ASA Ltd. (ASA): Diversity in mining

"ASA Ltd. (NYSE: ASA) is a closed-end investment company that keeps at least 80% of its holdings invested in mining stocks," notes Sy Harding in his Long and Short Stock Advisor.

"Gold mining stocks did prove to be a safe haven when the stock market was plunging sharply to its bear market low in early March.

"And perhaps more importantly, the mining stocks tend to move two or three times as much as the gold bullion when they are moving in the same direction.

"For instance, while gold bullion is up 49% since its low of last October, ASA is up 145% over the same period. 

"ASA provides an opportunity to be invested in a diversified portfolio of mining stocks, rather than individual mining stocks. And it provides diversification into silver, platinum and diamond mining. Currently 16% of its assets are in platinum miners Anglo Platinum Ltd, and Impala Platinum. 

"At the present time ASA is selling at a 6% discount to the net asset value of its combined holdings. With gold bullion having broken out above its previous peak, and currently about 5% above $1,000 an ounce, a reasonable preliminary target for ASA should be 5% or 10% above its 2008 peak of $92, which would be $96 to $101 a share. 

"We suggest a ‘mental’ protective stop at $69, as usual based on closing prices, with the exit to be made the following day if the stop is hit. And as usual, to lock in profits it is a trailing stop that would be moved up as ASA moves in our direction to keep the stop about 15% below the highest price achieved."