Wednesday, January 30, 2013

You may not want to buy today’s featured fund.  Indeed, we are going out on a limb by writing about the Market Vectors Gold Miners ETF (GDX) even though it is holding Quant’s 2nd place rank today.  Looking at its Dorsey Wright chart doesn’t engender excitement either as the fund looks like it could be breaking down below an uptrend line.  That breakdown sees it down by about 30% since it last ranked well in October making that Quant’s worst call in its young history.

So what does Quant like about this loser this time?  Not its Technical Score of 48.9 which is lower than most funds discussed in this space.  The short term score reflects that breakdown at an even lower 32.1.  But the flip side of technicals in our behavioral analysis is our Sentiment Score which comes in at 83 suggesting Quant thinks this selloff is overdone.  Graham and Dodd thought behavioral analysis applied to children but their traditional fundamental measures actually reflect very well on GDX.  Its 89.6 Fundamental Score is only beaten by 3 other funds that score even lower in our cutting edge behavioral measures.  Nothing exciting in its 55.8 Global Theme Score and its Quality Score of 69.3 is decent but not the reason for its high rank today.  That 2nd place is attributable to those good old fundamentals scoring in the 90s, except for its still good 66.7 yield score.  The market hates these companies but they have been printing money as the elevated gold price may not be rallying but seems to be enough above extraction costs to feed their balance sheets.

Fool us once shame on Quant, fool us twice shame on us.  We are betting that Quant doesn’t blow it twice on this fund and taking some risk in bringing it to you today.  That risk is also shown in the fund’s relatively high Red Diamond Risk Rating of 5.39.  That said, we are confident Quant is once again cutting through our natural human emotion and giving us a pick that we would otherwise shun.  We would understand if you pass on this one as it sure ain’t glittering but Quant sees gold in GDX.  Thank you for reading, we hope this one works this time.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.