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Gold/Mining/Energy : Gold Price Monitor

GDXJ 101.44

+3.5%

4:00 PM EST

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To: Rarebird who wrote (69259)	5/16/2001 11:27:57 AM
From: russwinter	Read Replies (3) of 116756

<In a Bull Market, one is supposed to buy and hold > I strongly agree in principle, but you need to be darn sure you own the right stuff if you are a gold stock holder. The valuation models being used in the sector are flawed, and a number of majors are just flat out overpriced or fully priced. Again, it is no secret (juniors) where I think the big money will be made. It is interesting that the fund manager Victor Flores addressed this very point in his presentation at PDAC: pdac.ca This is an exercise in accounting, but the point he (and I) makes is that return on invested capital (ROIC, see page 6) is critical to this kind of investing, not just EBITDA. He calls it "rating to economic profit" (REP): see page 11. He also works the data off of enterprise value (EV) to reflect current stock market valuations, which is exactly how I do it. His evaluation of a number of the majors is given, and it is not a pretty picture. I have broached this point on several occasions here, and have heard no one else (Bob Johnson a little) really discuss it. Watch out.

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