The 7 Best Gold Stocks to Buy for Portfolio Diversification
Gold is typically a safe haven asset that offers stability during tough economic times. The asset typically has a low correlation with the stock, bond, and crypto markets, so investing in the best gold stocks is wise now.
2022 has been an incredibly tough year for the financial markets. The S&P 500 fell 19.4%, while the crypto market and 30-year US Treasury futures in 2022 lost 64% and 21.6% of their value, respectively. Conversely, growth in the gold futures contract remained flat. These results reinforce my earlier point about yellow metals’ low correlation with capital markets. However, markets are still remarkably volatile, raising the need for safe-haven investments, including these best of the best gold stocks.
|A.E.M||Agnico Eagle mines||$50.84|
|BVN||Compania de Minas Buenaventura||$8.35|
Best Gold Stocks: Newmont Corporation (NEM)
At the top of the list of the best gold stocks is Denver Newmont Corporation (NYSE:NEM), one of the largest gold miners with a brilliant track record of delivering growth across both lines. Besides gold, it is also involved in the production of other precious metals including copper, silver, zinc and lead.
The volatility in gold prices, the unfavorable economic climate and the supply chain crisis over the past year resulted in negative sales growth. However, it has done well to control costs and generate relatively strong margins on a 12-month basis. It also has a whopping $3.2 billion in cash and a leveraged free cash flow margin of 11.6%, indicating its robust flexibility. Once gold prices pick up steam again, I expect NEM stocks to follow, and then some. Additionally, with 96 million ounces of proven reserves, Newmont has tremendous cash flow visibility over the decade.
Best Gold Stocks: Kinross Gold (KGC)
Kinross Gold (NYSE:KGC) is a penny gold stock poised for a massive uptrend if gold prices start to rally again. Kinross top and bottom line results improved significantly with gold price strength in the early months of 2022. In the months that followed, the company was able to offset the drop in gold prices with increased production.
It ended its most recent quarter with a 75% increase in gold production to 595,683 gold equivalent (Au eq. oz) ounces. In addition, the Company expects to produce 2.1 million AuEq. oz. in 2023 140,000 Au eq. oz. higher than last year. Total costs are also expected to increase by 5% to $1,271/oz. Nonetheless, with a dividend yield of 3.1% and KGC shares trading at multi-year lows, you have a long-term winner poised for big gains.
Barrick Gold (GOLD)
Barrick Gold (NYSE:GOLD) represents the cream of the crop in gold mining. The Canadian company operates 13 gold and copper mines from Nevada to sub-Saharan Africa under the dynamic leadership of its CEO, Mark Bristow.
The company has been one of the most profitable companies in the industry, generating an EBITDA margin of nearly 50% over the past five years. Additionally, despite a difficult 2022, profitability metrics were mostly in line with their historical averages. Fourth quarter results showed a 13% sequential increase in gold production at a slightly higher realized gold price of $1,728/oz. All-in sustaining costs fell to $1,242/oz from $1,269/oz in the third quarter. For fiscal 2023, the Company expects to produce 4.2 to 4.6 million ounces of gold, halting a three-year decline.
Another big opportunity for the company comes from its copper mining division, which accounts for 18% of total sales. This number could increase significantly over the next few years due to several long-term projects in development.
Agnico Eagle mines (A.E.M)
Agnico Eagle mines (NYSE:A.E.M) was arguably the best gold producer over the past year despite a challenging cost and staffing environment. It marched with superior cost control, with record margins beating its 5-year average. In addition, it pressed ahead with its mineral resource expansion projects and aimed to consolidate its position in the most lucrative mining areas.
The miner’s aggressive merger and acquisition activity, coupled with effective execution, resulted in a rapid increase in gold mineral reserves. Year-end 2022 gold mineral reserves increased 9% to 48.7 million AuEq. oz. on the back of the annual record production. Its payable gold production was 3,280,731 AuEq. oz., a whopping 62% year-over-year increase. A significant portion of the increase was due to the integration of Kirkland Lake Gold, another in the long list of companies AEM has acquired over the years.
Another element of the bullish perspective is the company’s solid dividend profile, which has seen its payouts rise by seven years with a 3.3% yield. Its 5-year growth rates are an impressive 30.7%.
goldfields (NYSE:GFI) is one of the leading gold mining companies in the resource-rich South African region. The Company operates mines in South Africa, Australia, Peru and Ghana according to its profile. GFI stock has lost 30% of its value over the past year, with structural headwinds weighing on the stock.
Perhaps the biggest obstacle holding back Gold Fields was South Africa’s energy crisis last year due to the collapse of Eskom. However, despite concerns over load-limiting, the fixed Wits Basin mine has held up strongly, delivering spectacular results over the past year as production levels and free cash flow rose 12% and 33%, respectively.
Additionally, despite the weather delays, the Australian segment’s production rose 4% from the same period last year. In addition, its gold-silver open pit project in Chile was scheduled to start production this year after several delays. The asset could potentially host world class oxidized minerals that could be effectively mined at low cost. As such, there is much to expect from GFI stock.
Franco-Nevada (NYSE:FNV) is a precious metals company specializing in gold-related royalties and streaming. Instead of mining assets, it funds mining companies for a percentage of sales or precious metals mined. FNV stock presents itself as a relatively safe bet in a volatile trading environment. That performance is evident in its high-quality profitability metrics, which show gross and EBITDA margins of 87% and 84% on a trailing 12-month basis.
According to its most recent report, FNV had $2.2 billion in available capital, zero debt and $1 billion in operating cash flows. Additionally, leveraged free cash flows are over 50%, which is amazing given the volatility of the business environment. With its disciplined capital management and low-risk business model, FNV stock should remain strong for the foreseeable future.
Compania de Minas Buenaventura (BVN)
Compania de Minas Buenaventura (NYSE:BVN) runs a business in Peru with high-quality precious metals.
Peru’s mining sector has always been vital to Peru’s economy. It is the second largest producer of copper and a major producer of silver, zinc and other minerals. In addition, it has a solid mining ecosystem, including rich mineral resources, favorable government policy, skilled workforce and strong environment for artisanal mining. Therefore, it will always remain relevant in mining and increase the attractiveness of BVN stock.
There was a familiar tone in BVN’s quarterly reports compared to other gold miners discussed in the article. Fourth quarter results were relatively encouraging, beating estimates in both divisions while effectively trimming losses. Its cash position reached an impressive $253.9 million at the end of December, while net debt fell by $484.6 million. The stock is trading below $8, making it worth betting on for the long term.
At the time of publication, Muslim Farooque held (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com’s publicity guidelines.