World Famous Investor Buying Gold Again: 4 Top Stocks for Investors

February 8, 2017 by 247lee

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.

Goldcorp

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.

Newmont Mining

This is one of the largest mining companies, as well as a solid buy for more conservative accounts and a top pick at Deutsche Bank. Newmont Mining Corp. (NYSE: NEM) is a leading gold and copper producer. It employs approximately 29,000 employees and contractors, with the majority working at managed operations in the United States, Australia, Ghana, Peru, Indonesia and Suriname.

Newmont is the only gold producer listed in the S&P 500 index, and it was named the mining industry leader by the Dow Jones Sustainability World Index in 2015. The company is an industry leader in value creation, supported by its leading technical, environmental, social and safety performance. Newmont was founded in 1921 and has been publicly traded since 1925.

The company announced recently that “first gold” has been poured at its new mine, called the Merian gold mine in Suriname in South America. Newmont reported Merian contains gold reserves of 5.1 million ounces and that annual production is expected to average between 400,000 and 500,000 ounces of gold at competitive costs during the first five full years of production.

Merrill Lynch noted after the most recent earnings report:

Newmont reported third quarter 2016 adjusted earnings-per-share of $0.51 that beat due to better results from discontinued operations (i.e. Batu Hijau) It was announced that the gold price-linked dividend will be enhanced, adjusting annual payout levels upward.

Newmont investors receive a tiny 0.3% dividend. Merrill Lynch raised its price target to $42, while the consensus target is $39.88. The shares were last seen at $37.47

Royal Gold

This a solid stock for investors looking for a gold presence with somewhat less risk. Royal Gold Inc. (NASDAQ: RGLD) is a precious metals royalty and stream company engaged in the acquisition and management of precious metal royalties, streams and similar production-based interests. The company owns interests on 193 properties on six continents, including interests on 38 producing mines and 24 development stage projects.

The company maintains a solid asset base of long-life royalties operated by some of the best gold mining companies in the world. Royal Gold announced earlier this fall the acquisition of a 3.75% net value royalty (NVR) on the Crossroads deposit for $70 million. Starting in fiscal 2019, the NVR is expected to add $8 million of annual revenue to the company.

The 2017 forecast for the company was lowered back in January, and Merrill Lynch feels the stock is very undervalued when compared to sector peers. The forecast is 38% revenue growth by 2019 for estimated earnings. The analysts also think the company’s rising cash-flow can be used for acquisitions and growing the dividend.

The $92.50 Merrill Lynch price target compares with the consensus target of $84.21. Shares traded early on Wednesday at $71.35.

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Another way for investors to buy gold and mitigate some risk is to buy the SPDR Gold Shares (NYSE: GLD). The trust seeks to reflect the price performance of gold bullion by holding gold bars and issuing shares backed by their holdings of physical metal.

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 the markets.