7 gold stocks to buy amid heightened market fears
As market concerns rise to the fore, investors are inherently looking for protection, which bodes well for gold stocks to buy. To be fair, the yellow metal has historically drawn criticism because, in the end, it’s just a commodity. Gold does not hire workers, it does not generate income and above all, it has a return (passive income) of 0%. What good is it in these difficult times?
Well, with fears of a banking contagion spreading to other parts of the global economy, investors shouldn’t be quick to dismiss gold stocks to buy. The development of this specific mining sector is an asset that offers intrinsic value. Basically, no matter where you go, gold will often have great value. Also, gold obviously carries physical mass – it’s not going to disappear arbitrarily. Finally, mining companies offer an important convenience compared to transporting investment bricks. With that in mind, below are gold stocks to buy amid heightened market fears.
|BPM||Wheaton Precious Metals||$46.15|
Wheaton Precious Metals (WPM)
A Canadian multinational, Wheaton Precious Metals (NYSE:BPM) represents a precious metals streaming company. According to its public profile, Wheaton produces over 26 million ounces and sells over 29 million ounces of silver mined by other companies as a by-product of their core operations. Of course, it also occupies an important place in the gold production market.
What gold stock investors to buy will appreciate about WPM centers on operational predictability. With streaming, participants understand the costs associated with streaming contracts in advance, which limits variability. Specifically, Wheaton enjoys a three-year EBITDA growth rate of 34.2%. In addition, its net margin is 63.19%. Both stats, especially the last one, rank in the top half of the underlying industry.
In terms of passive income, Wheaton isn’t the most generous with a forward yield of 1.32%. However, it pays one with a low payout ratio of 44.53%, which makes it easier to trust the sustainability of returns. Finally, Wall Street analysts view WPM as a strong consensus buy. Their average price target is $47.97, implying 6% upside potential.
Royal Gold (RGLD)
Another company specializing in the streaming business model, royal gold (NASDAQ:GDPR) also runs a royalty business. According to its public profile, Royal Gold has an extensive portfolio of streams and royalties in the production, development, appraisal and exploration stage on properties located in some of the most prolific gold regions in the world.
As with Wheaton Precious Metals, Royal Gold enjoys greater predictability relative to pure gold stocks to buy. With parties signing contracts whose terms are disclosed in advance, RGLD offers at least a modicum of investor confidence. Specifically, Royal’s three-year revenue growth rate is 12.5%, outpacing the competition’s 63.35%. Moreover, its growth rate of the book over the same period is 8.6%, a figure higher than the average.
Now, Royal doesn’t offer the best forward yield at 1.2%. However, the company achieves 21 consecutive years of annual dividend increases. Finally, hedging analysts rate RGLD as a consensus Moderate Buy. Their average price target is $134.67, implying more than 7% upside potential.
Based in Toronto, Ontario, Franco-Nevada (NYSE:FNV) is another Canadian gold royalty and streaming company. While many stocks stumbled during the banking sector fallout, FNV (and other gold stocks to buy) performed remarkably well. For example, in the previous week, FNV gained more than 5% in equity value. And although it’s down over the previous year, FNV’s recent performance could reverse the losses.
Again, like the top two gold stocks to buy, Franco-Nevada benefits from the predictability of its business. Better yet, it pays. For example, the company’s three-year revenue growth rate is 16.2%, higher than the industry’s 82.76%. Moreover, its EBITDA growth rate over the same period is 18.5%, ahead of 78.1% of players in the sector. Moreover, the company’s net margin is 53.21%, which is extremely high. Unfortunately, the forward yield here is only 0.95%. I guess it’s better than nothing.
On a closing note, coverage analysts rate FNV as a consensus Moderate Buy. Moreover, their average price target is $160.58, implying a 12% upside potential.
