Long-term investors have always looked to precious metals stocks as safe-haven investments. These typically see their importance surge in times of volatility and declines in equity markets. Global political worries, like concerns about the current situation in Afghanistan, can also raise prices of precious metals.
Many investors believe the outlook for gold these days is strong. After all, following the recent prolonged bull run in the market, a correction is likely to occur soon. Therefore, those who believe near-term choppiness is looming could consider buying precious metals stocks as a hedge against a potential drop in stock prices.
Precious metals are not “abundant in nature, and therefore they have high economic value. Precious metals are used commonly in jewelry, industrial processes, or very often as investment vehicles.” Among the most widely-followed precious metals are gold, platinum, silver, palladium, rhodium, ruthenium, iridium and osmium.
Most precious metals’ prices have an inverse relationship with the economy. Investors buy these stocks to protect their wealth or hedge against volatility. Inflation is another concern, as it can surge after central banks decrease interest rates due to an economic slowdown.
We saw evidence of such a price move during the early weeks of the pandemic, which pushed gold and silver prices to multi-year highs. The value of an ounce of gold increased from around $1,500 in January 2020 to nearly $2,100 a year ago. The surge in price also lifted precious metals stocks higher.
Today, the price of gold has retreated to around $1,800 per ounce, primarily driven by a gradual lifting of pandemic restrictions. We now see a generally positive sentiment in the market with expectations of fast economic recovery. Therefore, gold stocks have significantly underperformed the broader market over the past year. For example, the VanEck Vectors Gold Miners ETF (NYSEARCA:GDX) has plunged more than 20% over the past 12 months.
If you believe this sector might see a comeback later in the year, then here is a list of seven robust precious metals stocks to buy in September:
- B2Gold (NYSE:BTG)
- First Majestic Silver (NYSE:AG)
- Franco-Nevada (NYSE:FNV)
- Kinross Gold (NYSE:KGC)
- Newmont (NYSE:NEM)
- Royal Gold (NASDAQ:RGLD)
- Wheaton Precious Metals (NYSE:WPM)
Precious Metals Stocks: B2Gold (BTG)
52 week range: $3.65 – $7.14
Dividend yield: 4.28%
Canada-based B2Gold operates three open-pit gold mines in Mali, Namibia and the Philippines. It is also conducting various exploration projects across four continents.
B2Gold released second-quarter 2021 financials in early August. Consolidated gold revenue fell 18% year-over-year (YOY) to $363 million on sales of 200,071 ounces. That was down from $442 million on sales of 257,100 ounces in the prior-year period.
Adjusted net income came in at $52 million, or 5 cents per share, compared to $112 million, or 11 cents per share, in the prior-year quarter. Cash and equivalents ended the quarter at $382 million.
Like other miners, the group aims to maximize profitable production from mines and further expand its pipeline of exploration projects. B2Gold currently expects to meet the upper end of its 2021 forecast range for total gold production between 970,000 and 1.03 million ounces.
BTG stock’s price hovers just below $4. It is down 35% year-to-date (YTD) and has declined more than 40% in the past 12 months. Given its generous dividend yield, the pullback in BTG shares offers a potential investment opportunity for passive income seekers. The stock trades at 8.2 times forward earnings and 2.3 times current sales.
First Majestic Silver (AG)
52 week range: $9.33 – $24.01
Dividend yield: 0.2%
Canadian First Majestic Silver focuses on silver, but other metals like gold, lead and zinc are also produced as part of the extraction process.
First Majestic Silver released Q2 results in mid-August. Total revenue increased 342% YOY to a record of $154 million. The rise was partially driven by contributions from the recently-acquired Jerritt Canyon mine in Nevada.
Net earnings came in at $15.6 million, or 6 cents per diluted share, compared to a net loss of $10 million, or 5 cents per diluted share, in the prior-year period. Cash and equivalents ended the quarter at $227 million.
On the results, President and CEO Keith Neumeyer said, “Improved production rates and higher metal prices during the quarter generated record revenues for the business … As a result of the higher revenues, our quarterly dividend increased by approximately 33% when compared to the prior quarterly payment.”
First Majestic’s acquisition of Jerritt Canyon mine for $470 million weighed down on AG shares in July, leading to a decline of more than 10% during the month. The decision to acquire an all-gold mine didn’t go over well with some investors who chose the company for its exposure to silver. However, others point out that Jerritt could be a significant step toward expanding the company’s global footprint.
While management expects solid production growth in 2021, margins are expected to dip in Q3, as the company forecasts significantly higher costs and capital expenditures.
AG shares are down more than 25% in the past three months and 10% YTD. Forward price-to-earnings (P/E) and current price-to-sales (P/S) ratios stand at 17.21 and 5.58, respectively. Potential investors would find better value around $12.50.
Precious Metals Stocks: Franco-Nevada (FNV)
52 week range: $105.62 – $163.79
Dividend yield: 0.85%
Based in Canada, Franco-Nevada operates a diverse portfolio of royalty, streaming and working gold interests. The miner’s global holdings cover properties at various stages, from production to early exploration.
Franco-Nevada reported second-quarter results in mid-August. Its gold equivalent ounces (GEOs) sold increased 60% YOY to 166,856. Revenue increased 78% YOY to $347 million. Additionally, adjusted net income came in at $183 million, or 96 cents per share, up 99% YOY. The company had $1.4 billion in available capital as of June 30.
CEO Paul Brink stated, “Franco-Nevada is on track to achieve record results in 2021, thanks to both organic growth and the acquisitions completed in the first half of the year. The diversified portfolio performed well in the second quarter and, with the first Vale Royalty Debenture contribution, delivered record GEOs, revenue, Adjusted EBITDA and Adjusted Net Income.”
