If you’re worried about coronavirus and its potential impact on the global economy, or if you are skeptical that the U.S. economy can sustain its dizzying pace, then you’ve probably looked at buying gold as a hedge.
The gold miner stock investors have been turning to is Barrick Gold (NYSE:GOLD). Let’s take a closer look at this outstanding A-rated stock, which is ranked as a “strong buy” in my Portfolio Grader.
Barrick Gold Stock at a Glance
Barrick is on a strong run, moving 14% higher year-to-date and up sharply since Feb. 12 after a solid earnings report.
Barrick reported earnings of 17 cents per share on revenue of $2.88 billion in the fourth quarter, beating estimates of 14 cents and revenue of $2.8 billion. The company posted a 21.4% earnings surprise.
The stock also got a boost when Barrick announced it was raising its dividend to 7 cents per share, a 40% increase.
At just over $21 per share, Barrick is trading near its 52-week high and is threatening to break past $22.50, which would be its best performance since 2016. Fundamentally, GOLD stock is a relatively cheap one to hold, with a trailing price-to-earnings ratio of 9.5 and a price-book ratio under 2.
Much of that performance is thanks to a boom in gold prices. Gold climbed as high as $1,665.25, its highest price in seven years, and the price of gold has gone up 20% in the last year. Central banks have been on a buying spree for the precious metal, and gold has also seen a boost as investors sought safe haven during the U.S.-China trade war.
An increase in product price is always good for the bottom line, and Barrick is no exception.
Barrick CEO Mark Bristow is boasting of the company’s success to clean up its portfolio to improve the bottom line. Barrick is on pace to exceed its goal to dump $1.5 billion of assets this year, he told Bloomberg News.
“We’re going to beat it,” he said. “We still have some work to tidy up the portfolio.”
Barrick Is a Solid Hedge Against Fear
While the trade war rallied gold prices in 2019, the virus sweeping through China and peppering other countries around the world could do the same for precious metals in 2020.
There are legitimate fears that the coronavirus sweeping through China will have an effect on the global economy. More than 76,000 cases and 2,400 deaths have been reported in China, where the virus originated, and health officials around the world are reporting new clusters of outbreaks in South Korea, Italy, Iran and Singapore.
Perhaps the most troubling thing about this virus – it makes the 2003 SARS epidemic seems like child’s play by comparison – is that health experts can’t pinpoint what causes new clusters to form. The coronavirus is far from being contained or even understood. It shows every sign of becoming a global pandemic that could stall economic growth.
The U.S. is not immune to those fears. IHS Markit reported last week that U.S. business activity contracted in February for the first time since the government shutdown of 2013, with manufacturing production coming to a near halt.
The U.S. stock market continues to hit record highs, so many economists view those numbers with a healthy bit of skepticism. Washington keeps pushing the Federal Reserve to lower interest rates and the federal deficit is ballooning to unmanageable levels. Farmers are already getting massive subsidies to counteract dueling trade war tariffs, and it wouldn’t take a lot manufacturing pain to put an intolerable strain on the nation’s economic engine.
As the world’s second-largest gold company, Barrick is a top performer right now and is set up to be a solid hedge against economic uncertainty in 2020.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.