Pick of the Week: Goldcorp (GG: NYSE)

This major gold producer opened down 10% this morning (February 26, 2016) because of the earnings news released the night before. Were the earnings that bad? No, not at all. Once again, the market sells when it should buy and buys when it should sell.

Goldcorp opened down 10% this morning. Were the earnings that bad? No.

First, you need to know that Goldcorp just brought in a new CEO. The first thing a new CEO does is to clear the decks of any mistakes made by his predecessor that his predecessor did not want to admit. Why carry the can for the old administration? So, the new CEO wrote off everything possible. These are NON-CASH expenses. These horses left the barn long ago. The only actual expense involved is auditor’s ink.

And here’s the bonus: Goldcorp shareholders will not see another write-off for years. What they will see is exaggerated earnings now that the bad stuff is off the books.

Goldcorp also announced it is cutting the dividend. Right. They are cutting the dividend after the gold price is UP nearly $200 per ounce from the low of last year. Why? So the new CEO can show off his performance and get a bonus from thankful shareholders for raising the dividend later this year.

With the gold price UP nearly $200 from the reporting period released today, we are looking at ancient history here folks. History that is irrelevant. The economics have changed but the new guy gets the credit.

So, dear reader, if you are thinking of buying a gold stock, please take a look at GG. Buy when the masses are selling. Just remember to sell when they are buying.