October has been a choppy month so far, forcing long-term investors to seek potentially safer assets, such as gold and silver stocks. Over the past month, the Dow Jones Industrial Average (DJIA) is up 0.4%, while the S&P 500 index and Nasdaq 100 are down 1.5% and 3.4% respectively. As a result, tailwinds for gold and silver stocks have become strong.
After all, as most InvestorPlace.com readers probably know, gold typically has a low correlation with equities.
After an extended stock market rally, a correction seems to be on the horizon. Retail sales are down, China’s economy is slowing down, and many consumer goods remain in short supply due to the pandemic-induced disruptions in the global supply chain. As inflation goes up, markets are also getting ready for interest rate hikes.
While investors cannot foresee the specific date of a market decline, they can still prepare for one. In this context, gold and silver stocks could be valuable hedges.
The gold price is typically quoted by the ounce in U.S. dollars. In August 2020, it saw record highs and went above $2,050 per troy ounce. Now, it is hovering around $1,750.
By comparison, in August 2020, the price of silver hit multi-year highs and went over $30 per ounce. As I write, it is slightly above $22.50.
With the volatile market, the ongoing pandemic and rising inflation, October might be the right time to look at an asset class that’s home to many deeply discounted value stocks. However, adding gold and silver stocks to a portfolio should be viewed more as a diversification tool than a way to time the highs and lows of the overall stock market. Thus, a modest-size investment and long-term commitment to one or several of these stocks may be the best course of action.
With that information, here is a list of seven gold and silver stocks that should gain traction in the coming months:
- Barrick Gold (NYSE:GOLD)
- Hecla Mining (NYSE:HL)
- Kinross Gold (NYSE:KGC)
- Pan American Silver (NASDAQ:PAAS)
- Sibanye Stillwater (NYSE:SBSW)
- SSR Mining (NASDAQ:SSRM)
- VanEck Gold Miners ETF (NYSEARCA:GDX)
Gold and Silver Stocks: Barrick Gold (GOLD)
52 week range: $17.56 – $29.60
Based in Toronto, Barrick Gold is one of the largest gold producers worldwide, operating mines in North America, South America, Africa, and the Middle East. In 2020, the firm delivered 4.8 million ounces of gold while generating $12.6 billion in total revenue.
Barrick Gold issued Q2 results in early August. Revenue declined 5% year-over-year (YOY) to $2.9 billion. Adjusted net earnings came in at $513 million, or 29 cents per diluted share, compared to adjusted net earnings of $415 million, or 23 cents per diluted share, in the prior-year quarter. Cash and equivalents ended the quarter at $5.1 billion.
On the results, CEO Mark Bristow remarked, “We’re constantly pumping new prospects into a development and project pipeline which already contains Goldrush, Fourmile and Robertson in Nevada, Donlin in Alaska, as well as new Loulo-Gounkoto and Kibali targets in Africa.”
The miner generated record free cash flow of $3.4 billion in 2020. Now, with over $5 billion in cash and equivalents, the company has abundant financial resources to operate through fluctuations in gold prices. Management is forecasting stable gold deliveries that should average 4.5 million ounces per year.
Barrick stock has been more volatile than many of its peers. GOLD stock hovers at $18, down almost 20% YTD. The dip in price offers an attractive opportunity for long-term investors. Shares trade at 14.7x forward earnings and 2.6x trailing sales.
Hecla Mining (HL)
52 week range: $4.32 – $9.44
Hecla Mining is a leading player among the silver stocks, producing approximately one-third of all silver mined in the U.S. Its primary silver mines include Idaho-based Lucky Friday and Greens Creek in Alaska.
The miner issued Q2 results in early August. Revenue surged 31% YOY to $218 million. Net income came in at $785,000, compared to a net loss of $14 million in the previous year. It generated $54 million in free cash flow. The company boasts a strong balance sheet with $181 million in cash.
Hecla Mining is a pure-play silver mining stock for long-term investors looking for exposure to a precious metals bull market. The Greens Creek mine in Alaska is one of the largest and lowest-cost silver mines worldwide, generating significant cash flow.
Moreover, production at the Lucky Friday mine is forecast to more than double between 2020 and 2023. Lucky Friday’s return to full production capacity would…
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