Monday, January 11, 2010

Cramer On Gold For 2010


Jim Cramer continued on his theme stock picks for 2010 on CNBC’s MAD MONEY tonight.  We have already heard Cramer’s theme picks for homeland security, technology, ADRs, and for energy shortages.  Tonight Cramer’s picks were around gold in his “going for the gold” theme for 2010.  Cramer said gold was up 24% last year and thinks it has not finished going higher.  His picks tonight for the shiny yellow stuff are the SPDR Gold Shares (NYSE: GLD) ETF, and then in miners he likes Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX) and Eldorado Gold Corp. (NYSE: EGO).  Cramer even addressed the new small-cap Market Vectors Junior Gold Miners (NYSE: GDXJ) ETF for exposure.  A brief explanation of each and his more general reasoning is below.
Cramer thinks gold is better than holding bonds at the current point as currencies get devalued.  He thinks inflation will come and will go up if China releases its dollar-peg.  The net investment in gold rose five-fold and worldwide ETF holdings are at highs.  Central banks have increased gold holdings and emerging middle classes love gold in China, India, and Brazil.  An explanation of gold picks follows.

On owning gold bullion, Cramer likes this actually better than investing in the mines because there are no problems in business execution in the actual shiny yellow stuff.  Here Cramer likes the SPDR Gold Shares (NYSE: GLD) because it owns gold and moves in tandem with gold.  He likes this better than owning the gold bars.

In miners, Cramer noted that these can get crushed for reasons that have nothing to do with the cost of gold because of mines shutting, poor execution, labor issues, and other reasons.  Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX) is Cramer’s top stock with exposure, although Cramer said that this one is only about 20% exposed to gold.  He likes that they have a large copper business and deals with China, and he noted that the company recently reinstated its dividend.  Eldorado Gold Corp. (NYSE: EGO) has some of the lowest costs in the business and is up 87% since he first recommended it.  He thinks it has upside still as their production costs are about $100 per ounce compared to its competitors and it has production growth (expected 96% this year) and has China.

In a speculative gold stock, he wants to avoid the individual small speculative gold stock plays.  Here he likes the basket of junior miners called the Market Vectors Junior Gold Miners (NYSE: GDXJ).  Cramer did not note this in his explanation, but this should be pointed out here…. this one is a recent ETF that came on late to the game late last year, and some traders have discussed the possibility of tracking issues in this ETF.

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