In this episode I review the top 4 gold stocks in the market today.
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Hi guys and welcome to another video. Now, if you are looking for the best gold stocks to buy now then make sure to watch this video all the way to the end cause have I got 4 top gold stocks for you today.
Now, gold has long been regarded as a safe haven in times of market turmoil. Many investors have gained exposure to the precious metal by buying stocks of companies engaged in exploration and mining.
The price of gold and gold stocks jumped sharply in the aftermath of the US subprime mortgage crisis and the European sovereign debt crisis with the peak being in 2011. This chart shows the gold miners ETF on the blue line vs the S&P 500 which is the red line during that time.
Having a small allocation to gold makes a lot of sense in my opinion. Who knows what will happen to the price of gold during the next major recession if there is more quantitative easing, even lower interest rates and political instability. At the very least, having a little bit of gold or gold stock exposure may make you sleep better at night.
I keep about 4 to 5 percent of my portfolio in gold stocks with a major focus on gold royalty and streaming companies. That being said, there are also a small number of gold mining stocks I own due to their long records of good management which is a rarity in this industry.
But before I show you my list of gold stocks, if you are new to my channel please subscribe and hit that bell notification so you will know when I release more stock trading tips.
Alright, so let’s dive in and get started with the best gold stocks to buy now and the first gold stock on my list is Franco Nevada. Franco Nevada is one of the best-performing gold stocks in history. They gave investors approximately 400% returns since their IPO a decade ago and dramatically outperformed the price of gold and this doesn’t even include their dividends.
They’re a streaming slash royalty company rather than a miner. This means that instead of owning mines they finance other companies’ gold mines. It provides investors with gold price and exploration optionality while limiting exposure to many of the risks of operating companies.
Gold streaming royalty companies pay money up front to help develop mines, and in return they get either a percentage of the profits from that mine, or they get to buy a certain amount of gold from that mine at a very low cost, like at $400 per ounce.
All three major gold streaming royalty companies which are Franco Nevada, Royal Gold, and Wheaton Precious Metals have outperformed the price of gold and the gold mining index over the past decade.
The business model of streaming royalty companies is a lot safer than miners because their break-even prices on gold are so low at hundreds of dollars below mining all in sustaining cost values. And also, they don’t have the problem of overpaying for mines and acquisitions when the price of gold is high.
Now, there are two main downsides of streaming royalty companies compared to miners. First, because they are safer, they are also less explosive when gold prices go up a lot. Second, because the business model is so good there is a risk that too many players will crowd the space and reduce forward returns.
My first gold pick Franco Nevada is led by David Harquail who has been the CEO since the company’s IPO, he has overseen all this past outperformance and has been a senior executive for many years when the business was private before that, and Franco Nevada also happens to be completely debt-free.
Next one up is Sandstorm Gold. Sandstorm Gold is a junior streaming royalty company and they might be the next Franco Nevada in a decade. Compared to Franco Nevada, Sandstorm is riskier but with more upside potential, and like Franco Nevada Sandstorm gold is completely debt-free.
Sandstorm is earlier in its development process compared to major streamers like Franco Nevada, Royal Gold, and Wheaton Precious Metals. In other words, the three big ones are already getting a lot of cash from streaming royalty deals they made years ago.
But although they are still making new investments they’re in the “harvest stage”, enjoying results from investments long ago and hoping to continue this trend.
Sandstorm on the other hand is earlier in the process, in the “planting stage”, so it has a lot more growth potential and in addition, Sandstorm holds a stake in the Hot Maden gold development project in Turkey.
This is expected to be one of the most profitable mines in the world when it is in production and Sandstorm is quite concentrated in this gold mine. If this mine turns out great or gets derailed for some reason or another, it would have an outsized impact either positive or negative on Sandstorm.
Assuming flat gold prices, the Hot Maden mine is expected to nearly double Sandstorm’s cash flow when it comes online in 2022. Sandstorm was co-founded about a decade ago by two senior executives from Wheaton Precious Metals and is still run by them. That’s what I like to see in a gold stock- leaders with long tenures and track records of success.
The company funded its early growth by issuing a lot of new shares but going forward management doesn’t expect to have to dilute the existing shares any more.
The third gold stock on my list is Barrick Corporation. Barrick has a more challenging history than the other three on this list but it’s a turn-around story.
On one hand, Barrick is now the largest gold producer in the world with five out of the top ten mines in the world and it enjoys assets with very low AISC meaning it can survive periods of low gold prices that many other producers cannot.
On the other hand, management hasn’t been great historically. The company also has substantial debt but at least management did pay that down quite well in recent years.
However, Barrick and Randgold Resources merged at the start of 2019 and unlike Barrick, Randgold was historically exceptionally well-managed by its longtime CEO Mark Bristow for over two decades and outperformed most other gold miners. He’s a guy that knows how to manage a gold stock.
Bristow is the new CEO of the combined company so the new Barrick is more like a continuation of Randgold than Barrick. Bristow has been a critic of Barrick’s management in the past, so now it’s his chance to revitalize the company how he wants.
There’s some risk here, but as the largest gold producer in the world with generally low AISC values and a historically great CEO I think it warrants a small position in a portfolio.
And finally the last gold stock on my list is B2Gold. B2Gold is a relative small gold mining stock but one of the most promising ones in my opinion. The company was founded in 2007 by a group of executives from Bema Gold when Bema was acquired by another company. It’s still run by the co-founders and their track record is strong.
B 2 Gold over the past decade has built an increasingly diversified portfolio of mines with low all in sustaining costs, and they have relatively low debt as well. One of the extra potential upsides is that B2Gold could be acquired at a premium price by one of the larger gold producers.
As a profitable company with a great portfolio it’s a desirable takeover target in an industry that needs some consolidation. Most of the major gold producers haven’t been expanding their reserves in recent years because gold prices have been in a bear market, meaning that in order to grow, some of them may increasingly turn to acquisitions.
In my opinion shares of Franco Nevada, Sandstorm, Barrick and B2Gold represent a potential buying opportunity if you like to diversify your portfolio with some top gold stocks with great potential.
So that’s it, these are the best gold stocks for this month, thanks for watching and make sure to watch the next stock trading videos that should show up right about now.