Question of the week – Gold stock speculation

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Question: My financial advisor has purchased shares in Linc Energy and Northern Star Resources for me on behalf of my SMSF. To date both stocks are showing a loss on paper. I would appreciate your thoughts on these stocks.

Answer (By Paul Rickard): They are “interesting stocks” for an SMSF portfolio – so I hope that they are part of a more diversified portfolio and consistent with your investment objectives. If they are not, get a new adviser.

I don’t like gold, so only in exceptional circumstances would I contemplate buying a second tier gold producer. Northern Star is not well covered by the analysts – Macquarie recently instigated research on it, rating Northern Star as an “outperform” with a target price of $0.93. This is not that far from its current price of $0.86 – although a fair way from its 52-week high of $1.53. The company is forecasting to generate net cash this year, and pay a fully franked dividend of 3.5cents – so maybe this puts a floor on the price.

None of the major brokers research Linc Energy – which says something about the stock. I also can’t shed any light, apart from noting that it is pretty volatile. It is certainly in the ‘speculative’ category.

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.

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