The more you listen to the Wall Street pundits, especially those in the financial media, the more they have closed in on the ultimate contrarian indicator. That’s when they present the worst four words in the history of investing: “It’s different this time.” Sure it is, and with the market trading at the highest multiples in years, and the FOMO factor (fear of missing out) driving prices ever higher, you can bet that the much-needed correction, if not here already, is very close.
With the markets facing a “witches’ brew” of potential problems, including the coronavirus, the Senate impeachment trial, ongoing hostility in the volatile Middle East, trade-related issues, and the sheer fact that the stock market is horribly overbought, we could be in the beginning stages of a major shakeout.
One way to hedge a sell-off would be to buy gold, and while the SPDR Gold Shares ETF (NYSE: GLD) is an outstanding vehicle, as you literally buy physical gold, investors may want to invest in some of the top miners and royalty companies. We screened the Merrill Lynch precious minerals universe looking for companies rated Buy and found five solid choices for investors to go along with the SPDR Gold Shares fund.
Agnico Eagle Mines
This is one of Wall Street’s most preferred North American gold producers. 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.
The company’s Meadowbank complex in Nunavutis is expected to achieve commercial production very soon, and the Amaruq project is expected to ramp up to full production by late 2019. Amaruq’s gold output is forecast to rise from 130,000 ounces in 2019 to 351,000 ounces in 2021, and it could account for 17% of Agnico Eagle’s total output.
Agnico Eagle Mines shareholders receive a 1.14% dividend. The Merrill Lynch price target for the shares is $74, and the Wall Street consensus target is $70.39. Shares closed Thursday trading at $61.17.
Barrick Gold
This is one of the top companies in the sector, and shares have backed up from the late summer to early fall rally, offering a solid entry point. Barrick Gold Corp. (NYSE: GOLD) and Randgold Resources completed their merger on January 1, 2019, which created the world’s largest gold company in terms of production, reserves and market capitalization.
On July 1 of last year, Barrick and Newmont created the Nevada Gold Mines joint venture, on a 61.5% to 38.5% basis, with Barrick as operator. The venture is targeting $450 million to $500 million in annual operational and other synergies over the next five years.
Barrick says its gold production for 2019 is expected to come in near the top end of its guidance, while copper production is forecast to be more than earlier expectations. Preliminary results indicate it produced 5.5 million ounces of gold last year, compared with guidance for between 5.1 million and 5.6 million ounces.
Preliminary copper production results indicate it produced a total of 432 million pounds, compared with guidance for between 375 million and 430 million pounds.
Barrick says preliminary fourth-quarter results show sales of 1.413 million ounces of gold and 91 million pounds of copper, as well as fourth-quarter production of 1.439 million ounces of gold and 117 million pounds of copper.
The dividend paid to shareholders has 1.08% yield. Merrill Lynch has a $22 price objective, while the consensus target price is $20.80. Barrick Gold stock closed Thursday at $18.44 per share.
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