Trading #1 Gold Stocks

If you don't own any gold stocks, you might want to consider picking one or two. While the price of the barbarous yellow relic itself is driven by meaningful global trends in asset and monetary diversification, its swings will be volatile to trade.

But, buying and trading solid miners with earnings momentum may be the best exposure to the long-term trend. Barrick Gold (ABX - Analyst Report), the world's biggest producer of the metal, just reported its third-quarter numbers Thursday with profit jumping 52 percent as higher prices offset lower production.

Barrick also raised their dividend from 12 cents to 15 earlier in the week. The stock has surged for the past week from a very nice base of support at $43 to over $49 today, and with a forward P/E below 10, it could be a solid part of a metals portfolio.

But I want to consider three smaller names with more earnings momentum and thus more potential upside...

AngloGold Ashanti (AU - Snapshot Report) is a $17 billion producer who claims to be one of the largest at 7 million ounces per year and holding reserves of 126 million. The company has operations in six countries on three continents, some of which are joint ventures, as well as exploration activities in ten countries. With a forward multiple of 13 times, it's projected to grow earnings at 60% this year and 66% in 2012. They report November 4.

Gold Fields (GFI - Snapshot Report), a $12 billion miner, is one of the world's largest unhedged gold producers with operating mines in South Africa, Ghana, and Australia. Coming off of 155% projected EPS growth this year, they are expected to grow profits by 57% in 2012. The company is expected to report earnings on Nov 10 and is also sporting forward P/E ratio of 13.

Royal Gold (RGLD - Snapshot Report) is a $3.8 billion enterprise who characterizes its business as being "engaged in the acquisition and management of precious metals royalties. They seek to acquire existing royalties or to finance projects that are in production or near production in exchange for royalty interests." With a 32 forward multiple, the company is predicted to grow EPS by 65% in 2011 and next year's estimates call for 19% growth. They report Nov 3.

My favorite in the bunch is GFI. I recommended it here back in July at $15.50 when gold was just breaching $1,600 for the first time ever. In the article and attached video, Gold Headed to $1,750 Next?, I also looked at Rand Gold (GOLD) as a hot prospect when it was trading $90.

GOLD is slipping below $110 today, after trying to make another run at its all-time high near $115. Yet, more proof that there are lots of good opportunities trading the miners with solid earnings momentum.

Kevin Cook is a Senior Stock Strategist with Zacks.com

Read the full analyst report on GOLD

Read the full analyst report on ABX

Read the full analyst report on RGLD

Read the full analyst report on AU

Read the full analyst report on GFI

Read the full analyst report on GDX