We don’t think gold makes much sense outside perhaps a very diversified portfolio. Auto sales weren’t all that great in September, and some are calling for a bottom in General Electric.
By Brian Nelson, CFA
The price of gold (GLD) will continue to be volatile as many own it as both a global inflation hedge and an asset implying safety from global economic crisis. We think gold may make sense sometimes, but perhaps only as a very low weighting in a very diversified portfolio, if at all.
The case that gold has any intrinsic value is rather weak, too, “Gold Is But a Shiny Yellow Metal,” particularly because its industrial and consumer uses are rather limited. Gold holds value largely because others think it holds value, not that it can generate internal cash flows as in the case of actual intrinsic value. In some ways, gold can essentially be viewed as the previous generation’s cryptocurrency. Expect gold prices to continue to be volatile, now selling for $1,200 an ounce.
The news related to Tesla (TSLA) Elon Musk’s charges by the SEC has dominated auto-related press, “SEC Says Tesla’s Musk Broke Securities Laws, Allows Him to Retain CEO Role,” but it appears that September auto sales didn’t pace last year’s numbers, given the benefit to replacement-vehicle sales in part as a result of Hurricane Harvey in 2017. The timing of the weakness isn’t great, particularly given ongoing developments with respect to trade policies, both in North America and China.
We continue to like General Motors (GM), though auto-making exposure is but a very small portion of the simulated newsletter portfolios. We can think of a great many other ideas from Visa (V) to Apple (AAPL) that are far less controversial. Please be sure to be viewing the ideas in the simulated newsletter portfolios and evaluating the weighting ranges, an indication of how strongly we feel about each idea. Visa hit over $150 per share during the trading session October 2. It has been the highest-weighted idea in the simulated Best Ideas Newsletter portfolio for years.
The corporate mess that is General Electric (GE) is trying desperately to clean up the problems of the past several years. Diversifying away from financials and doubling down on the energy end market has been one of the most ill-timed moves perhaps in the history of the markets, and unfortunately, we can’t blame prior GE’s management too much, given the Financial Crisis and what was a long energy bull market prior to the collapse in oil shares in late 2015/early 2016. The company replaced CEO John Flannery with an outsider Larry Culp, former CEO of Danaher (DHR). GE may be back on track, but it may not be out of the woods, yet, and another dividend cut can’t be ruled out.
Related: DXY, SLV, CARZ
Metals & Mining – Gold: ABX, AUY, EGO, GG, KGC, NEM
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Brian Nelson does not own shares in any of the securities mentioned above. Some of the companies written about in this article may be included in Valuentum’s simulated newsletter portfolios. Contact Valuentum for more information about its editorial policies.