New Gold Inc (NGD): A Producing Gold and Silver Mining Stock for Less Than a Buck

New Gold Inc (NYSE: NGD) – Price Forecast: Higher!

New Gold Inc (NYSE: NGD) has two production-stage operations and one exploration-stage project, all in Canada

As we can see in the chart, NGD is currently selling for under $1.00

That’s technically a penny stock, and yet it has a listing on the NYSE and actually produces Gold and Silver!

Before you go looking for penny mining stocks on the TSX, look for the ones listed on the NYSE and NASDAQ

Check out NGD’s declining volume throughout 2018 and 2019 – investors lost interest in the entire mining sector, including New Gold Inc

And then we have June… Gold pole-vaulted through $1350 and $1400, and interest in the miners returned

The mining sector is tiny – when money starts moving into Gold and Silver stocks, their prices increase rapidly – you can see that in the 2016 rally

For a dramatic example of this phenomena look at First Majestic Mining (AG) – from $2.40 in January 2016 to $19.15 in August – an 800% gain in 8 months 

[as an aside, First Majestic is a fast-moving mining stock – when it runs, it runs hard – if you want to have one of the few remaining primary silver miners represented in your portfolio, take a look at First Majestic (NYSE: AG) now – AG has price targets around $14.00 in the weekly time frame and they could be reached relatively quickly – it will be hard psychologically to buy AG after it starts running, trust me, I know…]

New Gold Inc (NYSE: NGD) is not going to be a penny stock for much longer

In fact, I suspect NGD will quickly double once it moves out of its long consolidation phase

There are two key reasons NGD is going to pop higher in price IMO:

1. It’s cheap, and

2. It’s cheap

 

Buy the Least Expensive House in the Best Neighborhood You Can Afford

That’s investment advice for buying a home, but the concept can be applied to buying mining stocks as well

The neighborhood we want to focus on is the one where the producing miners live

We want to invest our money in companies that actually produce metal, as opposed to all the companies drilling holes in the ground and lying about the results describing the results in the most flattering manner possible

We also want the stock to be listed on one of the US indexes, just for safety and to weed-out most of the fly-by-night mining companies

These simple guidelines can help us sort through the universe of mining stocks:

1. “Least expensive” (or on the lower end of the price scale – i.e., NGD for $1 vs NEM for $38)

2. Actually produces metal

3. US listing

So the “least expensive house” strategy is likely to funnel money into New Gold Inc. (NYSE: NGD) before that same money seeks out stocks like NEM, currently pushing $40 per share

Also, some ‘least expensive house’ investors will take a larger (by dollar value) position in NGD (say 2% of their portfolio size instead of 1%) than they will in more expensive stocks

They will do this because it seems (on the surface anyway) more likely that a $1 stock will double in price before a $40 stock does

In 401K terms we might think of NEM as representing a “stable long-term growth” type of asset, while New Gold Inc. (NGD) falls into the “aggressive growth” category – investors can apply capital allocation and risk management strategies accordingly

 

Human Psychology – I Bought It On Sale

“Well Mr. Jones, for your $1000 I can sell you 26 shares of Newmont Mining (NEM), a major producer with a long history of mining metals”

“Or I can sell you 1000 shares of New Gold Inc (NGD), an intermediate producer …”

Some aspect of the human mind wants to favor “1000 of something” over “26 of something else” when the price point is the same ($1000 in this example) – it’s strictly a numbers thing: “1000” vs “26” – it has nothing to do with the relative value of the two items, or their respective levels of risk

Perhaps the “I bought it on sale” factor is in play here as well – 1000 shares of NGD for $1000 feels cheap (“on sale”) relative to 26 shares of NEM for the same $1000 bucks

 

Summary

New Gold Inc (NYSE: NGD) is currently on sale, IMO

The entire mining sector has been beaten to a pulp over the past few years, and NGD is no exception

This $14 stock has been marked-down all the way to $1

One meager buck for a producing Gold and Silver mining company with a listing on a US stock exchange

If you are building a portfolio of mining stocks for the emerging Golden Bull market, give NGD a look

Besides the fact that New Gold (NGD) is actually a decent mining company, there are two factors that will drive NGD’s price quickly higher IMO:

1. It’s cheap, and

2. It’s cheap

NGD shares – get yours while they’re still, well, cheap…