- (0:30) - Are The Gold Miners A Value Industry?
- (6:15) - Tracey’s Top Stock Picks Heading Into 2021
- (17:55) - Playing It Safe When Investing In Gold: ETF Options
- (27:00) - Episode Roundup: GOLD, NEM, BTG, GDX, GDXJ
- Podcast@Zacks.com
Welcome to Episode #213 of the Value Investor Podcast
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.
She’s been getting questions from listeners about the gold miner stocks.
Remember them?
They last soared in 2011 on the Eurozone crisis and worries about a US credit downgrade as well as fights over the budget.
But since then, it’s been tough to be a gold bug.
Until 2020.
Gold Hits a Record High in 2020
On the back of the pandemic and trillion-dollar stimulus packages, gold has seen a steady rise to new all-time highs above $2000 an ounce.
It has since pulled back to the $1800s but it’s still higher than a year ago.
The gold miners have been able to cash in on the record high gold prices with record quarters, including soaring cash flows.
Buffett Bought a Gold Miner in 2020
Even the world’s most famous value investor has noticed the solid fundamentals in the gold industry.
In the second quarter, Warren Buffett’s Berkshire Hathaway (NYSE:BRKa) added gold miner Barrick Gold (NYSE:GOLD).
It’s just a 0.27% position in the portfolio, but it’s a sign that there is value in the industry.
And Buffett loves companies with great cash flow. Right now, there aren’t many better than the gold miners.
How to Invest in the Gold Miners
1. You can follow Buffett into Barrick Gold GOLD. It’s a Zacks Rank #2 (Buy) stock as earnings are expected to jump 111% this year and another 30% next year. Additionally, in the third quarter it had a record free cash flow of $1.3 billion. The result was that it raised the dividend 12.5% to $0.09 a share. That’s a yield of 1.4%.
2. Newmont Corp. NEM is another big cap miner with global operations that has a great Zacks Rank. It’s currently a #1 (Strong Buy) as 2020 earnings are expected to jump 101% and another 79% next year. The third quarter was the best quarterly performance in the company’s history.
3. B2Gold (NYSE:BTG) BTG is a smaller miner with a $6.2 billion market cap and mines in Mali, Namibia, and the Philippines. In the third quarter, gold revenue was a new quarterly record. Full year projected cash flow is expected to be over $900 million. It’s net cash positive and debt-free as of the Q3. It’s cheap, with a forward P/E of just 12.5.
4. Why not buy the whole industry? VanEck Vectors Gold Miner ETF GDX is the industry leader. VanEck commenced this ETF all the way back in 2006. It has $16 billion in assets. The ETF has 52 holdings. You’ll get Newmont and Barrick in the ETF as they are the two biggest positions. Year-to-date, GDX has gained 28%.
5. If you’re looking to invest in the junior miners, VanEck launched the Junior Gold Miners ETF (NYSE:GDX) GDXJ in 2009. It has 83 holdings and it includes both gold and silver miners, including B2Gold. Year-to-date, the ETF is up 25.9%.
What else do you need to know about investing in the gold miners?
Tune into this week’s podcast to find out.
[In full disclosure, Tracey owns shares of BTG in her personal portfolio.]
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Newmont Corporation (NEM): Free Stock Analysis Report
Barrick Gold Corporation (GOLD): Free Stock Analysis Report
B2Gold Corp (BTG): Free Stock Analysis Report
VanEck Vectors Gold Miners ETF (GDX): ETF Research Reports
VanEck Vectors Junior Gold Miners ETF (GDXJ): ETF Research Reports
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