Is It Time To Follow George Soros?

Seasoned Investors

The long time successful investors like George Soros and Stan Druckenmiller are piling into gold and gold mining stocks. At the same time, there was news that Carl Icahn has dumped his high tech Apple stock.  In this article, we will not discuss Soros’ reflectivity logics or Icahn’s activist approach to investing.  They all have been successful with their own unique style. 

Our question is:  should we follow Soros and Icahn this time?

We first examine the mining stock Barrick Gold (ABX) and the Apple (AAPL) stock based on our near term cycle analysis and projection.  Then we revisit our basic premise and the big wave analysis published earlier.

Soros Piling In On ABX

Below are our analyses of Barrick Gold (ABX) and the popular gold stock index ETF (GDX).  We use a short-term daily price series with a 50-day moving average.  The selection of the particular 5-day moving average is not critical in determining the results and the internal cycles.  However the validity of forecast is limited to 1/10 of the given series.  The following chart shows:

• ABX price increases from 7.35 from the beginning of 2016 to a projected price 21.5 on 6-30-2016.  This is 193% gain for merely 6 months.  So Soros is quite right in investing in ABX.
• Note the dominant 4-month cycle marked in blue color.  While there may be a price correction in July, we believe that the big wave in the background and discussed later will likely overwhelm the correction.

A similar rise is shown in the chart of gold stock aggregate GDX since the end of 2015:

Icahn Dumping Apple

From the cycle perspective, Apple stock (AAPL) behaves very differently from the mining stocks ABX and GDX, as shown in the following chart:

• AAPL stock price decreases from 117 in the beginning of 2016 to a projected price of 86 by 6-29-2016.  That is a decrease of -26%.  So Carl Icahn is correct in dumping Apple unless Apple can come up with a uGadget in  the near future.
• Note the similarity in the dominant 4-month cycle in both AAPL and the mining stocks.  However, there is a small shift in the phase of the cycle.

To confirm our view on the gloomy prospect for tech stocks, we include our analysis of the NASDAQ index (IXIC):

A more cogent reason that one should consider investing in gold and gold mines rather than in equity shares is given in the next section.

The Big Waves Revisited

We reproduce our big wave charts on gold stocks (HUI+BGMI) and DOW below:

Forecast on Gold Stocks

Forecast on DOW

The reader can refer to our other articles published on this website on our method and analysis.

Historical Annual Returns

In the following two charts, we show the profiles of annual returns of DOW and BGMI for the last 75 years.  Based on our big wave cycle analysis, we project the annual price returns of these two asset classes for the next four years.

Equity DOW Returns

Gold Stock Returns

Summary

For the next four years, we believe the gold and gold mining stocks are the right investments, while the equity stocks including the tech stocks are not the place to be.  Of course, there are always special situations within each asset class.  As for the methodology in stock picking, we admit the cycle analysis is not unique.  However to have a big picture view in investments is a pre-requisite for large returns.  One should develop and sharpen one’s methodology in time to attain maximum results.

Caution:  We are not professional fund managers.  Do your own research and consult financial managers for investment advice and help.