Based in Greenwood Village, Colorado, Newmont (NYSE:NMS) holds the distinction of being the largest gold mining company in the world. As with other gold stocks to buy, life has been good for Newmont while other investment categories have suffered. Over the past week, NEM has gained nearly 11%, an excellent number, especially for such a large company. Although it has fallen sharply over the past 365 days, these could be interesting days for Newmont.
Financially, the company brings a mix of financial metrics, some good, some not so good. For the bad news, Newmont has struggled throughout the new normal, resulting in a negative three-year EBITDA growth rate. However, on the positive side, Newmont shows an operating margin of 13.47%, exceeding 69% of the field.
Another reason to consider NEM as one of the gold stocks to buy centers around the underlying passive income. Currently, Newmont’s forward yield is 3.32%, which is above the materials sector average yield of 2.82%. In conclusion, Wall Street analysts view NEM as a consensus Moderate Buy. Moreover, their average price target stands at $54.70, implying nearly 14% upside potential.
Gold Barrick (GOLD)
A mining company that produces gold and copper, Barrick Gold (NYSE:GOLD) has 16 operating sites in 13 countries. Due to its commodity portfolio, Barrick offers flexibility in which gold stocks to buy. Those primarily concerned about the fallout from the banking sector can drive GOLD stocks higher. On the other hand, copper production bodes well for buoyant sectors such as electric vehicles.
Carrying a similar profile to Newmont, Barrick offers a mixed bag financially. Again, the company suffered during the post-coronavirus new normal, resulting in a negative entry for its three-year EBITDA growth rate. On the other hand, buy gold stock investors will likely appreciate Barrick’s operating margin of 27.25%. This metric exceeds 85% of the competition. Interestingly, Barrick has a decent forward yield at 2.21%. In addition, its payout ratio is 39.44%. As far as Wall Street is concerned, analysts see GOLD as a consensus Moderate Buy. Moreover, their average price target stands at $21.74, implying a 20% upside potential.
Centerra Gold (CGAU)
A Canadian mining company, Centerra Gold (NYSE:CGAU) owns and operates the Mount Milligan copper-gold mine in British Columbia, Canada, and the Öksüt gold mine in Turkey. Given the excitement surrounding the purchase of gold stocks, CGAU has largely benefited. Last week it gained almost 3%. For the year so far, it has managed to climb almost 19%.
In all fairness, over the past 365 days, CGAU has fallen by 34%, making this a high-risk proposition. Still, contrarian investors might consider spinning the stock with funds earmarked for speculation. Most notably, Centerra benefits from a strong balance sheet. In particular, its debt-to-EBITDA ratio is 0.25x, well below the industry median of 1.53x.
Also, Centerra seems undervalued. Currently, the market is valuing CGAU at an accounting multiple of 0.77. As a discount to book value, the company ranks better than 80% of the competition. Looking to the street, analysts covering Centerra shares are a consensus Moderate Buy. Moreover, their average price target stands at $7.75, implying nearly 22% upside potential.
Sibanye Stillwater (SBSW)
Based in resource-rich South Africa, Sibanye Stillwater (NYSE:SBSW) arguably offers the most upside potential among gold stocks to buy here. However, it is also one of the riskiest businesses you can engage in, which means investors should take proper precautions. With Sibanye, it is not just the volatility of the underlying assets that is the problem. Increasingly, issues such as labor strikes are hampering progress.
As proof, look no further than the one-year loss of 53% of SBSW’s equity value. To complicate matters, since the start of the year, Sibanye has fallen almost 24%. To pour salt on open wounds, investment resource Gurufocus warns its readers that the gold miner could be a possible value trap. At the other end, the company’s three-year revenue growth rate is 20%, higher than the industry’s 79.19%. Moreover, its net margin stands at 13.3%, beating 76% of its peers. Finally, Wall Street analysts rate SBSW as a consensus Moderate Buy. Moreover, their average price target stands at $12.28, implying more than 48% upside potential.
As of the date of publication, Josh Enomoto had no position (directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.