Three Gold and Silver Stock Picks for 2011 and Beyond
By Robert Kientz
25 comments  |  January 21, 2011  | about: AUY / NEM / UXG

... Culling the Herd

I picked up an enormously valuable research tool from Tom O'Brien during the San Francisco Hard Assets conference, where he gave a class and a general lecture. Tom breaks his analysis down into two metrics, MCVOMI and EVOMI, which you can research here.

MCVOMI = Market Cap Value / Metal Inventory, and measures the investor's total cost of the metals resource.

EVOMI = Enterprise Value / Metal Inventory, representing investor's cost minus working capital, plus debt against metals resource.

These two measures simplify financial analysis into two easy to understand standards that can value companies side by side. In fact, Tom has already done this for us on his website for a select group of companies.

In visual form, the analysis looks something like this:

Click to enlarge

You also see that Tom has broken the miners into segments Therefore, you can compare miners based upon their life stage, whether it is exploration, junior, middle tier, or mature producer.

That is a nice way to quickly narrow your search before you break out into full fledged analysis mode. I admit that without this tool, my research would have taken much longer and been more haphazard in nature.

Note that the tool is very handy but the pre-work is not done for you on every company. Therefore if your company is not on Tom's list, you can still apply the MCVOMI and EVOMI formulas to any miner you can find the financial data for to begin your analysis.

I like to stretch across segments to have both stability and potential, so I picked one exploration company, one mid-tier miner, and one mature miner for my portfolio.

(Excerpt from SeekingAlpha.com article, for complete article click here)

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To learn more about the EVOMI click here

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