Commodities & Metals

Gold May Be Best Hedge Against Big Market Sell-Off: 4 Stocks to Buy Now

Newmont Mining

This is one of the largest mining companies, and its stock is a solid buy for more conservative accounts. 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.

Earlier this year the company announced 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.

The company also posted strong results, and the analysts said:

Newmont reported second quarter adjusted earnings per share of $0.46 that was a big beat versus our numbers and consensus both at $0.26. 2017 operating guidance was increased to 5.00-5.40 million ounces and CAS and AISC unit cost guidance were both lowered. Net debt continued to decline, down to $1.52 billion as of June 30, 2017; net debt has been reduced by 70% since 2013.

Shareholders receive a 0.8% dividend. The $47 Merrill Lynch price objective compares with the consensus target price of $40.31. The shares traded on Friday at $36.30.

Royal Gold

This a solid pick 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.

Merrill Lynch feels the company is very undervalued when compared to its sector peers. Backed by three new or expanding assets, the firm sees Royal Gold’s revenue growing by 13% to nearly $500 million by fiscal 2019. Royal Gold’s strong liquidity position means it can compete for royalty and stream acquisitions.

Shareholders receive a 1.11% dividend. Merrill Lynch has set its price target at a whopping $92.50. The consensus target is $85.64, and shares traded Friday at $85.60.

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.