Thursday, April 11, 2013

How we love to hate Barrick

This is a clip from today’s Globe Report on Business

“Barrick’s woes in Chile deepen as Pascua Lama is suspended” and “Barrick has endured one of the most tumultuous years in its 30-year history, beginning with the sudden replacement of its chief executive officer in mid-2012, the subsequent cost overrun at Pascua-Lama and a $3.8-billion writedown on a high-priced copper acquisition. As an industry, mining is facing the worst cost increases in decades”

In response to the news Canadian and U.S. investors pounded the stock down roughly 8.4% to close at $24.46 yesterday.

This Barrick fiasco could be a setup for a great contrarian play. I can’t imagine any advisor having the guts to call a client and table arguments as to why Barrick should be bought today. My experience has been that when a client is easily sold on an investment, it is too late. It is the hard sells that pay off in the long run. For example if a year ago your advisor called and told you to by Air Canada or Westjet you may have moved your account to another advisor

By the way I note that Barrick has a dividend yield of 3% and a payout ratio of under 20%, one of the lowest of all the CDN large caps

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