DRDGOLD Ltd. (DROOY) [Chart - Analysis - News] established a new 52-week low yesterday at $4.07. Clearly investors are not enthusiastic about the firm's prospects. The decline was accompanied by higher than average volume, which adds to the momentum behind yesterday's move.
The question is, will DROOY continue falling or will it turn things around and start moving higher? The stock has lost 5.05% during the past month, has a price-to-book value of 0.84 and a PEG ratio of 0.
Traders are often tempted to buy stocks hitting their arbitrary 52-week lows as a way to buy in when the stock has gone "too low." However, a 20-year study conducted by Schwab Analysts showed that, on average, buying stocks at their 52-week lows underperformed both a strategy of buying stocks at new 52-week highs and simply buying the major market indexes.
DROOY competes in the Gold industry with Barrick Gold Corporation (ABX) [Chart - Analysis - News]---the largest firm in the industry group---and Capital Gold Corp. (CGC) [Chart - Analysis - News], who have returned -3.33% and -0.28% during the past month, respectively. DROOY is likely to be sensitive to its competitors so future strength in the Gold industry could be an early warning sign that things might be turning around.