing basis when we consider special items, though according to Wall Street analysts these peers are actually bargains: in terms of consensus for 2014 they are valued at 5 and 8 times earnings estimates respectively. Their stock prices have not done well over the last year either obviously, and certainly we would be careful not to put too much weight on sell-side forecasts, but if an investor is interested in gold miners from a value perspective that advantage may be useful to note. Goldcorp and Yamana carry a slight premium in terms of their forward P/E multiples, but in the 11-12 range they would also qualify for value status assuming that analyst forecasts prove correct. Of course, any company in the industry is going to be dependent on gold prices over the long term and so investors would have to be comfortable with that factor.
We are a bit cautious ourselves when it comes to gold, and so even with this insider purchase- which of course could in turn be taken as bullish on gold, given how dependent Newmont Mining Corp (NYSE:NEM) itself is on the market- we’d hesitate to recommend any of these companies as a buy. It might be best to wait a quarter or so and see how the various mining companies have performed in the current environment, where gold prices are well below their levels from Q1.
Disclosure: I own no shares of any stocks mentioned in this article.
