9 Gold Stocks To Stave Off Coronavirus-Induced Volatility

| May 14, 2020
gold stocks

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There’s no quarantining gold fever

[Editor’s note: “9 Gold Stocks to Stave Off Coronavirus-Induced Volatility” is regularly updated to include the most relevant information available.]

As the Bureau of Labor Statistics recently revealed, a shocking 20.5 million Americans have lost their jobs, translating to a depression-level 14.7% unemployment rate. Therefore, the idea of a quick, V-shaped recovery seems remote. However, this period is also a boon for precious metals. That’s because — if we’re being quite honest — nothing glitters like gold during times of turmoil. As a result, some have turned their attention to gold stocks.

Personally, I believe physical gold is good to own as a safeguard for your portfolio. No, I’m not suggesting an underground bunker full of the stuff like some ardent proponents of precious metals. But a modest exposure can go a long way.

That said, I understand the drawbacks of gold bullion. Primarily, as physical assets, they’re not at all convenient. Further, if you decide to diversify your metal holdings with cheaper commodities like silver, they can become rather unwieldy. With gold stocks, they’re just like any other equity position you own, meaning storage and security are virtually non-issues.

Furthermore, gold stocks can fly far higher than holding the physical asset. Better yet, you can choose your risk-reward profile. For instance, you may allocate most of your precious metal positions in large-capitalization miners, while throwing in some “stupid money” funds toward junior mining companies.

Of course, this sector has huge risks. For some time, the mining complex failed to rise based on the fundamentals. But with the irrationality that we’re witnessing in the markets, I believe the longer-term narrative for is very positive for these nine gold stocks:

  • Barrick Gold (NYSE:GOLD)
  • Agnico Eagle Mines (NYSE:AEM)
  • Wheaton Precious Metals (NYSE:WPM)
  • Sibanye Stillwater (NYSE:SBSW)
  • Coeur Mining (NYSE:CDE)
  • Hecla Mining (NYSE:HL)
  • Americas Gold and Silver (NYSEMKT:USAS)
  • Great Bear Resources (OTCMKTS:GTBAF)
  • Revival Gold (OTCMKTS:RVLGF)

Gold Stocks: Barrick Gold (GOLD)

One of the biggest gold stocks by market cap, Barrick is a great anchor to have for your precious metal portfolio. Since the start of the year, GOLD stock is up nearly 40% despite some rumblings in the currency market taking some shine off the underlying asset.

First, as a major institution within the mining industry, GOLD stock is likely to offer you a relatively evenhanded exposure to daily gold fluctuations. Fundamentally, the underlying company has been making significant progress. For instance, in its fourth quarter of 2019 earnings report, Barrick rang up revenue of $2.88 billion, up over 51% year-over-year. Plus, it carried positive momentum into Q1 2020, which saw Barrick post per-share earnings that were in line with analysts’ expectations.

Second, despite the choppiness, GOLD stock has been trending nicely on a bullish channel in place since last November. With fear not only ramping up due to the coronavirus but also because of economic uncertainty, Barrick Gold should perform quite well this year.

Gold Stocks: Agnico Eagle Mines (AEM)

Another one of the big players among gold stocks, Agnico Eagle should have enjoyed a better start to 2020. In its Q4 2019 earnings report, Agnico Eagle delivered adjusted earnings per share of 37 cents. Additionally, the miner generated top-line sales of $753.1 million, which was up 40% against the year-ago quarter. Both figures beat covering analysts’ consensus targets.

Unfortunately, management guided down their expectations for gold production for the year. Instead of 1.9 million to 2 million ounces, the leadership team anticipates 1.875 million ounces. That sent AEM stock down in a hurry.

However, with the company’s most recent Q1 2020 earnings report, AEM stock received a much better response. EPS was 23 cents, up 3 cents from the consensus estimate, while revenue was $671.9 million, comfortably above the consensus of $652.5 million.

Include the fear factor and you have a much stronger case now for AEM stock.

Gold Stocks: Wheaton Precious Metals (WPM)

In my opinion, no portfolio of gold stocks to buy is complete without mentioning companies like Wheaton Precious Metals. Unlike traditional mining units, Wheaton uses a streaming business model. Rather than mine for metals themselves, WPM buys out a mining company’s production (either part or whole) at predetermined prices. As a result, this makes WPM stock far more stable than traditional mining investments.

Of course, this situation works the opposite way as well. If gold explodes into a mania, WPM stock is unlikely to skyrocket with its peers (although it’s proving to be very robust right now). Currently, speculators are gambling that we’ll see an enormous sentiment lift. For instance, China’s government has been busy bolstering their gold reserves, while other nations have been lackadaisical in this department.

Still, this business of gold is a cruel one. Thus, WPM stock gives you a little more stability in a very wild market.

