The Great Contrarian Trade of 2014? Great article on Gold 12/14/2013 - 00:00 It’s worth asking then where the next great contrarian trade may be? Some investors are pushing emerging market stocks as they scour for laggards in a maturing bull market. While others are suggesting emerging market bonds may be worth pursuing for similar performance/valuation reasons. Both of these ideas have some merit but they probably don’t quite qualify as true contrarian trades.No, instead, Asia Confidential thinks commodities may be a more prospective potential area. More specifically, gold stocks, or better yet, junior gold stocks. The junior gold miners have been obliterated, down around 80% since the 2011 peak. Causes include a declining gold price, production shortfalls, cost blow-outs, dilutive capital raises and too many snake oil salesmen disguised as CEOs. There are signs though that some of these things may be turning around: bad management is being given the boot, capital expenditure programs are getting slashed, fewer capital raises are taking place given a lack of market appetite and boards are placing greater weight on shareholder returns over growth. Moreover, the valuations of many quality junior gold miners appear compelling. A number are discounting gold prices of less than US$700/ounce into perpetuity. That means even if gold prices don’t rise from here, the downside on these stocks seems relatively limited. Higher gold prices would just be gravy.
