One of the most successful long-term strategies when hunting for the best stocks to buy is contrarian investing.
It's a rather simple strategy: buy something when it is out of favor and everyone else is selling, which leads to bargain prices. Then wait for sentiment to turn, sell and pocket your profit.
Many contrarian investors are taking a long, hard look at one particular sector: gold miners. This is a sector that has not only been battered by falling prices for the gold they mine hurting profitability, but also a sector plagued by poor management at many companies.
But a closer look shows why some of these miners are among the best stocks to buy now when prices are low and potential is soaring.
The Best Stocks to Buy Now
Brenton Saunders, who helps manage about $600 million for Taurus Funds Management in Sydney, Australia, told Bloomberg News, "Gold companies have underperformed the gold price for more than the past 20 years, quite simply because they make as little money today for shareholders as they did at $300 an ounce."
An unpleasant mixture of circumstances has led to most investors shunning the sector entirely. A few weeks ago, Bloomberg said that gold stocks were trading at the lowest level relative to gold prices in at least 20 years.
Frank Holmes of U.S. Global Investors, in a recent Money Morning article, added that gold stocks were trading at bargain basement levels on a price-to-cash-flow-basis. Current valuations haven't been this low on that basis since 2001.
All of this is music to a contrarian's ear!
The selloff in gold stocks certainly caught the attention of Money Morning Global Investing Specialist Martin Hutchinson. Last week, he called the gold mining sector the best sector to invest in right now.
Hutchinson pointed to global central banks' continued low interest rate and money printing policies as pushing fiat currencies down and gold up in the long-term.
A Key Reason to Buy Gold Stocks Now
And there are even more reasons to buy gold stocks…