Shares of the Ivanhoe Mines (IVN) was up almost 20% after TD Newcrest upgrades shares to Speculative Buy on positive prospects of the Oyu Tolgoi project in Mongolia which is scheduled to go in production in first quarter 2013.

Today, 36 out of 45 gold stocks finished in green while gold future prices rose by only 0.35% a very bullish sing for the lagging shares. Is this a short term rally or big comeback?

Many gold stocks are currently undervalued and are trading at a discount. We like to have a closer look at the underlying fundamentals of these companies to pick the best ones. Among gold miners Newmont Mining has a unique position of:

John Paulson has recently lost money on his bets on banks and gold miners. He remains bullish on gold and the gold miners, specifically AngloGold. The company is performing in line with the expectations but the stock is not. The market has not priced in the fact that the company closed the hedge book and is now totally exposed to $1,500 an ounce gold. Near term margin concerns and labor costs have weighed on gold miners but long term focus on fundamentals will come through.

Download Paulson thesis and his take on economy below.

Barrick Gold net margin is up high at 30.15% vs. 5-year average of 5.72%. This makes Barrick unique among other gold miners. The fundamental measure indicates that the company has become more profitable but shares are technically oversold. A good buying opportunity?

Net margin is a fundamental measure of how well the company is taking profits from sales. To calculate net margin, divide net income by earnings.

There is one big advantage in investing in gold stocks compared to buying bullion gold and that is the possibility of getting regular income. Gold stocks have been a great disappoint recently. Knowing they won’t stay down forever, why not investing in ones who provide some income in the down cycles? After all one big criticism of most gold mining companies is that they do not directly share the gains with share holders.

These are the highest dividend payers in the gold market measured by the dividend yield:

Jim Cramer seams to be done with NovaGold. For a long time it was his favorite stock. NovaGold shares rallied along with gold prices and outperformed gold bullion gains last year but it seams shares are running out of fuel. NG is trading at $9.2 down 45.50% from 52w high of $16.9. While gold stocks in general are disappointing, smaller caps like NovaGold and US Gold are leading the way down.