Gold has risen about $60-$70 an ounce since the beginning of the year, or roughly 10%, yet the price of Newmont has only risen from $44.20 a share at the begging of the year to $45.81 as of early February, or just a measly 3.6%, amazingly underperforming the price of gold itself! Why is this amazing? Because the strongest, best gold stocks typically will outperform the actual appreciation in the price of physical gold by multiples of 2, 3, 5, and even higher. This statistic tells me, as Newmont is the most prominent gold stock of the lot in the eyes of institutional fund managers (note not in my eyes, but in the eyes of institutional managers) that they are not on board yet at all.

So why would I say that if you haven’t already bought Newmont, that it’s not too late to buy Newmont now? Because when the rest of the thundering sheep herd out there finally climbs on board, so will all the institutional managers, and since the overwhelming number of institutional managers in the United States have no idea how to evaluate gold stocks to choose the best ones, they will undoubtedly just dump money into the “safe” gold stock - which I believe will be Newmont, or possibly Barrick Gold, if I had to pick one stock. In addition, it’s always a good idea to have some “anchors” in your gold portfolio. Newmont can certainly fulfill that role as one of your anchors.

Although I’m sure that Canadian institutional managers are much more knowledgeable about selecting gold stocks since a great deal of “resource” stocks trade on the Toronto and Vancouver exchanges, still given the relative size of the U.S. stock market in comparison to the Canadian market, U.S. fund managers that eventually start investing in gold stocks will influence the price of gold stocks with their purchases, and Newmont is the stock most likely to benefit from their realization, even if it comes late in the game.

By far, Newmont won’t be the gold stock that will appreciate the most or grant investors legendary profits. In order to achieve this, you simply must take the time to learn how to identify great gold stocks. It’s not about following the media and the institutional buyers that will make you wealthy. It’s about beating them to the punch.

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J.S. Kim is the Managing Director of SmartKnowledgeU™. He has over thirteen years of experience in finance and financial services, and has earned a BA in Neurobiology from the University of Pennsylvania, a Master in Public Affairs from the University of Texas at Austin, and an MBA with a concentration in finance from the McCombs Business School, University of Texas at Austin. He is the inventor of the revolutionary MoneyPing™ investment strategies, a novel approach to learn how to build wealth, not just dreams.

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