One of the primary keys to success in investment and speculation is picking the right stocks to trade. That’s no mean feat, as it takes great effort, expertise, and time to winnow the whole field down to the likely winners with the best fundamentals. Although deeply out of favor now in the summer doldrums, the small contrarian gold-stock sector has generated truly epic gains for investors and speculators over the years.

I’ve been in the financial-newsletter business for 17 years now, after founding my company Zeal LLC way back in early 2000. I needed to do extensive markets and individual-stocks research to support my own personal speculation and investment, so I figured why not share it so others can benefit as well. Since then I’ve researched and written 765 web essays, 204 monthly newsletters, and 748 weekly newsletters.

The primary mission of my research has always been to drive profitable real-world trading. If financial-market research doesn’t actually help multiply wealth, why even bother? The stock trades resulting from these 17 years of hard work were all recommended in real-time in our newsletters as the buys and sells were actually made. Our cumulative realized stock-trade count is now up to 357 in our monthly and 571 in our weekly.

928 real-world stock trades fully disclosed to, fully accountable to, and fully auditable by our subscribers over such a long span of time has been an unparalleled learning experience. Like all speculators, we won some and lost some, but our overall track record is outstanding. All 928 Zeal newsletter stock trades ever closed, including all losers, have averaged impressive annualized realized gains of +22.0% since 2001!

Since our first newsletter was published on August 1st, 2000, the compound annual rate of return of the benchmark S&P 500 has only been 3.1%. The S&P 500’s absolute return over that long intervening secular span is 67.6%. But 22.0% compounded annually since then equates to a radically-better 2903.4% return. There’s no doubt that studied stock picking and trade timing can vastly outperform the indexes!

Since general stocks have mostly been mired in a secular bear since early 2000, the great majority of our Zeal trades have been gold stocks and silver stocks. The precious metals are one of the best-performing sectors during sideways-grinding general stock markets. So one of the most common questions I get is how do I go about picking great gold stocks? What factors do I consider in trying to sort the best from the chaff?

These are tough questions to answer. So much time on task, so many trades, so much experience both winning huge profits and suffering vexing losing streaks are challenging to distil down into a book, let alone an essay. It’s hard to even know where to start after tens of thousands of hours of research on markets and individual stocks. Nevertheless, I get this question so often that I should at least attempt to address it.

So here’s a brief overview of key things I look at when comparing and contrasting gold stocks attempting to find fundamentally-superior ones to trade. And “gold stocks” used in this essay applies equally to silver stocks. My stock-picking methodology is a perpetual work in progress. I’m always learning and striving to improve it, and there are plenty of traders out there with long track records better than mine.

Major-ETF Inclusion. Ask any prospector where the best place to find gold is, and he’ll say where it has already been found! Great gold stocks are very similar. So one of the first things I check when I’m researching individual stocks is what ETFs they are included in. The companies creating the leading exchange-traded funds and the indexes behind them have big research departments full of experienced analysts.

The dominant leading gold-miner, gold-junior, and silver-miner ETFs today are GDX, GDXJ, and SIL. They are the VanEck Vectors Gold Miners ETF, the VanEck Vectors Junior Gold Miners ETF, and the Global X Silver Miners ETF. Being considered worthy of inclusion in these elite ETFs truly is the gold standard in precious-metals stocks. So if a miner or explorer is large enough, I always check for ETF inclusion.

I certainly don’t only trade gold stocks included in major ETFs, but when one is I know it has been vetted by leading expert researchers. While some of the stocks they include perplex me, the majority are truly the best in the business. ETF inclusion can be a self-fulfilling prophecy too. Since most investors and speculators settle with ETFs these days instead of individual stocks, their ETF buying drives up components’ prices.

Market Capitalization. If I had to decide on a single-most-important factor for picking great gold stocks, I’d actually choose market capitalization. That may sound shocking, as how could market cap be even more important than production, costs, or reserves? The reason is market caps ultimately distill everything that all traders collectively know about any gold stocks, and govern their potential for big near-future gains.

When buying a house, the first thing you have to consider is price. It makes no sense to fall in love with a perfect house you simply can’t afford. Gold stocks’ market capitalizations, especially when they are considered relative to each other, give great insights into how valuable their mines and projects actually are. Market caps are the ultimate form of relative ranking resulting from actual real buy-sell votes from all traders!