While following what some of the world’s greatest investors are doing is not always a guarantee of success, one thing is for sure: they didn’t get there as a result of a poor long-term track record. When we saw one of Wall Street legendary investors reversing back to a positive stance on gold, after changing his mind and getting out after the election, it caught our attention.
Stanley Druckenmiller has reversed ground on gold and is buying the precious metal again. This is a quick about-face, as the legendary investor, who carved out an incredible record that started with George Soros and continued at Duquesne Capital, which he closed in 2010, got out of gold after the election in November.
Druckenmiller cited comments from central bankers on economic growth as a key reason for returning to the gold trade. We screened the Merrill Lynch research database, and found four stocks that make good sense for investors to add to their portfolios now, and all are rated Buy. We also included an exchange trade fund in which investors can buy shares that represent actual gold bullion holdings.
Agnico Eagle Mines
This top stock has remained a long-time Wall Street favorite. Agnico Eagle Mines Ltd. (NYSE: AEM) is a senior Canadian gold mining company that has produced precious metals since 1957. Its eight mines are located in Canada, Finland and Mexico, with exploration and development activities in each of these regions, as well as in the United States and Sweden. The company and its shareholders have full exposure to gold prices due to its long-standing policy of no forward gold sales. Agnico Eagle has declared a cash dividend every year since 1983.
Merrill Lynch has stated in the past it feels the company can achieve its goal of mining a stunning 2 million ounces of gold by 2020. Total gold output for past year is expected to be in excess of 1.6 million ounces, and the company has also substantially reduced the long-term debt on the balance sheet.
The stock is a top pick on Wall Street as it fits the objectives of having quality mining assets with attractive margins, and it sports a very solid balance sheet.
Agnico Eagle investors receive a 0.8% dividend. The Merrill Lynch price objective for the stock is $55. The Wall Street consensus target is $51.87. The shares traded early Wednesday at $50.59.
This top company with a solid balance sheet makes sense for investors to consider. Goldcorp Inc. (NYSE: GG) engages in the acquisition, exploration, development and operation of precious metal properties in Canada, the United States, Mexico and Central and South America. It primarily explores for gold, silver, copper, lead and zinc deposits.
Goldcorp’s principal mining properties include the Red Lake, Éléonore, Porcupine and Musselwhite gold mines in Canada; the Peñasquito and Los Filos mines in Mexico; the Marlin property in Guatemala; the Cerro Negro and Alumbrera mines in Argentina; and the Pueblo Viejo mine in the Dominican Republic.
Some Wall Street analysts feel that the company deserves a premium valuation to its peers due to its excellent balance sheet, growth profile with lower cost new mines, longer average mine life and a solid dividend yield. Over the past few years, Goldcorp has been altering its mine plans, cutting spending and disposing assets in order to reduce costs and focus on the most profitable production.
While Merrill Lynch reduced estimates for 2017 and 2018 recently, it is positive on the company’s growth strategy that intends to boost output by 20% and lower all-in sustaining costs by 20%, all by the year 2020.
Goldcorp investors receive a 0.5% dividend. Merrill Lynch has a $21 price target, and the consensus target is $18.11. Shares traded Wednesday at $16.96.