In times of high volatility, precious metals would see increased purchases as investors seek a safe haven. Gold, the original hard cash, is the tradition safe play, the place where investors can park their money and see it hold its value. With gold on the way up, stock investors will naturally be looking for a way to buy in – and they can do this while sticking to the stock markets.
In the hope of coming across some hidden gems, we turned to TipRanks’ database. With the investing platform’s help, we were able to zero in on three precious metal stocks getting nods of approval from the analyst community, enough so to have a ‘Strong Buy’ consensus rating bestowed upon them. Add in hefty upside potential and you have three compelling investment opportunities. Let’s get started.
Barrick Gold Corporation (GOLD)
We’ll start with number two, the world’s second largest gold mining company, Barrick. This company, based in Toronto, taps into Canada’s well-known expertise in mining and resource extraction and channels it into gold and copper mines, with operations in 15 countries. In 2019, Barrick saw a 21% year-over-year increase in its gold output, reaching 5.5 million ounces, and also pulled 432 million pounds of copper out of the ground.
Barrick finished up 2019 with a solid quarterly performance. The 17-cent EPS beat the forecast, while the $2.88 billion in quarterly revenue represented 51% year-over-year growth. Looking ahead, analysts project Q1 EPS at 19 cents – a sharp contrast to last the year-ago figure of 11 cents.
Barrick’s strong and stable position in the gold mining industry have attracted Wall Street’s attention. Writing from Deutsche Bank, analyst Chris Terry put a Buy rating on the stock, with a $25 price target that suggests an upside of 25%. (To watch Terry’s track record, click here)
Supporting his contention, Terry stated, “Barrick is one of the largest gold companies globally and we believe the company is well positioned to benefit from a rising gold-price environment, and one of the first companies asset allocators looking for gold exposure will be drawn towards […] We anticipate ~10% FCF yield in 2020 on our revised gold forecasts,a very attractive yield, particularly when compared to falling interest rates. In addition we expect the company to continue to progressively increase its dividend over the next few quarters given the strength of its balance sheet.”
Also bullish is UBS’ Daniel Major, who wrote of GOLD, “We expect gold prices will remain well supported given low interest rates and negative GDP revisions… We think Barrick’s and the gold price selloff were a function of rebalancing around global stock market moves. We expect Barrick to re-rate higher once the sharp moves in global equity markets begin to stabilize… Barrick will remain shareholder friendly with a focus on dividend growth…”
In line with this optimistic view, Major upgrades his stance on GOLD, from Neutral to Buy. His price target, set at $22, implies an upside of 10%. (To watch Major’s track record, click here)
Overall, GOLD shares have a Strong Buy rating from the analyst consensus, based on 6 Buys and 1 Hold rating. The stock sells for a low price of $20.16, and the $22.60 average price target is indicative of a 12% upside potential for the stock this year. (See Barrick stock analysis on TipRanks)
B2Gold Corporation (BTG)
Next on our list is Canada-based gold producer, B2Gold. The company controls five mines, with its operations widely dispersed in Africa, Central America, and the Philippines. Success in both attracting investors and resource exploration have allowed the company to expand in recent years, and pushed BTG shares to a 37.5% gain in 2019.
B2Gold had a solid finish to 2019. In Q4, the company produced 980,219 ounces of gold, beating the high end of its own forward guidance and generating $1.15 billion in revenue. That top-line number represented 10% year-over-year growth.
Looking ahead, the company has guided toward just over 1 million ounces of gold production for 2020, and stands by that even in the current climate. For now, B2Gold is able to maintain production at all five of its active sites despite the COVID-19 pandemic.
5-star analyst Ovais Habib, covering B2Gold for Scotiabank, sees reason for optimism in this stock. He maintains his Buy rating along with a price target of C$6.25, or $4.40 in US currency. This implies a substantial 21% upside potential for the shares in 2020. To watch Habib’s track record, click here)
Backing his bullish stance on B2Gold, Habib says, “BTO continues gold production and gold shipments and the company benefits from ample onsite stockpiles and high levels of onsite supplies/spares/consumables. Financially, BTO remains well positioned with cash of $140M and $200M drawn on the $600M credit facility…”
Habib adds, summing up B2Gold’s position, “The company remains focused on the organic pipeline… BTO has many promising exploration targets to follow up. Mines continue to run and the company has been taking advantage of lower fuel prices…”
B2Gold has a unanimous Strong Buy analyst consensus rating, with 7 Buys set in recent weeks. Shares are priced at a discount – selling for just C$4.87 or US$3.43, even qualifies as a penny stock – but the average price target of C$6.97 (US$4.91) implies an impressive upside potential of 35%. (See B2Gold stock analysis on TipRanks)
Newmont Mining (NEM)
Last on our list is Newmont, which with a $38 billion market cap is the world’s largest gold mining company. Newmont boasted $1.4 billion in free cash flow for 2019, produced 6.3 million ounces of gold, and controls some 100.2 million ounces in recoverable gold mineral reserves. Taken together, it’s no wonder that NEM shares have managed a net gain while the broader markets have slumped.
Looking ahead, the company guides toward 6.4 million ounces of gold production in 2020, and sets an annual range of 6.2 million to 6.7 million ounces annually through 2024. Sometimes, it’s just plain good to sit on a gold mine. Or several of them.
Of additional interest to investors, Newmont made headlines in January when it agreed to a $10 billion deal to acquire Goldcorp. The move will create the world’s largest gold producer by output. Also in the news, Newmont in March closed out a senior note offering which brought in $1 billion in funding. The notes are due in 2030, and will be used to refinance current debt at lower interest rates; the company is effectively reducing its interest rates from 3.5% and 3.7% down to 2.25%.
Raymond James analyst Brian MacArthur provides coverage of this stock. He lowers his price target from $58 to $56, mainly due to concerns over the COVID-19 impact on operations, but keeps his Buy rating on the shares. His new price target implies an upside of 12%. (To watch MacArthur’s track record, click here)
MacArthur writes, “the company expects that some production could be deferred into 2021, potentially impacting costs in 2020 if some operations are on care and maintenance for an extended period… Newmont is not currently experiencing significant delays in the shipping of concentrate or transportation and refining of ore, but expects that delays may occur in the coming days and weeks if certain government-required shutdowns and border restrictions occur.”
All in all, Newmont’s Strong Buy analyst consensus rating is based on 7 Buys and 2 Holds from recent reviews. The stock is selling for $47.15, and the $52.64 average price target suggests it has room for modest 5% upside growth in the coming 12 months. (See Newmont stock analysis on TipRanks)
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