The gold stock sector has started to move and my clients and I are loaded up. This last week, most of the companies have had a good run although there is much more to go. Did you know this or are you fixated on yesterday’s bull market on NASDAQ?

I think gold has begun to move into a new bull market which will last several years and create lots of 10 baggers. This is how the markets work. There is always a bull market somewhere but investors miss it because they are still focussed on the dying bull of yesterday. Gold is the mirror of the stock market and like all mirrors, it operates in reverse. While NASDAQ soared, gold stocks were killed. Now the shoe is going on the other foot.

The great thing about bull markets is that you can make mistakes and still be fine, as long as your mistakes are from the long side. You can buy after a run higher and still win if you are patient enough to wait out the inevitable corrections. And if you are careful, you can buy the underperforming junk and do really well as long as you buy good management. You can’t buy junk in a bear.

The gold sector always has some underperformers that are being punished for what they did in the past but no longer do. Kinross is a good example. Previous management made two grievous errors. First, they wildly overpaid for assets at the top of the market. As the gold price declined, their financial statements were a sea of red. Second, they went big into Russia at a time when Russia was the wild west of property rights; if a well-connected Russian liked what you owned, he stole it.

Both of these negatives have been fully discounted in the share price and then some. Meanwhile, the management has changed and the company has put its house in order: capital spending has been scaled back; operating costs have been cut; new projects have been acquired at a good price in mining-friendly Nevada; and Russia has become a much better (not perfect) place to be. In fact, with the collapse of the rouble, Russia is a very inexpensive place to operate and the government actually believes in the importance of gold. In short, Kinross is an undervalued turnaround—perfect for the investor who thinks he may have missed the first leg of a new bull market.

For a great write-up (and way more detail), see Pater Tenebrarum’s A Senior Canadian Gold Producer Worth a Close Look at http://www.acting-man.com/?p=42982.