Yamana Gold Incorporated has had a torrid year losing almost 70% of its stock price to close at $5.54 on Friday having lost 19.48% in one day on heavy volume. Gold took a hammering on Friday too dropping from around $920/oz in Hong Kong to $825/oz in New York before improving to close at $849.90. However the damage to the stocks had already been done.
The technical indicators are in the oversold zone so we are looking for a sizable rally during gold’s next up leg. We do need to see Yamana bounce from these levels in order to restore some confidence in this stock.
Yamana Gold has a market capitalisation of $3.87 billion, with 698.66 shares outstanding and now has a P/E ratio of 18.13. The company’s next set of financial results is due after the close of business on 4th November, which we eagerly await.
Scotia Capital in an article carried by The Financial Post recently, published the following three reasons to own Yamana:
Yamana Gold Inc. (YRI/TSX) should likely benefit from the miseries of the current credit crunch, with its ability to buy up companies that are financially less secure, according to Scotia Capital analyst Trevor Turnbull. "Yamana's core operations generate excess cash even under bearish scenarios," he said in a note to clients.
His three top reasons for owning Yamana stock:
1. Yamana is trading at less than five times estimated 2009 cash flow of $1.28 per share:
2. One-year growth of 43% and two-year growth of 54% is fully financed by cash flow.
3. Yamana can buy and fund opportunities arising from the seized financing environment.
However, this current dash for cash is not taking any prisoners so good quality stocks are not immune from investors who are largely unwinding their positions in order to meet margin calls.
We currently hold both the stock and Call Options on Yamana Gold, so we will be keeping a close eye on it as the various rescue packages for the worlds financial system are revealed and implemented.
Yamana Gold Incorporated is appearing on a screen near you as it trades as AUY on the New York Stock Exchange and as YRI on Toronto Stock Exchange and as YAU on the London Stock Exchange.
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