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...
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Question to heavy stock investors: Is purchasing various stocks a means to an end or an end in itself?
Wouldn't it be better to invest in actual gold, silver,etc. not the stocks? I would want the actual metal. Companies have oversold these metals, and I wonder if the metal exists for all the shares sold all over the world. There have been scandal in this, I think it is safer to have the actual gold/silver. paper is worth nothing if their actually isn't enough of these metals for the shares that are sold. Think what were to happen if everyone who invested in gold/silver wanted the actual metal and not just paper saying how many ounces, etc, that you own. Would everyone be able to get what they are told they own, and some may have been paying storage/ rental fees for storing of their metals. Think about it… I don't claim to know anything, I just read and it just seems, more is being sold than what's actually there.