Agnico-Eagle Is Now A Sell

On April 8, 2012 (article found here), we recommended Agnico-Eagle Mines (AEM).  At the time, we were basing our first individual recommendation of gold stocks on our Gold Stock Indicator.  Our Gold Stock Indicator had been in a declining trend since November 2010 suggesting that no purchase of gold stocks should take place. However, once our Gold Stock Indicator declined below the long-term buy indication in early April 2012, it was a clear signal to start acquiring gold stocks.

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The reversal of the declining trend has been reflected in gains in the gold stock sector across the board.  In our initial analysis of Agnico-Eagle Mines (AEM) we projected that, based on Edson Gould’s Altimeter, the stock price was likely to increase from +100% to +175% over a two year period.  Since our recommendation on April 8th, Agnico-Eagle has gained just over +45%.  Our experience indicates that there will be many opportunities to re-acquire Agnico-Eagle at better relative prices.

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According to Value Line Investment Survey, Agnico-Eagle trades at a fair value of $39.  The current price of Agnico-Eagle, at $49.76, is 27% above the fair value price.  Stocks that are selling above fair value and that have had above market returns should be sold.  Yahoo!Finance and Morningstar.com indicate that Agnico-Eagle is operating at a loss for the trailing 12-months.  We will re-consider Agnico-Eagle when the stock approaches an undervalued range based Edson Gould’s Altimeter.

Those not interested in following through with our sell recommendation can feel comfortable knowing that Agnico-Eagle (AEM) is a reasonable holding until our Gold Stock Indicator crosses above the long-term sell level.  So far, AEM has a 45% downside cushion since our investment observation. It should be noted that the stock faces significant upside resistance at $52 and $60.

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