Sand Spring Advisors LLC

The Chart du Jour

Seasonal Buy: AngloGold

November 22, 2000

By, Barclay T. Leib

Among the stocks we have been favorably inclined to in recent months (Campbell Soup, Cadbury-Schweppes, and Anglogold), two have been doing quite well of late, and Anglogold has been a dog. Notwithstanding this fact, we think adding to Anglogold positions at current levels is a good risk-reward proposition. Among the largest producers of gold in the world, Anglogold currents sells at just 8.6x earnings and sports a dividend yield of 10.5%. Technically, it is trading at the low of its Bollinger bands, with an RSI below 20. This puppy is a long-term buy even if we do not expect gold to really take off until late in 2001.

Chart courtesy of BigCharts.com
One thing that makes us even more favorable to picking up a battered gold stock at this time is the seasonal aspect of how gold often behaves post Thanksgiving. Within the overall context of a twenty year bear market, if you go back and measure gold's performance on average between Thanksgiving and Christmas, it is up approximately 14 out of 20 years. Statistically, we feel there is a strong seasonal bias at work here. It may be driven in part by the fact that December is summertime in South Africa and also year-end, so what selling of gold that mining houses and central banks need to do, tends typically to be done as executives retire to the beaches of Cape Town.

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