If there’s one recent bright spot in this awful year we’re suffering, it’s that novel coronavirus cases appear to be on the decline. No, that’s not from some crackpot conspiracy website, but rather data from the Centers for Disease Control and Prevention. Perhaps in anticipation of a gradual return to normal, precious metals have sold off. However, this is no time to get complacent regarding gold stocks to buy.
First off, no one should get complacent with the pandemic; after all, that’s what helped contribute to the conflagration. Further, top health officials are warning that loosening restrictions too early could result in another flare up. However, this is a difficult proposition as Main Street’s economy has been battered. Probably, this disconnect with Wall Street’s record valuations can’t last indefinitely, bolstering the case for gold stocks to buy.
And this segues into my second point. Not only is the coronavirus a massive health threat, but it also threatens the sustainability of our long-term economic bullishness. In May, the Washington Post sounded the alarm, reporting that 100,000 small businesses have closed their doors permanently. By the end of this year, that tally could be increased substantially.
Since small businesses are truly the engine of the U.S. economy, that spells big trouble. In addition, they employ millions of Americans. With a second coronavirus relief bill still hanging in the balance, many devastated households are in limbo. Given this unprecedented uncertainty, these gold stocks to buy likely have significant room to run:
- Newmont Corporation (NYSE:NEM)
- Barrick Gold (NYSE:GOLD)
- Gold Fields (NYSE:GFI)
- Royal Gold (NASDAQ:RGLD)
- Franco-Nevada Corporation (NYSE:FNV)
- Wheaton Precious Metals (NYSE:WPM)
- Sandstorm Gold (NYSE:SAND)
- Fosterville South Exploration (OTCMKTS:FSXLF)
- Paramount Gold Nevada (AMEX:PZG)
Finally, to have confidence in the precious metals’ narrative, you only need to look at one statistic: gun sales. Previously, I’ve discussed the mad rush for firearms. And there’s nothing in sight that would suggest that this demand will wane anytime soon. That’s a huge signal that something isn’t right, which benefits these gold stocks to buy.
Newmont Corporation (NEM)
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Armed with a market capitalization of over $52 billion, Newmont Corporation consistently ranks as one of the leading gold stocks to buy. According to Newmont’s website, the company has “the largest gold reserve base in the industry.” This fact established a simple dynamic for why you should consider NEM stock: it tracks the price of gold reasonably well.
If you listen to advocates of precious metals, many if not most will argue that you should have at least some exposure to physical bullion. While I believe this is sound advice, physical ownership has its many risks and inconveniences. Obviously, outright theft is a major concern. In addition, precious metals are dense and if you have lower priced metals like silver, storage can be an issue.
With NEM stock, you eliminate virtually all of the inconveniences associated with physical ownership. As well, you’re investing into a productive venture, not just a commodity.
Barrick Gold (GOLD)
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Constantly swapping the top spot with Newmont is Barrick Gold. Also sporting a $52 billion-plus market cap, GOLD stock has been a solid choice for those wanting a reliable name in the industry. However, if you’re also a fan of Warren Buffett of Berkshire Hathaway (NYSE:BRK.B) fame, you may want to take a closer look at Barrick.
Recently, Berkshire made waves when it announced a 20.9 million-share stake in GOLD stock, worth $564 million. Frankly, this is more significant than many people realize. After all, it was the Oracle of Omaha who once stated the following:
[Gold] gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.
I guess we’re now all scratching our heads! In all seriousness, Barrick CEO Mark Barstow replied that it’s the “ultimate privilege to have Berkshire Hathaway as an investor…” If you’re looking for stable gold stocks to buy, keep Barrick on your must-watch list.
Gold Fields (GFI)
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One of the smaller of the big gold stocks, Gold Fields nevertheless commands a substantial presence with its nearly $11 billion market cap. More importantly, GFI stock is poised to do well in an environment that’s all but bullish for precious metals.
First, Gold Fields is literally operating in fields of gold – and no, I’m not referring to Sting’s music video. Rather, the company calls South Africa home, which is a huge source of the yellow metal, along with platinum and palladium.
Second, GFI stock skyrocketed from mid-June to end of July of this year, right when the U.S. saw a dramatic rise in daily new coronavirus cases. That tells me that GFI tracks sentiments of fear and uncertainty – exactly the tailwinds that support gold prices.
With the quieting of coronavirus cases recently, GFI has likewise sold off. However, this is likely temporary as 2020 is year of nasty surprises.
Royal Gold (RGLD)
As the name suggests, Royal Gold is in the business of gold royalties. As Royal’s website explains, is a “non-operating interest in a mining project that provides the right to a percentage of revenue or metal produced from the project after deducting specified costs, if any.”
In addition, RGLD stock is exposed to the streaming business model. The key difference is that in exchange for an upfront deposit payment, the streaming company has “the right to purchase all or a portion of one or more metals produced from a mine” at a pre-determined contractual price.
