A Tale of Two Miners
Patrick is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Newmont Mining Corp (NYSE: NEM), primarily a gold mining company, is up 6% over the past year. Compania De Minas Buenaventura SA Buena (NYSE: BVN), primarily a gold mining company, is down 18% over the same period. Why the difference?
It's not in the numbers. BVN earnings are growing twice as fast as NEM's, 30% to 15%. Both stocks are cheaply priced at a PEG of 0.5.
It could be the size. BVN has a market cap of only 1/3 that of NEM, with half the institutional ownership. BVN hasn't really been noticed yet.
It could be the location. BVN's operations are primarily in Peru, whereas NEM is US based with operations worldwide. Since Peru's new president, Ollanta Humala, started his political career as a left-leaning populist, one could certainly expect some political risk.
It could be that the stage is set for BVN's stock price to make a nice pop. Humala had to move considerably to the right to become president, and has recently supported Peruvian mining companies over labor interests. At some point the big institutions will realize this and show BVN some love. In the meantime, both BVN and NEM pay respectable dividends, and both will benefit from Peru's relative stability.
The author is long NEM and BVN, and short the corresponding January near the money calls.