Just when investors thought that the price of gold couldn’t go any higher, the Federal Reserve added fuel to the fire. On July 29, the Fed said there was not sufficient evidence of an economic recovery to warrant changing their current policies.
Not only does that mean that interest rates will stay at or nor zero, but that the Fed may initiate other actions as well. In his statement after the Fed meeting, chairman Jerome Powell said the Fed was “not even thinking about thinking about raising rates.”
And while the novel coronavirus was certainly a factor, it’s not the only factor. The Fed is looking intently at the collateral damage from the lockdown measures in March and April. Over 14 million Americans who had jobs in February are unemployed. And many of those jobs will not be coming back.
This is creating the perfect scenario for gold and gold stocks. The price of gold has surged over 25% in 2020. At the time of this writing, it sits at $1,953 per ounce. Of course as soon as gold starts to near $2,000 the cries that the rally is over begin.
Are they right again? Maybe, but I’m a little skeptical. Gold always climbs during times of uncertainty. That’s true today more than ever. We’re months away from a presidential election. We’re learning how to live with a novel virus for which there is no vaccine. We have social unrest that has turned into riots in many major cities.
With that in mind, here are seven of the best gold stocks that you can invest in right now.
Quick Links
- Kirkland Lake Gold
- Newmont Corporation (NEM)
- Yamana Gold
- Barrick Gold
- Wheaton Precious Metals
- Iamgold Corp
- Vectors Gold Miners ETF
#1 - Kirkland Lake Gold (NYSE:KL)
Year-to-Date Gain: 14%
The first company we’re looking at is Kirkland Lake Gold (NYSE: KL) because they just reported earnings on July 30. And the earnings were very good. In terms of profit, the company generated 79 cents per share. That’s a gain of over 50% from the same quarter in 2019. And it’s a jump of over 10% from the previous quarter. The revenue story was also strong. The company’s revenue totaled $581 million which was 107% year-over-year gain and a 5% beat from the prior quarter.
However one of the best reasons to love Kirkland stock is because the company is sitting on $537.4 million in cash on its balance sheet with no debt. And this was accomplished despite the company acquiring Canada’s Detour Lake mine. Furthermore, Kirkland is standing by its full-year production growth guidance of between 1.35 and 1.4 million ounces.
Kirkland stock has a 12-month price target of $53, but recent price targets have been higher with one as high as $75 per share. But for the Toronto-based company, every new high the stock hits will be a new all-time high, so the company has already exceeded many expectations.
About Kirkland Lake Gold
Kirkland Lake Gold Ltd. engages in the mining, development, and exploration of gold properties. The firms projects include Holt Mine, Macassa Mine, and Detour Lake Mine. The company was founded on June 29, 1983 and is headquartered in Toronto, Canada.
- Current Price
- $38.92
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#2 - Newmont Corporation (NEM) (NYSE:NEM)
Year-to-Date Gain: 52%
Newmont Corporation (NYSE: NEM) is another mining company that recently reported earnings. On July 30, Newmont Corporation posted earnings per share of 32 cents on revenue of $2.4 billion. Both numbers were closely in line with analysts’ expectations. So does that mean the stock’s run is over?
I’m going to say no. The stock was up 43% for the year in May and has only continued to climb. In fact the stock is now up over 77% in the last 12 months. Yes, it’s getting more expensive for Newmont or any gold miner to extract the precious metal, but that shouldn’t steer you away from NEM stock.
In the company’s first-quarter earnings report it cited its ability to continue to operate throughout the Covid-19 pandemic. As proof of that, the company announced it had produced 1.26 million attributable ounces of gold.
But what investors will really like is the company’s free cash flow which came in at $388 million. This compares to a negative $79 million in FCF the company had reported just a year earlier. And investors will enjoy Newmont’s dividend which it just increased by 11 cents to 25 cents per quarter.
About Newmont
Newmont Corporation engages in the production and exploration of gold. It also explores for copper, silver, zinc, and lead. The company has operations and/or assets in the United States, Canada, Mexico, Dominican Republic, Peru, Suriname, Argentina, Chile, Australia, Papua New Guinea, Ecuador, Fiji, and Ghana.
