Most gold stocks have retreated from their highs after a sharp runup earlier in the year. "Gold will have to break out decisively above the pivotal price of $410 an oz. for the precious-metal stocks to challenge their recent highs," says investment adviser Charles LaLoggia. But he's a bull on gold stocks, nonetheless, because he believes the "weakness of the bond markets worldwide is giving the financial markets the message that inflation will be the big problem ahead."
He has been buying gold shares, but one stock that has intrigued him is virtually unknown--Glamis Gold, a Big Board stock that has fallen from 81/4 in January to 53/4 in early May. Since then, it has edged up to 71/8.
This underfollowed, Vancouver-based, low-cost-mining company operates three gold mines in California--and is making money. Analyst Vahid Fathi of Kemper Securities expects Glamis to earn 30 cents a share this year and 36 cents next year, up from last year's 5 cents. Already, Glamis has earned 25 cents in the first nine months of the year. Gold output in the third quarter soared nearly 70%, to 27,793 oz. The company has told him that its Picacho Mine in California's Imperial County has up to 1.1 million ounces of gold, although the company has not yet included these figures in its proven or probable reserve numbers. LaLoggia notes that the company also has four properties in Mexico that he expects will double Glamis' gold reserves within a year.
On its own steam, Glamis stock should climb to 10 this year, says LaLoggia. But if the price of gold climbs to $410 an oz., he sees the stock hitting 15. One gold bull, CBS Chairman and CEO Laurence Tisch, owns about 4% of the stock, notes LaLoggia.