Add Glitter to Your Portfolio With These 10 Gold Stocks

Gold stocks have pulled back as the overall stock market jumps higher. Nevertheless, several MoneyShow.com contributors continue to recommend exposure to gold for both diversification and as a safe haven against uncertainty. Several leading experts also like the outlook for silver stocks. Matthew Miller, CFRA Research's The Outlook Gold fundamentals arguably have never been stronger, as the Covid-19 pandemic (and the depressing reality of its economic damage) has led to an unprecedented amount of quantitative easing across the globe. CFRA Research thinks the rally in gold has only just begun and gold miners are the best way to play an appreciating gold price, given their leverage to gold price movements. Equity markets are attempting a strong bounce back from the steep declines in the first quarter,. However, there is a disconnect between the current recovery and the economic reality, and the recent strength in equities could be underestimating the risk of a subsequent outbreak of Covid-19 after economies restart. Gold is a great hedge against tail risk amid Covid-19. Below we have listed those gold miner stocks we believe carry positive implications at this time. Gold is a great hedge against tail risk amid Covid-19. Agnico-Eagle Mines Franco-Nevada Barrick Gold Kinross Gold Newmont Corporation Royal Gold Wheaton Precious Metals Unprecedented levels of quantitative easing and negative yields are bullish indicators for gold. The Federal Reserve's balance sheet has seen the fastest and largest expansion over the past two months, reaching a record $6.72 trillion, as of May 6. The Fed will likely need to do more to stimulate the economy and bond yields will likely continue to head lower, possibly even go negative. Higher gold prices and stable per-unit operating costs will likely drive meaningful free cash flow growth. When the gold bullion price moves, gold miners generally move in the same direction to the tune of 2x to 3x the price of underlying gold bullion. The major reason for this leverage to gold prices is the operating leverage that is achieved as a result of relatively stable cost structures. In our view, gold is the best hedge against economic uncertainty in general and, more specifically, against fiscal deficit, negative-yielding bonds, fiat currency debasement, and potential inflation. Mark Skousen, Forecasts & Strategies For years, gold mining stocks lagged gold, but now that sector is catching up. John Hathaway, co-manager of the Sprott Gold Equity Fund, said gold shares, in relation to bullion, are the cheapest they have been in his 20 years in the business. What astonishes me -- I'm an old value investor -- is that so many companies are generating free cash flow, and it is not hard to find companies with free cash flow yields of 10% or better, Hathaway said. Our favorite is B2Gold , the Toronto-based international mining company. It is up 20% since we recommended it a month ago. Last month, it reported record gold production, record revenues, record earnings and record cash flow for the first quarter. Gold production rose 25% and revenues climbed 44% to $380 million. And the future looks extremely bright, with estimated earnings expected to rise 234% this year! The company is so confident that it doubled its dividend from $0.01 to $0.02 per share. The yield is only 0.74%, but that's better than most mining stocks. Zacks has added it to its #1 buy category. Bernie Schaeffer, The Option Advisor Newmont Corp. has pulled back to its 30-day moving average in the last week, an area that coincides with the round year-over-year 100% return level. As the shares continue to retreat from doubling off their March intraday lows, there's reason to believe another rally could be imminent. Short interest is up 24% from its August 2019 lows, but has been declining since the beginning of 2020. Among options-related support, there's peak put open interest at the 69-strike, which could act as a magnet going forward. Echoing this, the security's open interest of 0.98 sits in the elevated 76th percentile of its annual range, suggesting short-term options players have not been more put-heavy during the past 12 months. In other words, there's a lot of options-related pessimism that could unwind and push the stock higher. Lastly, Newmont's technical readings suggest that options have been pricing in relatively low volatility expectations right now. Our recommendation for options traders is to buy the July 17, 2020 60-strike call. Adrian Day, Global Analyst The business model behind gold royalty streamers allows companies to benefit from rising precious metals prices without the risks of operating individual mines. Franco-Nevada -- the large-cap gold royalty streamer -- reported first-quarter earnings that were slightly better than expected, with Gold Equivalent Ounces (GEOs) up over 10% compared with a year ago. It has withdrawn its full-year guidance due