Read More - Current Price
- $38.28
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 9 Buy Ratings, 7 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $54.31 (41.9% Upside)
#3 - Yamana Gold (NYSE:AUY)
Year-to-Date Gain: 64%
One of the strongest gainers of the year is Yamana Gold (NYSE: AUY). AUY stock is up approximately 10% since reporting strong earnings on July 23. The company more than doubled up expectations for earnings, generating 7 cents per share (the consensus of analysts was 3 cents per share).
Considering that the quarter encompassed the worst of Covid-19 lockdown measures, Yamana posted strong revenue of $303.4 million. During the quarter, the company gave investors an optimistic assessment of its Jacobina and El Penon mines. In terms of the Jacobina mine, the company now believes it has a much longer life (14.5 years) than previously thought. At the El Penon mine, Yamana found evidence of additional gold “veins” that should allow the mine to make more efficient use of its production capacity.
Yamana has a solid balance sheet with $324.8 million of cash on hand. The company has $992.8 million of long-term debt. However, $100 million is a draw from the company’s credit facility which the company says it intends to pay back.
About Yamana Gold
Yamana Gold, Inc engages in the production of gold, silver and copper. It operates through the following segments: El Peñón, Canadian Malartic, Jacobina, Minera Florida, Cerro Moro, Other Mines, and Corporate and Other. The company was founded by Peter Marrone on March 17, 1994 and is headquartered in Toronto, Canada.
- Current Price
- $5.85
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#4 - Barrick Gold (NYSE:GOLD)
Year-to-Date Gain: 53%
Barrick Gold (NYSE: GOLD) is known as a mining stock that has a price which closely correlated with the spot price of physical gold. This is because it has high-quality gold and copper assets (known as tier one assets). In 2019, Barrick’s gold (six million ounces) and copper (400 million pounds) production were at the upper end or above the company’s guidance.
With that said, there was some concern that the company’s production would suffer when mining operations were suspended due to the novel coronavirus. However, in its most recent earnings report, Barrick’s revenue was largely unchanged which should help alleviate those concerns. However, the company should provide further guidance when it reports earnings on August 10. Investors will be keenly interested in that as GOLD stock is at a seven-year high.
Barrick has operations in five countries on three continents. Since the selloff in March, Barrick stock is up over 90%.
About Barrick Gold
Barrick Gold Corporation is a sector-leading gold and copper producer. Its shares trade on the New York Stock Exchange under the symbol GOLD and on the Toronto Stock Exchange under the symbol ABX.
In January 2019 Barrick merged with Randgold Resources and in July that year it combined its gold mines in Nevada, USA, with those of Newmont Corporation in a joint venture, Nevada Gold Mines, which is majority-owned and operated by Barrick.
Read More - Current Price
- $15.46
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 7 Buy Ratings, 5 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $24.82 (60.5% Upside)
#5 - Wheaton Precious Metals (NYSE:WPM)
Year-to-Date Gain: 78%
Before we take a look at a mining exchange-traded fund (ETF), let’s take a look at a mining stock that behaves similar to an ETF. That would be Wheaton Precious Metals (NYSE: WPM). It doesn’t have traditional mining operations. Rather, Wheaton’s model is one in which it doesn’t mine the metals directly. Instead, Wheaton buys the output from other mines at a predetermined price.
By occupying this middle ground between pure-play mining stocks and ETFs, WPM gives investors stability. This stability comes at a slight cost because in times like these where the price of gold is surging, Wheaton does not climb as high. However, when gold goes down, Wheaton has lower lows.
But in 2020, investors are seeing the WPM stock price be much higher than the price for physical gold. That may be because, as its name implies, Wheaton Precious Metals is involved in more than just the production of gold. WPM stock hit an all-time high in May and has not stopped climbing. With sentiment for gold expected to stay strong, Wheaton looks like a solid bet for the rest of 2020.
