The sell-off we at 24/7 Wall St. have been anticipating for some time is probably here. Investors that got used to a market that kept going up despite minor sell-offs could be in for some pain. The buy-the-dip crowd probably cannot save it this time, especially with some across Wall Street saying the Federal Reserve may raise rates as many as six times this year. Despite the end of the day rally Monday, and the potential for an oversold bounce, the setup for stocks going forward in the near term looks negative.
There are two reasons for the recent intense selling. First, stocks are, and have remained, horribly overbought and have been trading at absurd multiples for months. Every time there was a swoon, money would flow in, especially from the growing hordes of retail traders that swelled when the pandemic was raging. Second, inflation is out of control and the Federal Reserve has to raise rates and raise them fast. Some think the Fed could raise them this week, but most think the start will be in March. The Fed meeting this week should provide additional color.
The question for investors is what to do now. One of the best ideas always has been to seek positions in commodities. The best area there for investors to look at is the top gold miners and royalty companies. We screened the BofA Securities research universe looking for the top stocks and found five that look like great ideas for worried investors now.
It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
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 stock was crushed as gold sold well off the January highs, and with an inflation surge you can bet many savvy portfolio managers are ready to add back top companies like this.
Shareholders receive a 2.75% dividend. The BofA Securities price target on Agnico Eagle Mines stock is $68.50. The consensus target is up at $94.39, and shares closed Monday’s trading at $50.29.
This is another top gold stock, and it still offers a solid entry point. Barrick Gold Corp. (NYSE: GOLD) and Randgold Resources completed their merger on January 1, 2019. This created the world’s largest gold company in terms of production, reserves and market capitalization.
The company holds a 50% interest in the Veladero mine located in the San Juan Province of Argentina; 50% interest in the KCGM, a gold mine located in Australia; 95% interest in Porgera, a gold mine located in Papua New Guinea; 50% interest in the Zaldavar, a copper mine located in Chile; and 50% interest in the Jabal Sayid, a copper mine located in Saudi Arabia.
Barrick also owns gold mines and exploration properties in Africa and gold projects located in South America and North America. It also has a strategic cooperation agreement with Shandong Gold Group.
Barrick Gold stock investors receive a 1.86% dividend yield. BofA Securities has a $27 price target, while the consensus target is $28.41. Monday’s closing share price was $19.37.
This is a small-cap gold stock for aggressive investors looking for sector exposure. B2Gold Corp. (NYSE: BTG) is a global, growth-oriented mid-tier gold producer whose primary assets include gold mines located in Nicaragua (La Libertad and El Limon), the Philippines (Masbate) and Namibia (Otjikoto) and Mali (Fekola).
During the third quarter, the company recorded consolidated gold production of 295,723 ounces, up 19% year over year on solid performance across three of its operating mines. B2Gold increased throughput at the Fekola mill and completed the significant waste stripping campaigns at both Fekola and Otjikoto mines. Those mines achieved record quarterly gold production in the third quarter of 2021.
Investors receive a 4.34% dividend. The $5.85 BofA Securities price target compares with a $6.20 consensus target for B2Gold stock, which closed on Monday at $3.56.
Investors who are more aggressive may want to consider this smaller cap mining company. Kinross Gold Corp. (NYSE: KGC) engages in the acquisition, exploration and development of gold properties principally in Canada, the United States, the Russian Federation, Brazil, Chile, Ghana and Mauritania.
The company also is involved in the extraction and processing of gold-containing ores, reclamation of gold-mining properties and the production and sale of silver. The company posted quarterly earnings that were much lower than a year ago but topped the consensus estimates, offering an earnings surprise of 40%.
Wheaton Precious Metals
This precious metals royalty stock makes good sense for more conservative investors who are looking to have exposure to the sector. Wheaton Precious Metals Corp. (NYSE: WPM) is a Canadian precious metals streaming company with approximately 60% of its revenues from the sale of silver and 40% from gold.
Under the terms of long-term contracts, the company purchases silver and gold from a variety of mines, including Goldcorp’s Penasquito mine in Mexico, Vale’s Salobo mine in Brazil, the Lundin Mining Zinkgruvan mine in Sweden, and Glencore’s Antamina and Yauliyacu mines in Peru, and then sells the silver and gold into the open market.
Shareholders receive a 1.47% dividend. The BofA Securities price target is $56. The Wheaton Precious Metals stock consensus target is $55.24. Shares last closed at $40.21.
The SPDR Gold Shares ETF (NYSEARCA: GLD) is perhaps one of the best pure plays on gold for investors. The trust that is the sponsor of the fund holds physical gold bullion as well as some cash. Each share represents one-tenth of an ounce of the price of gold. It should be noted that the fund does not pay a dividend.
Proper asset allocation should always include at least a single-digit percentage holding of precious metals like gold and silver. Not only do they hedge inflation (which could be huge now and over the long term), but they can really help if the market does go into correction or bear market mode, as they tend to trade inversely to markets.