9 Ways to Invest in Precious Metals

The recent pullback in gold has not deterred the sector bulls; many still consider gold and silver to be important hedges against economic and market volatility. Several contributors to MoneyShow.com offer their top current ideas for investors seeking exposure to gold & silver. Adrian Day, Global Analyst As a group, the gold producers, developers and exploration stocks are very undervalued today, including the major mining companies. Gold stocks have been lagging bullion since 2011, and the gap continues to be wide. In fact, the gap between gold and gold stocks is wider today than it ever has been. If you are bullish on gold, you should be even more bullish on gold stocks. More important than mere price is value. If we look at valuations, the story is even more compelling. On every valuation metric, the gold stocks today, despite record gold prices, are in the lowest quartile on a historical basis. On a price-to-book value, the gold stocks over the past five years have traded at the lowest multiples ever. Even more compelling is price-to-cash flow: other than the last quarter of 2018, the gold stocks have never been cheaper! If I were to buy four gold and silver companies today, to hold for the next three or more years, what would be those companies be? In this list, I am, less concerned about a stock's price today; we are buying companies rather than stocks. On that basis, here are my top gold and silver stocks. First, Franco Nevada is the largest of the royalty companies. We favor over Royal because it has a strong balance sheet; a more diversified revenue base; and a deeper pipeline. Second would be Barrick Gold . I favor Barrick the world's second-largest gold miners over Newmont , #1, because of better management, stronger balance sheet, and higher free-cash flow. Agnico-Eagle Mines Ltd. along with Barrick, is my favorite of the big-cap miners. With a focus on Canada, it has first-rate management, a solid balance sheet, a good pipeline, and spends money on exploration and alliances with exploration companies. Lastly, Pan American Silver , the largest of the silver producers outside of Mexico, with a diversified asset base, strong balance sheet, and two high-potential assets (acquired from troubled companies), either one of which could add significantly to the company's production and NAV. Now, as an investor or trader, we would not necessarily buy each of these at today's price. But, if you want to buy four great companies and hold for the next few years, this basket represents the best of the best. In addition to this package of large cap mining stocks, if you want to add a smaller company with high potential, we would pick Fortuna Silver , a growing gold and silver company, which is very undervalued relative to other silver miners. Frank Curzio, Venture Opportunities I first recommended First Majestic Silver in July of 2019 when silver prices started breaking out above key resistance levels (then above $16 per ounce), kicking off another bull market. A significant reason for our decision to invest in First Majestic Silver was based on its CEO, Keith Neumeyer, who is one of smartest people in the resource business. He's able to make tough decisions and understands the long-term game. When silver prices crashed (along with everything else) in March, he stopped selling silver ounces and waited for higher prices. This is just one example of his incredible leadership. He understands when to push ahead and when to hold off on any actions. Speaking of action, on Sept. 10, AG announced it entered into an agreement with Eric Sprott. Long-time readers of our newsletter know that Eric is one of the best investors in the mining business. And he's buying five million shares at C$15.60 (roughly $11.72 U.S.). It's always great to see big investors take large stakes at higher prices than we do. Governments all over the world are hell-bent on printing money and propping up economies at all costs. And in a zero percent interest rate world, hard commodities like silver will continue to shine as fears of inflation take hold and investors looks to preserve value. In sum, I expect the bull market in silver to continue -- and that AG will be one of the biggest beneficiaries. Take the recent pullback in opportunity to add to your position. Eddy Elfenbein, Growth Stock Advisor By historical standards, gold is still under-owned; global investors now have about 3% of their assets in gold, which is half the size of allocations in 1980. And gold-backed ETFs represent only 2.5% of global ETF holdings. This compares with 10% back in 2011 when gold hit its prior peak. Some of the world's most prominent investors have turned into gold supporters. In a letter to investors in May, Paul Tudor Jones of Tudor Investment Corp said a simple ratio tracking the value of gold above the ground to global money supply suggests its price could reach $2,400 an ounce. There is a long and fast-growing list of many of the world's wealthiest investors who are eagerly buying gold and gold stocks right now. This list includes such legendary billionaires as Ray Dalio, who runs the world's biggest hedge fund, Bridgewater; John Paulson, who made billions shorting subprime in the financial crisis; Ken Griffin, founder of hedge fund Citadel; David Einhorn of hedge fund Greenlight Capital; and former real estate mogul Sam Zell of Equity Group Investments. And then there is Warren Buffett. In August, Buffett's Berkshire Hathaway announced it had purchased a $565 million position in Barrick Gold . Why did he do this after scorning gold for so many years? I think Buffett's change of heart was due to the combination of our government borrowing heavily and the Federal Reserve printing a seemingly infinite amount of money. Another factor at play here is that Buffett likes companies that pay rising dividends. And Barrick fits that description. In fact, Barrick has been growing its dividend over the past 10 years. In August, the company hiked its dividend by 14% to $0.08 per share. That stands in stark contrast to hundreds of other companies that have had to suspend or reduce their payouts due to the pandemic. Barrick is well positioned after its 2019 merger with the major African gold producer, Randgold. It has the greatest concentration of Tier 1 gold assets in the industry, so let's follow Buffett and buy the second-biggest gold producer in the world. Purchase the shares up to $37 a share. Frank Holmes, US Global Investor's Frank Talk Gold bullion is now down about 10 percent from its high of $2,075, putting it in correction territory. I've already seen numerous headlines questioning whether this is the end of the gold rally. Hardly. Corrections such as this are normal and healthy. Gold is now more oversold on the short-term, 10-day relative strength index (RSI) than at any other time since the golden cross took place in January 2019. The last time the precious metal was this oversold, in mid-March, gold fell below not just its 50-day moving average but also its 200-day average. With real rates still negative (and likely to remain that way for some time longer), and unprecedented money-printing threatening to heat up inflation, I believe it only makes sense to buy the dips at this time. Gold and silver are in golden times right now, according to Randy Smallwood, the president and CEO of royalty streamer Wheaton Precious Metals . Wheaton is one of our favorite mining stocks. At present it pays out 30 percent of its cash flow in dividends, but this could rise to between 40 percent and 50 percent with higher metal prices, Randy says. Another royalty and streaming company we have our eye on is Maverix Metals , formed in 2016 after the company acquired a package of assets from Pan American Silver . Maverix has just entered into a binding purchase and sale agreement to buy a portfolio of 11 royalties from Newmont, including the Camino Rojo gold and silver project in Mexico. Raymond James has given the stock an Outperform rating, with a price target of C$7.50. We like the stock and, based on our quant stock-picking model, added it our portfolio.

9 Ways to Invest in Precious Metals

There is a long and fast-growing list of many of the world's wealthiest investors who are eagerly buying gold and gold stocks right now.

Columnist Conversation

This Weekend on Real Money

Thursday Morning Fibocall for 10/14/2021

Wednesday Morning Fibocall for 10/13/2021

COLUMNIST TWEETS

Please Join or Log In to manage and receive alerts.