Gold plays

Inflation will be a huge problem in the coming year(s). A common hedge against inflation and the US dollar, which has precipitously fallen, is gold. I wanted to point out some gold plays that may interest you.

If you want direct investment in the gold index then I would recommend GLD. This is the 'streetTRACKS Gold Shares ETF'. It mirrors the GO@LD, which is the London gold index price. This is directly correlated to the gold price. Gold is trading at $900/ounce today and GLD is at just under $90/share.

To evidence the statement that GLD and GO@LD mirror each other, I have pasted in the graphs below. The top is GO@LD, again, the actual price per ounce of gold and the bottom is GLD, the etf that mirrors the gold price.

GO@LD


GLD




Looks the same right? Well, that's b/c it is! Just goes to show there is no reason to buy the actual gold. Just buy GLD.

Another play would be to own stock in gold explorer, miner, producer and manufacturer companies. Some of these are ABX, AUY, NEM, GG, GOLD, and HMY. There are several others but these are the most well known. They differ somewhat as to where they mine or own mines at and to what extent they are vertically integrated (which means whether they just mine the gold or if they look for it, mine it, and then produce bars/coins, and sell it). Check some of them out and see if owning one or a couple would interest you.

The main idea is to diversify your portfolio. The best way to do so is to own some gold in the portfolio b/c it is a hedge against the dollar and inflation. This helps b/c usually the dollar depreciates during times when the market has soured, precisely as it has done in the past 6 months or so. During the same time gold has appreciated and the GLD and gold stocks have followed.

For the record, I own AUY. I think it's a great growth play. I also believe gold as a commodity will continue to rise in price for a year or two, or at least until the inflation anxiety passes.

The Guru

Some other ideas to look at........

First, if you are sold on the fact that oil and energy prices will keep skyrocketing you might want to look into oil/energy equipment and servicers. One that I like is FTK, Flotek Industries. Their principal activities are to supply drilling and production products and services to the oil and natural gas industry on a worldwide basis. They operates in three business segments: chemicals and logistics, drilling products, and artificial lift. Check out the chart below. FTK is trading near its 52-week lows and could be a great growth play as energy continues to become more expensive.

Next, RTEC, Rudolph Technologies looks like a good buy. It is in the technology sector, more specifically, dealing with semiconductors for the solar companies. You can see the levels it is trading at below in the chart. Currently at about $9/share. The annual high is $20/share and the low is $8/share so it is a good entry point. RTECs principal activity is to design, develop and manufacture systems used in semiconductor device manufacturers. These solutions enable semiconductor device manufacturers to improve yields and reduce overall production costs. As long as energy costs keep rising, people will continue to emphasize the need for and turn to alternative energy plays. With that said, RTEC is in a great position to help service the solar panel manufacturers and to benefit for the energy crisis, for lack of a better term.

I would suggest taking a look at these and developing your own opinion. These aren't recommendations and I'm not saying "BUY BUY BUY" like Jim Cramer on CNBC, I just wanted to point out some ideas that you can start looking at to possibly spark your interest in certain investments.

As always, good luck and feel free to comment or submit questions.