Commodities & Metals

Despite Caution About Gold, Merrill Lynch Has 4 Gold Stocks to Buy Now

Tahoe Resources

The Merrill Lynch analysts remain very positive on this smaller play. Tahoe Resources Inc. (NASDAQ: TAHO) is a U.S.-based gold and silver producer with zinc and lead by-products. Tahoe’s primary assets are its Escobal silver mine in Guatemala, the La Arena and Shahuindo gold mines in Peru, and the Timmins operations in Canada. In 2016, Tahoe expects to produce 370,000 to 430,000 ounces of gold and at the high end of 18 million to 21 million ounces of silver at all-in sustaining costs of $950 to $1,000 an ounce for gold and $8.00 to $9.00 an ounce for silver.

This is the top mid-tier play at Merrill Lynch, and the analysts cite two very solid acquisitions over the past 18 months in which the company should be reaping benefits as the firm updated guidance earlier in August.

Tahoe investors are paid a 1.81% dividend. The Merrill Lynch price objective is posted at $22.50. The consensus target is $20.46, and the shares closed most recently at $13.29, down 4.5% for the day.

Silver Wheaton

This is another top company that many on Wall Street favor. Silver Wheaton Corp. (NYSE: SLW) is the largest pure precious metals streaming company in the world. Based on its current agreements, forecast 2015 estimated annual attributable production is approximately 44.5 million silver equivalent ounces, including 230,000 ounces of gold. By 2019, estimated annual attributable production is anticipated to increase significantly to approximately 55 million silver equivalent ounces, including 325,000 ounces of gold.

This anticipated growth is expected to be driven by the Silver Wheaton’s portfolio of low-cost and long-life assets, including precious metal and gold streams on Vale’s Salobo mine and Hudbay’s Constancia project.

Silver Wheaton has 18 long-term purchase agreements and one early deposit long-term purchase agreement associated with silver and gold relating to 27 various mining assets. It has silver and gold interests primarily in the San Dimas, Zinkgruvan, Yauliyacu, Stratoni, Los Filos, Peñasquito, Keno Hill, Neves-Corvo, Cozamin, Minto, Barrick, Aljustrel, 777, Salobo and Sudbury mines, as well as the Rosemont, Loma de La Plata, Constancia and Toroparu projects.

Again, the company fits nicely into the Merrill Lynch metrics for quality assets and royalty streams, and the kind of balance sheet that has protected the company from the pitfalls of miners with huge capital expenditures.

Silver Wheaton shareholders are paid a 0.78% dividend. The Merrill Lynch price target is $35, and the consensus target is set at $33.55. The stock closed Tuesday at $25.60, down 4.55% as well.

Proper asset allocation should always include a single-digit percentage holding of precious metal like gold and silver. Not only do they hedge over the long term, they can really help if the market does go in to correction or bear market mode, as they tend to trade inverse to markets trading down.

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