Cramer expects gold to be a big theme in 2010, and these are his stocks to play it.
Remember, he recommended this precious metal because it both protects against inflation and market volatility and has turned into a growth investment in its own right. Gold prices rose 23% in 2009, and the continued demand should propel them even higher. While Cramer thinks buying bullion, preferably through an exchange-traded fund like SPDR Gold Shares, is the best gold play, he did offer up a few of his other favorite picks.
Freeport-McMoRan may earn just 20% of its revenues from gold, Cramer, but the company is still the sixth-largest producer in the world. The bulk of Freeport’s business is copper, where it’s ranked number two and operates an Indonesian mine that’s just a short boat ride from China. Chine is, of course, the source of much of the world’s copper demand, and it helped to deliver a 73-cent earnings beat last quarter. Freeport also reinstated its dividend, though at a lower level.
For a pure play on gold, Cramer suggested Eldorado . He’s a bit wary of recommending companies over the bullion because companies can disappoint regardless of the commodity’s high price. But EGO is one of the lowest-cost producers in the business – an expected $330 an ounce for 2010, while Friday’s closing price was over $1,100 – leaving it some wiggle room. The stock has soared 87% since Cramer’s Feb. 25, 2009, call, and he thinks there’s plenty of upside left.
Investors may want to speculate on this sector, and Cramer doesn’t have a problem with that. It’s just a matter of how they do it. Instead of buying an individual company, he said he’d rather see people in the Market Vectors Junior Gold Miners exchange-traded fund. This ETF is a basket of 38 small- and medium-sized gold and silver miners that offer more growth than bigger gold companies. And it reduces the chances of losing big money if just one of them has a bad quarter – or year, for that matter.
Viewers can pick and choose from his recommendations to suit, Cramer said, but 10% of a portfolio should be in gold.
“The world’s too dangerous a place to have any less than that,” he said, “and the profits, in no matter what form you own it, are just too golden to pass up.”
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