Commodities & Metals

J.P. Morgan's Gold Stocks to Buy After Survey Produces Surprising Results

The one asset class that has befuddled investors over the past two years has been gold. The bears have said the gold trade is over and chasing
it now is a fool’s game. The bulls have maintained that, between solid Asia and India demand, and a host of geopolitical hotspots around the
world, the precious metal can more than regain at least a portion of its former mojo.

In what has to be viewed as a somewhat bullish survey released by J.P. Morgan’s precious metals team, the number of funds holding gold has
actually increased over the past year. Gold equities are back in favor with more than 71% (vs. 48% in 2013) of the J.P. Morgan survey respondents expecting equities to outperform gold in the next 12 months. In the longer term, 62% of investors believe equities will outperform gold over a 36-month time horizon, compared to 49% last year.

Here are some of the top gold stocks that are followed by the J.P. Morgan analysts.

Agnico Eagle Mines Ltd. (NYSE: AEM) is rated Neutral at J.P. Morgan. The company recently completed its joint acquisition of Canada’s Osisko Mining and its Canadian Malartic mine, which the company purchased together with Yamana Gold. The Osisko deal guided investors on both companies in recent months, so any positive news on the performance of the Malartic mine will have an immediate effect on valuation. Most Wall Street analysts feel that consolidation at attractive prices could become much bigger in the space. Investors are paid a 0.9% dividend. The Thomson/First Call price target is $39.63. Shares closed Tuesday at $39.42.

ALSO READ: World Gold Council Gets Much More Positive on Gold

Barrick Gold Corp. (NYSE: ABX) is another top name rated Neutral at J.P. Morgan. Between asset sales and new equity, the company has raised nearly $4 billion in liquidity. Coupled with a lower dividend payout of $235 million and reduced capital expenditures, Barrick should generate about $1.2 billion in free-free cash flow.

Barrick also recently announced it will work with the Saudi Arabian Mining Company (Ma’aden) to develop its copper mine in the country, a partnership that the Canadian company aims to replicate with other projects, such as its mothballed Pascua Lama in the Andes. The stock pays investors a 1.1% dividend. The consensus price target is $20.29. Barrick closed Tuesday at $18.33.

B2Gold Corp. (NYSE: BTG) is a small cap name rated Overweight at J.P. Morgan that could bring investors big results. The company recently announced a $570 million acquisition of Papillon Resources at a very remarkable $125 per ounce. With an African project that is expected to be in production in 2016, many on Wall Street feel that is a very bullish sign for the overall gold sector. The consensus price target is $3.70. Shares closed trading on Tuesday at $2.71.

Eldorado Gold Corp. (NYSE: EGO) is also rated Overweight at J.P. Morgan. The company engages in the exploration, development, mining and production of gold properties in Turkey, China, Greece, Brazil and Romania. The company also explores for iron, silver, lead, zinc and copper ores.

Its principal properties include Kisladag and Efemcukuru gold mines located in Turkey; Jinfeng open pit and underground gold mine situated in southern China; and the Olympias gold, silver, lead and zinc development project and the Skouries gold-copper development project located in northern Greece. Investors are paid a small 0.3% dividend. The consensus price objective is $8.65. Eldorado closed Tuesday at $7.18.

ALSO READ: J.P. Morgan Raises Targets on Top Solar Stocks Before Earnings

Goldcorp Inc. (NYSE: GG) is another name rated Outperform that ranks high at RBC. The company operates as a gold producer involved in the exploration, development and acquisition of metal properties in Canada, the United States, Mexico and Central and South America. 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. Now those efforts have begun to pay off. Investors are paid a 2.2% dividend. The consensus price target is $31. Goldcorp closed Tuesday at $26.98.

New Gold Inc. (NYSE: NGD) is rated Overweight and is considered an intermediate gold mining company. It has a portfolio of four producing assets and three significant development projects. The New Afton Mine in Canada, the Mesquite Mine in the United States, the Peak Mines in Australia and the Cerro San Pedro Mine in Mexico provide the company with its current production base. In addition, New Gold owns 100% of the Blackwater and Rainy River projects, both in Canada, as well as 30% of the El Morro project located in Chile. The consensus price target is $7.06. New Gold closed Tuesday at $6.13.

Despite the fact that arguments have raged over inflation, both pro and con, the money printing has gone on unabated now for five years. One day that catches up. Combined with physical demand and a very unstable world, a small position of gold carved out in a well-rounded portfolio makes good sense now and in the future.

ALSO READ: Highest Yielding MLPs That Can Outperform for the Rest of 2014

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