Gold Stocks: Sibanye Stillwater (SBSW)

As the largest individual gold producer in South Africa, Sibanye Stillwater is one of the most popular gold stocks. Certainly, it doesn’t hurt that the underlining country features an abundance of riches. Therefore, I consider the current volatility — though admittedly steep — in SBSW stock a buying opportunity.

Contributing to the red ink, though, is the drama surrounding palladium. Rather quietly, palladium exploded to become the most expensive precious metal — well higher than gold, platinum and silver. A major reason for this is that the metal is very strategic as many industries utilize it for their products.

But with the global economy in turmoil, the palladium price has been all over the place; hence, the extreme volatility of SBSW, making it riskier than other gold stocks. Nevertheless, palladium’s relevance to the electronics industry should eventually bolster demand.

Additionally, Sibanye is the world’s largest primary producer of platinum. Interestingly, the U.S. is apparently running short of this precious metal. Thus, you may want to consider SBSW stock, if you can handle the heat.

Coeur Mining (CDE)

As one of the mid-tier gold stocks, Coeur typically would offer you a balance between upside rewards and downside mitigation. However, this year, it’s all red ink, with CDE stock plummeting 52%. Admittedly, this isn’t what I was hoping for. On the flipside, though, it does offer a compelling entry point given the positive environment for gold.

As with other mining companies, analysts didn’t like the mixed bag that Coeur delivered in terms of metals produced. On certain projects, lower ore crushing rates led to overall lower production. However, management invested in higher-capacity machinery which should resolve these challenges. Therefore, it’s possible that CDE stock could get back on the Street’s good graces.

For now, shares are at a crazy discount, returning to levels seen back in June 2019. Plus, with other gold stocks rising on economic fears, CDE could potentially hitch a ride back up.

Hecla Mining (HL)

Another popular mid-tier name, several investors were optimistic about Hecla heading into the new year. In the final calendar quarter of 2019, HL stock nearly doubled in value. Early in January, management seemingly justified that optimism with strong production figures: silver production was up 22% and gold was up 4%. Unfortunately, “seemingly” is the operative word here.

When the company released its actual results for the quarter ending Dec. 31, Wall Street wasn’t quite so impressed. Despite revenue growth of 68% YOY to $236.3 million, Hecla still inked a net income loss of $8 million. Basically, the organization is not as efficient as other miners. And that’s worrisome given that this is a positive environment for gold stocks.

Moreover, the Covid-19 pandemic impacted operations, though Hecla was able to keep its key mines operation. In its disclosure for its most recent Q1 2020 earnings report, management expects a stronger output as operations normalize. Though HL stock remains a very speculative bet, the positive environment for precious metals may make this a worthwhile idea.

Americas Gold and Silver (USAS)

For the last three gold stocks on this list, I’m going to focus my attention on the junior miners. Fair warning: these are extremely speculative names, so please don’t go crazy on them.

First up is Americas Gold and Silver. One of the more promising of the small miners, USAS stock experienced a strong run up in December. However, as we rang in the new year, shares slowed, then became downright volatile, beginning in February. Unfortunately, disappointing financial results negatively impacted the equity valuation.

Due to a recapitalization plan at one of Americas Gold and Silver’s projects, production for certain metals were down for the year. Furthermore, expenses related to mining industrial metals increased, impeding earnings.

On the positive side, the company expects to see big increases from the addition of a new project. Therefore, USAS stock might appeal for the risk takers.

Great Bear Resources (GTBAF)

Although one of the most bullish small-cap gold stocks of last year, between late February to mid-March, Great Bear Resources lived up to its name. Now, it’s one of the high-flying names among the speculative junior miners.

Essentially, much uncertainty exists among lesser-known gold stocks. Frankly, Great Bear is an extremely speculative belt, fueled in part by fundamentals and hope. However, the fundamentals encompass a 100% royalty-free interest in the Dixie project. This is an area known for high-grade gold and is situated very close to the renowned Red Lake gold district.

Will Dixie turn into another Red Lake, which has produced roughly 30 million ounces of gold? Obviously, no one knows for sure. But that is the compelling story driving GTBDF stock. Factor in the broader economic turmoil and the narrative – while still risky – becomes even more attractive.

Revival Gold (RVLGF)

If you want a junior miner that isn’t completely nuts, take a look at Revival Gold. Currently, Revival Gold has interests in three projects: Beartrack, Arnett Creek Gold and Diamond Mountain Phosphate. According to their website, management is interested in pursuing other exploration and development opportunities, which may entail mergers and acquisitions.

For now, RVLGF stock is a gamble that these projects will develop according to plan. Naturally, this is a huge risk. However, shares have traded sideways — albeit in choppy fashion — since the spring of 2018. To me, this implies that the markets are reserving judgment.

I suppose no bad news is good news for RVLGF stock. While I’d like to give a more convincing argument, this is the nature of junior mining investments. Enjoy!

Note: A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he is long the precious metals mentioned in this article.

 

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Category: Commodities, Stocks

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