3 best gold stocks to buy now

Gold prices have fallen steadily this year after soaring in 2020. This has driven some investors out of gold stocks, but those in the know will see these times as opportunities to put money into an asset that served well as a cover during the stock market turmoil.

Gold stocks are, in fact, the best way to invest in gold, and with the earnings season in full swing, now is a great time to look for winners who are worth your money. If you’re wondering where to start, here are three top gold stocks with incredible growth potential to buy now.

Unleash the growth of the big acquisition

Kirkland Lake Gold (NYSE: KL) started 2021 on a strong note and was among the few gold mining companies to exceed their production and cost forecast in the last quarter. Kirkland produced 302,847 ounces of gold in the first quarter, beating its forecast of 280,000 ounces at the midpoint. To top it off, Kirkland’s All-in-One Sustaining Cost (AISC) was $ 846 per ounce of gold sold compared to management’s AISC forecast of approximately $ 1,000 per ounce.

There are two things to note here. First, a record first quarter tonnes were processed at the Detour Lake mine in the first quarter. Detour Lake, a mine that Kirkland acquired in January 2020, is the second largest gold mine in Canada and holds the key to Kirkland’s growth. Second, the ore grade at its declining production Fosterville mine in Australia has exceeded management’s expectations.

Image source: Getty Images.

There is much more in store and this is where the appeal of the stock lies. For starters, Kirkland plans to end 2021 with an AISC of just $ 790 to $ 810 per ounce sold, which should kick off especially if gold prices hold.

Additionally, Kirkland has established extensive exploration plans for all three mines, particularly Detour Lake, and plans to spend a record $ 170 million to $ 190 million in capital this year to boost production. It’s extremely helpful that Kirkland also has one of the strongest balance sheets in the industry – he’s a low-leverage, positive free cash flow, dividend-paying gold miner. There’s a lot to like here, and with a stronger second half expected, you’ll want to pay close attention to this gold stock.

Lots of money is on its way to you

Newmont Goldcorp (NYSE: NEM) Stocks have been very volatile over the past year, but investors seem to have perceived the value of the gold mining stock in recent weeks, as evidenced by its rally of nearly 17% since mid-March. Rightly so, as Newmont’s production in recent months has been affected due to the COVID-19 pandemic shutdowns, but its growth story remains intact. Newmont’s share price has generally mirrored the growth of the FCF, which is exactly why it’s such an attractive stock to own now. Let me explain.

NEM chart

Despite the decline in gold production in the first quarter, Newmont reiterated its full year production outlook of 7.8 million ounces of gold equivalent (GEO). Further on, Newmont predicts stable GEO production of around 8-8.5 million per year through 2025.

Here’s the real deal: Even if gold prices drop to $ 1,200 an ounce, Newmont could generate a whopping $ 3.5 billion in annual FCF over the next five years with GEO’s average annual production of 8. million ounces. And for every $ 100 increase in the price of gold, he could earn an additional $ 400 million in FCF. It’s huge, and it’s hard to find another gold miner with such incredible visibility on cash flow. As a prospect, Newmont generated a record $ 3.6 billion FCF in 2020 at a realized gold price of $ 1,775 per ounce.

Cash flow is the key to the survival, growth (through mergers and acquisitions) and success of gold miners; and Newmont’s potential cash flow growth is extremely promising. Additionally, FCF growth should also mean larger dividends, as Newmont pays a base dividend of $ 1 per share at the gold price of $ 1,200 per ounce and 40% to 60% of the additional FCF earned. at higher gold prices. Again, this is one of the most stable dividend policies among gold miners, and Newmont’s 3.3% dividend yield is also among the best, making it one of the best. best gold stocks to buy.

The only gold stock that thrives at any gold price

Franco-Nevada (NYSE: FNV) is one of the safest actions to bet on gold for a simple reason: the miner can earn large margins even in an environment where the price of gold is low, and accumulate a lot of money when the price gold is increasing. This is because Franco-Nevada is not a miner, but a gold and royalty distribution company. He therefore makes deals with the gold miners to buy gold from them at predetermined prices and percentages in exchange for initial funding. Since the purchase price is usually set at levels significantly lower than the spot price of gold, Franco-Nevada wins in any type of gold price environment.

To illustrate, I pitted Franco-Nevada against the two gold mining stocks discussed in this article to show you how the former has consistently achieved higher margins.

NEM operating margin graph (TTM)

I’ll get right to the point and give you four reasons why Franco-Nevada is such an attractive gold stock right now:

  • He is on track to reach record numbers in 2021.
  • It is a debt free business.
  • He expects 25% revenue growth over the next five years.
  • It has increased dividends every year for the past 14 consecutive years.

Franco-Nevada also has an oil and gas royalty business, but it’s only a small, prominent contributor at the moment. With a core gold portfolio of diversified streams across some of the world’s largest operating and developing mines, Franco-Nevada doesn’t have to worry about revenue growth. As income grows, its cash flow, dividends, and stock price are also expected to rise.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

About Myra R.

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