The newly crowned king of the commodity stocks has been named by Barron's in its top stock picks for 2024, and this is one trend that is being backed by significant investment authorities like BlackRock NYSE: BLK and The Goldman Sachs Group NYSE: GS, with a behind-the-doors sponsor found in the United States FED and its plans to cut rates this year.
Why Barron's even looked at the mining stocks group is a questionable move by today's standards. Still, because they are making decisions based on tomorrow's standards, you too can get behind the thesis being formed around this mega trend that's about to start, but more on how this battlefield looks later.
Barrick Gold NYSE: GOLD is the top pick among them. Because most of its peers are benefitted from the coming boom in the commodity cycle, there must be more specific reasons that make this name the pick of the litter; MarketBeat has done the homework to bring these reasons to you today, so do yourself a favor and stick around.
Deal making
There is a major money shift coming to markets, particularly sparked by the pivots mentioned by the FED today. You see, while interest rate hikes made asset classes like commodities unattractive since expensive money makes it harder for manufacturing and business activity to peak, the market has punished the space in 2023.
You can see this relationship live by comparing the performance in the VanEck Gold Miners ETF NYSEARCA: GDX against the broader S&P 500 during the past twelve months, which turns out to be an underperformance of up to 29.0%. As everything that gaps must close eventually, here's what could happen next.
The dollar index could fall due to lower interest rates, making the price of commodities rise as a result, considering that they - like gold - are quoted in U.S. dollars. Now, there is a second side to this equation affecting the prospects of the manufacturing sector.
In their 2024 macro outlook report, Goldman Sachs analysts are betting on a manufacturing sector turnaround and possible breakout, which clearly includes the mining sector. If this respected investment bank is right in its prediction, it could trigger the Miners ETF to rally and close the performance gap against the S&P 500.
As always, there is one bottom line that these advisers and strategists are looking for, especially in 2024, where low interest rates could make for a much more competitive stock market. That bottom line is growth, particularly above-average growth projections.
Stand out
Of course, the most commonly traded name in the gold mining space is Royal Gold NASDAQ: RGLD because of its industry's operating track record and brand recognition. However, Barick has come to blow past the former favorite in all the ways investors want to see.
Starting with the average expected growth in earnings per share for the whole industry, the metric - or benchmark for you to follow - sits at 4.6% today, nothing to write home about. Since not all miners are created equal, you'll see why Barrick quickly stands out from the pack.
But first, you must find the leader's weakness to bet on the underdog. Royal Gold Analysts expect an EPS jump of 17.8% in the next twelve months, definitely more attractive than the industry average. Can Barrick stand to beat this projection in their own set of earnings?
Well, the answer is clearly yes; today, analysts are projecting an advance in EPS of 37.0% in the coming year, massively above both the industry and its close competitor, Royal Gold. Knowing what you know now, is it really a surprise to learn of these projections and Barron's decision?
These same analysts pushing Barrick's growth above the rest of the peer group have also landed on a consensus price target of $22.2 a share. At this level, there is an implied upside of 27.0% from where the stock trades today.
Combined with a 2.2% dividend yield, the upside for the next year quickly rises to nearly 30.0%, which is not a bad way to start your 2024 and overall journey to wealth building.
One last check before you go and make your own consideration: there is a reason that the market has decided to bid up the price of Barrick stock, rewarding it with bullish momentum. You can come to this conclusion by pondering upon its 10.0% outperformance against the Miners ETF in the past quarter.
Before you consider BlackRock, you'll want to hear this.
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