About Wheaton Precious Metals
Wheaton Precious Metals Corp. primarily sells precious metals in North America, Europe, and South America. It produces and sells gold, silver, palladium, and cobalt deposits. The company was formerly known as Silver Wheaton Corp. and changed its name to Wheaton Precious Metals Corp. in May 2017. Wheaton Precious Metals Corp.
Read More - Current Price
- $57.11
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 9 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $71.67 (25.5% Upside)
#6 - Iamgold Corp (NYSE:IAG)
Year-to-Date Gain: 30%
Iamgold Corp (NYSE: IAG) is a bit of a longer play as mining stock. The company is considered a mid-tier mining stock. However, they are recognized for having “accountable” mining through high standards of environmental, social, and governance (ESG) practices.
The Canadian company would have rewarded investors over the last five years with a gain of over 200%. But that gain has come with a lot of volatility. And even at its peak of just over $7 in 2017, IAG stock was still more than 200% off its all-time high.
So what makes the stock compelling? The company recently announced that it was commencing construction on a mining project in Ontario. The Cote Gold project will, in the estimate of at least one analyst, boost the company’s gold production and net asset value (NAV) up to 50% by 2024.
Iamgold also recently announced that it would be able to restart operations at its Rosebel Gold Mine after a shutdown brought on by the Covid-19 pandemic.
About IAMGOLD
IAMGOLD Corporation, through its subsidiaries, operates as an intermediate gold producer and developer in Canada and Burkina Faso. It owns 100% interest in the Westwood project that covers an area of 1,925 hectare and located in Quebec; a 60% interest in the Côté gold project, which covers an area of 596 square kilometer located in Ontario, Canada; and a 90% interests in the Essakane project that covers an area of 274,000 square kilometer situated in Burkina Faso.
Read More - Current Price
- $5.20
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 6 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $6.68 (28.5% Upside)
#7 - Vectors Gold Miners ETF (NYSEARCA:GDX)
Year-to-Date Gain: 41%
The last mining play isn’t a mining stock, but an ETF. These funds are an exceptional way to invest in a basket of gold mining stocks without having to take possession of the physical bullion (which is often not an option for investors). And one of the best funds for that purpose is the Vectors Gold Miners ETF (NYSEARCA: GDX).
One of the best parts of owning this ETF however is that Barrick Gold and Newmont (two of the stocks in this presentation) make up 30% of the ETFs weighting. That means that as the outlook for these two companies remains bullish so should the ETF.
In the 12 months ending in February 2020, the Vectors Gold Miners ETF delivered a total return of 32.6%, more than double that of the S&P 500. Since then, the ETF has brushed off the selloff in March and is now up over 40% on the year.
About VanEck Gold Miners ETF
The Fund seeks to match as closely as possible the price and yield performance of the AMEX Gold Miners Index. The Fund, utilizing a passive or indexing investment approach, attempts to approximate the investment performance of the Index by investing in a portfolio of stocks that generally replicate the Index.
- Current Price
- $34.73
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 4 Buy Ratings, 7 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $34.73 (0.0% Downside)
Gold has been climbing to levels not seen since 2013. And as the cost of the precious metal continues to climb, so too does the price of gold stocks. I can make a case that gold should be a part of every investor’s portfolio. But in volatile times, many investors flee to the safety of gold as part of the “Fear Trade”.
The fear trade is an amalgam of three fears that are prominent among investors. These are the fear of war, the fear of a recession, and the fear of the unknown.
And mining stocks, like the ones in this presentation, can be a great way to invest in that fear trade for two reasons. First, they provide investors with leverage. For example, if gold goes up another $100 from its current level, investors will get right around a 5% boost. That same $100 would increase the cash operating margin of a gold miner by a double-digit percentage.
Second, mining companies are always responding to broader market conditions. This means they can bring mines online or rein in costs as market conditions dictate. With physical gold, you have less protection on the downside.
The uncertainty in our economy is not just about the effects of the novel coronavirus. Remember, we’re still in an election year.
That means that gold looks like a solid bet for the rest of 2020, and maybe further than that.
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