There’s no getting around it. Inflation is going to be an unwelcome guest at our holiday gatherings this year. Estimates say this will be the most expensive Thanksgiving dinner in years. The Consumer Price Index (CPI) jumped 6.2% in October. That was the biggest surge in 30 years.
But the latest inflation data only confirmed what investors already knew. At least the ones that put gas in their cars or buy groceries. And yet, Washington continues to advocate even more spending. The latest “skinny” infrastructure bill will still pump over $1 trillion (that’s trillion with a “T”) into the economy. Even economists who would usually be favorably disposed to the current administration acknowledge that this will only cause inflation to increase.
That means it’s a good time to consider investing in precious metals which are considered to be safe-haven assets and a hedge against inflation. But that’s not the only reason to consider precious metals. You can also get some nice growth. Gold, for example, is up more than 300% in the past 15 years. And we would certainly advocate that you consider owning a bit of physical metals if you can.
However, buying precious metals stocks gives you exposure to many mining companies. As the spot price for the metals rises, it becomes more profitable for these companies to run their mining operations.
Quick Links
- Agnico Eagle Mines
- Barrick Gold
- Newmont Corporation
- First Majestic
- Freeport-McMoRan
- Platinum Group Metals
- Hecla Mining
#1 - Agnico Eagle Mines (NYSE:AEM)
One attribute to look for in any equity, but in precious metals stocks in particular, is a high floor. That’s a solid reason to look at Agnico Eagle Mines (NYSE:AEM). The company trades at a premium compared to other mining stocks. However, the company is widely seen as carrying a high upside with minimal risk to the downside.
But sound management is not the only one to consider the stock. Another catalyst for AEM stock is its pending mergerwith Kirkland Lake Gold (NYSE:KL). When the merger is complete, Agnico will be the third largest miner behind only Newmont Corporation and Barrick Gold.
This Canadian company has been mining gold and other precious metals since 1957. Analysts give the stock a consensus price target of $91.07 which gives the stock an upside of nearly 60% from its present price. The company has declared a dividend every year since 1983. The company’s annual dividend (paid quarterly) as of this writing is $1.40 which comes out to a yield of $2.46%.
About Agnico Eagle Mines
Agnico Eagle Mines Limited, a gold mining company, exploration, development, and production of precious metals. It explores for gold. The company's mines are located in Canada, Australia, Finland and Mexico, with exploration and development activities in Canada, Australia, Europe, Latin America, and the United States.
Read More - Current Price
- $77.15
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 7 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $86.78 (12.5% Upside)
#2 - Barrick Gold (NYSE:GOLD)
If the rally in gold is really underway, then Barrick Gold (NYSE:GOLD) merits consideration. The Canadian multinational miner is engaged in the production and sales of gold and copper. It has active gold and copper mining-related activities in the United States and Canada.
GOLD stock is down for the year as the initial optimism about gold in the early part of the year evaporated. However, despite a series of analysts lowering their price targets for GOLD stock, it still presents investors with a potential 56% gain from its current level.
In a similar dynamic that occurs with oil stocks, gold mining stocks become more attractive as the spot price of gold climbs. You can see that GOLD stock has had a correlation with the spot price. And both have been moving higher in the last month.
Barrick Gold reported earnings in mid-November and reported free cash flow of $481 million in addition to being able to save shareholders approximately $1.4 billion. And the company sustained its quarterly dividend at nine cents per share.
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
- $15.43
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 7 Buy Ratings, 5 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $24.82 (60.8% Upside)
#3 - Newmont Corporation (NYSE:NEM)
Newmont Corporation (NYSE:NEM) is the largest miner in the world and it has a premium stock price to support that. But are other gold stocks more worthy of your attention? You might think so, particularly after Newmont missed analysts’ expectations for earnings and revenue in its most recent quarter. But if you’re a risk-averse investor than the quality of NEM stock should come shining through.
In its most recent earnings report, Newmont reported 1.45 million ounces of gold production. Although that would put the company on pace to come in below 2020 production, the company still presented a bullish outlook that said it would extract 6.0 million ounces for the year.
However, like Barrick Gold, even with lowered expectations, NEM stock is still forecast to deliver strong 12-month price growth of over 23%. And that doesn’t include the sweetener investors get from the company’s dividend which currently nets out to $2.20 annually at an attractive yield of 3.83%.
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
- $37.11
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 9 Buy Ratings, 7 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $54.31 (46.3% Upside)
#4 - First Majestic (NYSE:AG)
The first three stocks on this list have been gold producers. And while there’s a case to be made for the yellow metal today, there may be an even stronger case for silver. Which brings us to First Majestic (NYSE:AG). After spiking at the beginning of the year, AG stock has been a laggard. But simple supply/demand dynamics make a strong case for a move higher.
If you look at the recent infrastructure bill that is likely to pass through Congress, you’ll see an emphasis on electric vehicles and solar technology. These are two sectors that will continue to have strong demand for silver. In fact, according to data provided by the company, 57% of silver consumption comes from industrial applications.
First Majestic is also the only mining company that makes their own production available in the form of silver bullion. The company’s Bullion Store is open 24/7 for online ordering. Analysts give AG stock a consensus price target of $21 which would be a 54.87% gain from its current level.