Franco-Nevada has one of the most diversified portfolios of cash-flow generating assets in the precious metals space. The company has no debt and uses its free cash flow to enhance its portfolio and pay dividends. Thus, its stock could be an excellent pick for dividend seekers who also want exposure to gold.
FNV stock currently hovers around $141. It is up more than 8% YTD. The shares are trading at about 40 times forward earnings and 22 times current sales. In other words, FNV stock looks expensive compared to its peers. Interested readers would find better value if the stock price falls lower.
Kinross Gold (KGC)
52 week range: $5.62 – $10.32
Dividend yield: 2.1%
Kinross Gold announced Q2 results in late July. Total revenue came in at $1 billion, about the same as its revenue in the prior-year quarter. Management reported adjusted net earnings of $156.5 million, or 12 cents per diluted share, down from $194 million, or 15 cents per diluted share, in the prior-year quarter.
Free cash flow stood at about $183 million. Cash and equivalents ended the quarter at $675.6 million after the company repaid $500 million in debt in Q2.
Following the announcement, CEO J. Paul Rollinson remarked, “Our excellent free cash flow, as well as the strength of our investment grade balance sheet and growing production profile, underpin today’s announcement of a share buyback program and our continuing quarterly dividend, which supports our commitment to enhance shareholder value.”
After hitting a high of $10.32 in late 2020, KGC shares have lost more than 40% of their value. The price currently hovers around $5.80, and shares are down nearly 24% so far this year.
Given its position in the global market and improving production profile, KGC stock’s depressed price is an opportunity for investors to buy shares at a discount. The stock trades at 1.68 times current sales.
Precious Metals Stocks: Newmont (NEM)
52 week range: $54.18 – $75.31
Dividend yield: 3.86%
Colorado-based Newmont is the largest producer of gold worldwide. In 2020, the miner saw 5.9 million attributable ounces of gold and more than 1 million GEOs from byproduct sales.
Newmont announced second-quarter results in late July. Revenue soared 30% YOY to $3 billion. Attributable gold production rose 15 percent YOY to 1.45 million ounces.
Net income came in at $650 million, or 81 cents per diluted share, up from $344 million, or 43 cents per diluted share, in the prior-year quarter. The company ended the quarter with $4.6 billion in cash and $7.6 billion of liquidity.
CEO Tom Palmer commented, “Capitalizing on the strength of our assets and integrated operating model, Newmont delivered a solid second quarter performance with $1.6 billion in adjusted EBITDA and $578 million in free cash flow.”
If the price of Gold were to start a bull run again, it would imply a significant upside potential for NEM stock. After all, 94% of the company’s revenue comes from gold. Additionally, Newmont currently offers a generous dividend yield of more than 3.8%.
Yet the recent decline in gold prices has taken a toll on NEM stock. It fell 17% in the past three months and currently trades below $60 per share, about where it was selling at the end of 2020.
Given the company’s asset base and solid fundamentals, Newmont looks like an attractive stock at its current price level. Forward P/E and current P/S ratios stand at 18.32 and 3.67, respectively.
Royal Gold (RGLD)
52 week range: $99.32 – $132.66
Dividend yield: 1.1%
Denver, Colorado-based Royal Gold is a leading precious metals streaming company. It acquires and manages precious metal streams, royalties and similar production-based interests. The group earned about 75% of its 2021 revenue from gold.
Royal Gold released its fourth quarter and fiscal year 2021 results in mid-August. Record revenue increased 40% YOY to $168 million. Net income came in at $81.7 million, or $1.24 per diluted share, compared to $49 million, or 75 cents per diluted share, in Q2 2020. Cash and equivalents ended the quarter at nearly $226 million.
On the results, CEO Bill Heissenbuttel remarked, “Not only did we produce record financial results, but we also achieved several significant strategic goals in fiscal 2021.”
Wall Street was pleased that the company reported record revenue, net income and cash flow in fiscal 2021. Additionally, the company has no debt and operates a mine that has just started producing. Management has recently purchased two new mine investments as well.
Despite the intrinsic choppiness of commodity markets, Royal Gold has consistently increased its dividend for 20 years. The stock’s price is effectively flat so far this year. RGLD shares trade at 20.92 times forward earnings and 11.58 times current sales. Potential investors should consider investing when the price falls between $105 and $108.
Precious Metals Stocks: Wheaton Precious Metals (WPM)
52 week range: $34.85 – $54.83
Dividend yield: 1.34%
Canadian Wheaton Precious Metals is one of the world’s largest precious metal streaming companies. It announced second-quarter results in mid-August. About 49% of its revenue came from gold in Q2 and 45% came from silver.
Record quarterly revenue increased 33% YOY to $330 million. Net earnings came in at $166 million, or 37 cents per diluted share, up 57% YOY from $106 million, or 24 cents per diluted share, in the prior-year quarter. Cash and equivalents ended the quarter at $235 million.
CEO Randy Smallwood said, “Wheaton once again delivered strong results in the second quarter … With record sales volumes in the first half of 2021, Wheaton generated both record revenue and cash flow of $655 million and $449 million, respectively.”
The company has a variable dividend policy, fixed at 30% of the average cash generated over the trailing year. This means investors can benefit directly when the company is doing well.
WPM stock currently trades slightly below $45. Its price is relatively flat so far this year, having risen only about 2% YTD. The gold and silver balance in its portfolio, as well as its variable dividend policy, makes WPM stock a compelling option for readers interested in the precious metals space.
A potential decline toward $43 would make a long-term investment in WPM stock more attractive. The shares trade at 28.8 times forward earnings and about 16 times current sales.
On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.