The Best Income Idea in the Market Today
By Jeff Clark
February 16, 2010
If you're looking to get income from your investments, then you have to own precious metal stocks.
No, they don't pay interest on your money. And no, they don't issue huge dividends. But the option premiums on gold stocks are so enormous, a covered call strategy using gold stocks generates some of the highest returns you'll get from any investment.
Best of all, it's low risk. As long as you get the timing right.
And right now is the best time in a year to buy into the precious metal sector.
My subscribers have done pretty well with the gold stocks I've recommended in Advanced Income. All six of the gold recommendations have been profitable – ranging from a 15% return on Market Vectors Gold Miners Fund in three months to a monster 110% six-month return on Hecla Mining.
But we haven't owned any gold stocks since our Silver Wheaton shares were called away for a 35% gain last September. The timing just hasn't been right.
You see, gold stocks are a volatile bunch. They make large moves in a short timeframe. And those big, short-term moves create large option premiums.
Over time, however, gold stocks really don't go anywhere.
Think about this... Newmont Mining (NEM), one of the largest of the gold stocks and the one most investors think about when they think of gold, ended 2003 at about $45 per share. By the end of 2004, it was still $45. Newmont was $45 per share at the ends of 2005 and 2006 as well.
What about 2007? You guessed it – $45. Sellers took hold of Newmont in 2008, however, and managed to push the stock down to $40 per share by yearend. But the buyers fought back in 2009. On Friday, the stock closed right around $45.
Of course, NEM hasn't traded in a straight line for the entire six-year period. It has been significantly higher and lower, and the shares have been fraught with volatility. A chart of NEM has more squiggles than Dick Cheney's EKG.
When all is said and done, however, the stock is in the same place it was six years ago. Long-term investors have nothing to show for their labor.
Covered call sellers, on the other hand, could have generated consistently high rates of return by selling calls against their shares. The trick, of course, is to get the timing right.
For reasons I explained a couple weeks ago, right now is the best time in a year to buy gold stocks. It's an even better time to generate income on the shares by selling covered calls. My latest Advanced Income recommendation pays an 8% immediate return, offers the potential for a 20% return in the next four months, and protects against an unexpected decline in the share price.
It's the best income-producing idea in the market today.
To find out how you can generate income from your precious metal investments, click here.
Best regards and good trading,
Jeff Clark |
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Restaurants rally... Chipotle, PF Chang's, Cheesecake Factory, and Panera make fresh highs. |
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AT&T slides... telecom giant hits six-month low, down 10% since January 1. |
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Earnings today... Abercrombie & Fitch, Kraft, Merck, Waste Management, Whole Foods. |
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Last |
Change |
52-Wk |
| S&P 500 |
1075.51 |
-0.27% |
+28.77% |
| Oil (USO) |
36.31 |
-1.28% |
+38.96% |
| Gold (GLD) |
107.04 |
-0.08% |
+14.89% |
| Silver (SLV) |
15.24 |
-0.85% |
+14.33% |
| U.S. Dollar |
80.19 |
-0.03% |
-6.80% |
| Euro |
1.36 |
+0.34% |
+6.84% |
| VIX |
22.73 |
-5.13% |
-44.90% |
| HUI |
401.71 |
-0.89% |
+26.75% |
| 10-Year Yield |
3.69% |
-0.04 |
1.30 |
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| Company |
Sym |
Industry |
Ralcorp |
RAH |
packaged foods |
Vishay |
VSH |
electronics |
SkillSoft |
SKIL |
software |
Novo Nordisk |
NVO |
pharma |
Chipotle |
CMG |
restaurants |
Riverbed |
RVBD |
network equip |
PF Chang's |
PFCB |
restaurants |
Cummins |
CMI |
heavy equip |
Valeant Pharma |
VRX |
pharma |
NetLogic |
NETL |
semiconductors |
Rogers Comm |
RCI |
TV broadcasting |
Harman Intl |
HAR |
electronic equip |
Lancaster Colony |
LANC |
packaged foods |
Sara Lee |
SLE |
packaged foods |
UAL |
UAUA |
airlines |
Chscake Factory |
CAKE |
restaurants |
NY Community |
NYB |
bank |
Panera |
PNRA |
restaurants |
99 Cents Only |
NDN |
discount stores |
ResMed |
RMD |
medical devices |
JDS Uniphase |
JDSU |
telecom |
US Airways |
LCC |
airlines |
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| Company |
Sym |
Industry |
Theravance |
THRX |
biotech |
Administaff |
ASF |
outsourcing |
Cambium Learning |
ABCD |
for profit ed |
Medidata |
MDSO |
health IT |
SuperMedia |
SPMD |
advertising |
Myriad Genetics |
MYGN |
pharma |
China Hydro |
CHC |
utilities |
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