to Covid-related the shutdown of some of its mines; about 30% of its production has been affected, primarily at Cobre Panama and Antamina. The timing of the restart in Panama is uncertain, though work is ongoing towards a restart. Another 11 assets had announced stoppages, though five of those have since resumed activities. In two signs of confidence however, Franco paid off its remaining $80 million in debt; the company has always been debt averse. And it increased its quarterly dividend by a penny to $0.26, for its 13th consecutive annual dividend increase. Both these moves contrast with most mining companies with have drawn down on the credit facilities and cut their dividends. Franco now has $200 million in cash with $1 billion undrawn on its revolver, and it has increased to $300 million the amount authorized under its ATM, the ability to issue small amounts of shares at the market, more than sufficient for any near-term transactions. Trading at 5.6x book, a price-to-cash flow of 40x, well above even Franco's historically rich valuations. Based on historical norms, Franco-Nevada is not cheap. But it belongs in every gold investor's portfolio. Osisko Gold Royalties had seen several mines had been hit by government-mandated lockdowns; Quebec has now lifted the restrictions and mines are ramping back up to steady production. This includes two mines on which its largest royalties are based -- Malartic and Eleonore. Osisko has a respectable balance sheet, with $158 million cash and over $300 million available on its credit line; net debt as of the end of the quarter stood at $265 million. It also has investments in juniors worth $250 million. After quarter end, it raised $85 million from a Quebec investment fund. Osisko's hybrid approach to the royalty model unquestionably adds risk. At the same time, the profile of its revenue generating assets is reasonably low risk, consisting primarily of royalties (not streams), with over 80% in gold, on primary gold mines (not by-products), mostly in Canada, and with a 91% cash margin. Given the recent stock price rally back to February highs, we are not chasing stocks here. But we would be buyers again on a pullback. Mike Larson, Safe Money Report Beyond the stock market, you can clearly see investors remain worried about the very real, very severe pain being inflicted on the economy. They're flocking to gold and mining shares, which are closing in on eight-year and seven-year highs, respectively. For exposure to precious metals miners, we recommend by adding a position to the VanEck Vectors Gold Miners ETF . With a relatively low expense ratio of 0.53%, total assets of around $13.7 billion and 50 of the world's largest mining firms on its holding list recently, GDX is truly the gold standard of mining ETFs. Top holdings include industry giants Newmont Corp. and Barrick Gold as well as royalty/streaming favorites like Wheaton Precious Metals and Franco-Nevada . Canada-based firms make up about 52% of the GDX, followed by U.S. miners at 20% and Australian firms at 13%. From a technical perspective, GDX spent the last several years carving out a massive rounded bottom pattern. It's now breaking out from that pattern, something that opens the door for a move back toward the old highs. Mike Cintolo, Cabot Top Ten Trader With economic data falling through the floor, safe-haven gold demand has remained elevated. Enter Barrick , which is effectively a leveraged play on rising gold prices, something that's already showing up in its results. The recent first-quarter report was fantastic, giving investors a glimpse of why the firm is one of this year's top-performing miners. Revenue rose 30% in the quarter, earnings surged 45% and free cash flow came in at a big $438 million (a bit higher than Q4 and nearly triple that of a year ago), while its debt load was further reduced by 17%. It now has no significant maturities until 2033! Interestingly, gold production of 1.25 million ounces was actually down from a year ago, but all-in sustaining costs of $954 per ounce are miles below the current gold price. Looking ahead, Barrick guided for production to improve in the second half of 2020, while analysts expect earnings to increase in the next four quarters. The Carlin Trend mine in Nevada hosts some of the biggest gold concentrations in the western hemisphere and is the most active exploration area in its portfolio; the firm sees major potential in Carlin, with far fewer political risks than other countries it mines. Gold stocks were some of the first to move to new high ground after the crash in February and March, and GOLD was among the leaders in the sector. And now it looks to be near a new, solid entry point. Starting a position here or on dips to that moving average makes sense to us.

Add Glitter to Your Portfolio With These 10 Gold Stocks

These gold-related names are a great hedge against tail risk amid Covid-19.

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