About First Majestic Silver
First Majestic Silver Corp. engages in the acquisition, exploration, development, and production of mineral properties with a focus on silver and gold production in North America. Its projects include the San Dimas mine covering an area of approximately 71,867 hectares located in Durango State, Mexico; the Santa Elena that covers an area of approximately 102,244 hectares located in Sonora State, México; and the La Encantada covering an area of approximately 4,076 hectares located in Coahuila State, México.
Read More - Current Price
- $5.41
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 1 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $7.50 (38.6% Upside)
#5 - Freeport-McMoRan (NYSE:FCX)
Up to this point, the stocks we’ve looked at are down for the year. That’s not the case with Freeport-McMoRan (NYSE:FCX). The stock is up 42% this year. This is largely due to the rally in copper prices which tends to move higher in times of economic growth.
And the company’s assets include the Grasberg minerals district in Indonesia. This area has one of the world’s largest copper and gold deposits. With the demand for copper likely to increase with the U.S. infrastructure plan including the need for copper in electric vehicles, the company is likely to have a catalyst well into 2022.
Freeport-McMoRan last reported earnings in October and delivered a split decision with an earnings beat, but a slight revenue miss. The consensus price target of analysts suggests that the rally could be coming to an end. However, recent price targets are much higher than the consensus estimate.
About Freeport-McMoRan
Freeport-McMoRan Inc engages in the mining of mineral properties in North America, South America, and Indonesia. It primarily explores for copper, gold, molybdenum, silver, and other metals. The company's assets include the Grasberg minerals district in Indonesia; Morenci, Bagdad, Safford, Sierrita, and Miami in Arizona; Chino and Tyrone in New Mexico; and Henderson and Climax in Colorado, North America, as well as Cerro Verde in Peru and El Abra in Chile.
Read More - Current Price
- $38.05
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 8 Buy Ratings, 5 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $53.92 (41.7% Upside)
#6 - Platinum Group Metals (NYSE:PLG)
Under the heading of all that glitters is not necessarily gold, investors should consider investing in Platinum Group Metals (NYSEAMERICAN:PLG). This could classify for some as a penny stock, but it’s an intriguing play for investors interested in investing in platinum and palladium.
This past summer, the company received a new patent for technology that is designed to accelerate the development of “next generation” lithium-sulphur batteries. These batteries aren’t drawing as much attention as lithium-ion batteries, but they have the potential to increase the power-to-weight ratios. To that end, the company is researching ways its proprietary technology may boost the performance of lithium-ion batteries.
After a strong 2020 in which the company benefited from increased demand for both metals, PLG stock has taken a beating in 2021. But in the last month, the stock has rallied 19%. With a beta of 1.99, this is a volatile and speculative stock. However, as a play on what is likely to be an extended rally in precious metals, it should be on your watch list.
About Platinum Group Metals
Platinum Group Metals Ltd. engages in the exploration and development of platinum and palladium properties. It explores for palladium, platinum, gold, copper, nickel, and rhodium deposits. The company holds 50.02% interest in the Waterberg project located on the Northern Limb of the Bushveld Igneous Complex, South Africa.
Read More - Current Price
- $1.28
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#7 - Hecla Mining (NYSE:HL)
Closing out our list of precious metals stocks is Hecla Mining (NYSE:HL). This company is a pure-play on silver mining. In fact, the company produces approximately one-third of all silver mined in the United States. One of the company’s primary assets is the Greens Creek mine in Alaska. This is one of the largest silver mines in the world and helps the company generate significant cash flow.
Hecla Mining draws a surprising amount of interest from the analyst community. The consensus of six analysts is for HL stock to climb 22.58% above its current price. It should encourage investors that even after a disappointing earnings report in November, HL stock has climbed 7%.
That is likely because the company forecasts that production at one of its other assets, the Lucky Friday mine will double between 2020 and 2023. And with the price of silver rallying since the end of September, this should boost the company’s top and bottom lines in subsequent quarters.
About Hecla Mining
Hecla Mining Company, together with its subsidiaries, provides precious and base metal properties in the United States, Canada, Japan, Korea, and China. The company mines for silver, gold, lead, and zinc concentrates, as well as carbon material containing silver and gold for custom smelters, metal traders, and third-party processors; and doré containing silver and gold.
Read More - Current Price
- $4.90
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 4 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $7.94 (62.0% Upside)
There is a sentiment among many retail investors that precious metals are yesterday’s news. In their minds, the real hedge against inflation is cryptocurrency. They may be right. We’re inclined to believe both will be quite effective. Let’s just agree that a growing cryptocurrency market doesn’t change the value of precious metals. They are a proven store of value against inflation.
A “typical” precious metals portfolio will give investors exposure to gold, silver, platinum, and palladium. The latter two are used in many of the sectors that will drive the economy forward. And that’s what we’ve tried to provide in this presentation. And it’s often theorized that one or more precious metals is always in a bull market.
Investors who don’t want to invest in a single metal or any single company (like the ones in this presentation) may consider one of the many precious metals exchange-traded funds that focus on precious metals. If you choose this alternative, you may have to pick one or more funds as many funds are specific to a particular metal.
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