What makes Royal appealing compared to other gold stocks is mitigation of volatility. If a project encounters production issues for whatever reason, that could lever a detrimental impact to the underlying mining firm. However, with a royalty or streaming model, you can better predict your revenue and earnings trajectory.
On the flipside, this business model also mitigates RGLD from realizing potential upside. Still, the mining sector is a wild one. Therefore, Royal Gold represents a solid backstop for your portfolio.
Franco-Nevada Corporation (FNV)
Another dual royalty and streaming company, Franco-Nevada Corporation mitigates the risk of operating gold stocks. With the “indirect” royalty/streaming business model, FNV stock receives exposure to an exciting, relevant market but without much of the wildness associated with operators. Conservative investors appreciate that since they can better understand cost predictability.
Further, investors can also sit back and enjoy their dividends while watching the precious metals bull market play out. What might make FNV stock appealing relative to Royal Gold is that Franco-Nevada currently has no debt on its books. That’s not quite the same situation for Royal, which has $300 million of long-term debt as of the second quarter of 2020.
Finally, FNV stock is quite mobile for a royalty/streaming investment. Typically, such investments tend to lag other gold stocks noticeably. That’s not the case here, which will only support the optimism toward Franco-Nevada.
Wheaton Precious Metals (WPM)
Similar to Royal, Wheaton Precious Metals operates a streaming business model, one of the world’s largest in the precious metals industry. Wheaton has entered into streaming agreements (the right to purchase metals production in exchange for an upfront payment) “for 20 operating mines and 9 development stage projects.”
According to Wheaton’s website, the company’s portfolio features low-cost, long-life assets. So far, the market wholeheartedly agrees – WPM stock has been one of the best performing gold stocks this year. And that’s the compelling part about Wheaton. Ordinarily, you wouldn’t expect such robust upside from a streaming company which inherently mitigates gains.
However, the bullishness may continue as economic conditions have not yet recovered convincingly. For instance, initial weekly jobless claims for the week ending Aug. 15 jumped above one million after falling below the key threshold for the first time in the prior reporting week.
We’re not out of the woods yet, which cynically bodes well for WPM stock.
Sandstorm Gold (SAND)
For the final third of this list of gold stocks, I’m going to go with the spicier side of things. Ordinarily, speculative precious metal miners or streamers should be approached with an abundance of caution. Despite the rise in the metals, nothing has changed: you don’t want to bet the house on risky companies.
Still, a rising tide lifts all boats. With that in mind, I’d take a look at Sandstorm Gold and SAND stock. Its business model is similar to Royal Gold and Franco-Nevada, focusing on royalties. Again, this is a benefit to investors, particularly those who are more risk averse. By receiving a percentage of revenues generated or metals produced, Sandstorm can better predict its business.
Also, a major plus is that Sandstorm currently has no debt, signaling a fiscally responsible management team. If you’ve ever wanted to buy the next Franco-Nevada but at a lower price point, Sandstorm is a viable idea.
Fosterville South Exploration (FSXLF)
Admittedly, speculative gold stocks are sometimes akin to shots in the dark. In most cases, you just don’t know what you’re going to get, no matter how diligent your due diligence. But if you’re willing to take some risks with money you can afford to lose, you may want to consider Fosterville South Exploration.
Primarily, what makes FSXLF stock stand out is that the underlying company is located in the Fosterville area of southeastern Australia. Owned by Kirkland Lake Gold (NYSE:KL), Fosterville features the world’s highest-grade and lowest-cost gold mine. Here, Fosterville South Exploration owns three potentially viable gold projects.
Plus, you have to appreciate the broader fundamentals. In an email sent to me, Fosterville CEO Bryan Slusarchuk stated, “I’ve been in the gold business for a long time and there has never been a better set up for gold than present time. We are at the start of a once in a generation opportunity in gold. Gold is a store of wealth, a currency and also a hedge against uncertainty.”
There’s certainly plenty of uncertainty going on, which may further lift FSXLF stock.
Paramount Gold Nevada (PZG)
If you really want to dial up the risk in your portfolio of gold stocks, check out Paramount Gold Nevada. Straight up, PZG stock is unlike the other gold-based investments mentioned on this gallery in that this is all about potential. Yes, Paramount could skyrocket, but it could just as easily collapse.
The company has two main projects under its belt. First, Paramount owns a 100% interest in the Sleeper Gold Project, which according to its website is a “former high-grade open pit gold producer.” That’s a nice way of saying that Sleeper is an inactive mine. However, the investment thesis for PZG stock is that Paramount can extract whatever gold is remaining.
The other project is the Grassy Mountain Gold Project, located in eastern Oregon. According to a preliminary feasibility study, Paramount estimates that this area can produce 47,000 ounces of gold and 50,000 ounces of silver “over a 7.25 year mine life with a 2.5 year payback period.”
Currently, Paramount is not producing any gold. But if it does, PZG could fly.
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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.