When a Favorite Stock Disappoints, But Promises a Quick Fix

Should we buy the dip?

One of the frustrations of the past few years has been the gold mining stocks’ failure to outperform the underlying metal. But that’s not true in every case. Some miners have outpaced gold by doing everything right, making their early investors a ton of money in the process.

One of these stocks, which wasn’t in our Portfolio but should have been, just presented us with a teachable moment. And maybe an excuse to finally buy it.

In a nutshell, after several years of rising production, low costs, and solid earnings, this miner reported a disappointing March quarter. With gold in a bit of a correction, the bad operational news hit the stock with a double whammy.

But company management attributes the bad quarter to one-off events and predicts a return to normal (i.e., excellent) results going forward. So…do we trust a company that has clearly earned it, and buy the dip? Or do we wait for those back-to-normal results to manifest before acting?

Situations like this are common, and they resolve in lots of different ways. So let’s dig a little deeper: