We have added Newcrest Mining to our Australian portfolio.
Summary
Newcrest Mining Ltd (NCM: ASX)
Market Cap (AUD): 10 B
Shares Outstanding (M): 766.511
Average Volume: 3,549,288
Activity: Exploration, development, mining and the sale of gold.
We based our investment thesis on the following premises:
- As a major gold producer, NCM is highly exposed to the precious metal, which we believe to be currently undervalued.
- Gold has appreciated against all the currencies (except for the USD) in the last couple of years and therefore NCM becomes a natural currency hedge;
- NCM has large reserves of gold and an appreciation of the yellow metal, which we believe is about to happen, would be translated into higher shares value;
- NCM`s productions costs are low compared to the other companies in the same industry, which reduces risk and makes it an even more attractive bet in case of a bull market in gold;
- We write calls on NCM in order to create a cash flow that nearly turns the security into a fixed income asset.
Trades
Buy (Share)
Security: NCM
Price (AUD): 11.98
Date: 03/11/2015
Sell (Call)
Security: NCM call
Price (AUD): 0.385
Date: 03/11/2015
Strike: 12.50
Expiration date: 26/11/2015
The call expired worthless, so we sold another call the very next day:
Sell (Call)
Security: NCMR87
Price (AUD): 0.62
Date: 27/11/2015
Strike: 12.00
Expiration date: 28/01/2016
The price of the stock today is just above A$13, which means that we are going to hand over our shares. So far, this strategy has brought +8.5% return in only 2 months.
