Mary, Mary Quite Contrary

If you know me, then you know I can be rather contrary at times. (For the record, that is the correct form of a math If-Then Statement. The hypothesis is true therefore the conclusion must also be true.) There are times that taking a contrarian approach to investing can prove to be profitable despite the prevailing market sentiment. In a nutshell, contrarian investing says buy when everyone else is selling and sell when everyone else is buying. Okay, so you don't want to do it in a haphazard style, you need to look for value and then do your buying as close rock bottom prices as you can. This is referred to as bottom fishing. If I was trying to explain to my darling wife, I would tell her it's like buying name brands at Filene's Bargain Basement since she understands neither the stock market nor fishing.

Even if you are not an active investor, you most likely are aware of the plummeting price of gold. A few summers ago, gold was selling for close to $2000 a Troy ounce. Lately, it has been selling for closer to $1400 a Troy ounce. Despite my father's insistence that I keep the gold coins he had given over the years, I sold them into the feeding frenzy of 2010 and did not buy any to replace them. All of the coins I sold were were modern coins, minted after 1990. Today, I can repurchase the same coins for a fraction of the price at which I sold them. You see gold is now out of favor with investors. In fact, after the last six months or so all precious metals are out of vogue and with them the companies that mine and refine those precious metals. (Yea, I know it was a roundabout way to get to the stock market but it made for a good story.)

Now, before I go any further,

I AM NOT ADVOCATING THAT YOU BUY THIS STOCK. I AM WRITING ABOUT MY VIEWS AND OPINIONS OF THIS STOCK. I HAVE NO BUSINESS CONNECTIONS WITH THE COMPANY AND NO ONE GAVE ME ANY COMPENSATION FOR WRITING ABOUT THE COMPANY. I DO HAVE A LONG POSITION FOR THIS COMPANY IN MY PORTFOLIO.

There, disclaimer out if the way so I guess my butt is covered.)

The point of the story is a contrary stock pick that has some real short term profit potential. With gold and other precious metals having been hammered of late, metal stocks also have been hammered and are hovering near their 52-week lows. There are a couple I really like but IAMGOLD Corp. (IAG) really caught my attention recently.

Here are a few of the specifics about IAG:

Book Value per Share - $9.90

Current Price per Share (Close: 06/07/13) - $5.29

IAG has more cash than long term debt

52-week price range $16.88-$4.60

There are some other details relative to IAG's financial performance at which you want to look but as a contrary investment choice the risk versus return ratio is strongly in favor of return.

IAG Stock Chart December 2012 to Present

www.stockcharts.com

 

You can see the price performance of IAG in the chart above (December 2012 to present). Technically speaking, you are looking at a bearish technical pattern with the stock meeting resistance with the 50-day SMA (simple moving average).