With rising geopolitical tensions and potential Federal Reserve interest rate cuts looming, 2024 is expected to see a sustained rally in gold prices. Against this backdrop, high-grade gold stocks Alamos Gold (AGI), Barrick Gold (GOLD), and Harmony Gold Mining Company (HMY) could be solid buys to improve your portfolio's performance now. Read….
Gold prices have recently hit record highs with recent bets on Federal Reserve interest rate cuts and geopolitical tensions driving the market. Therefore, investors could improve their portfolio performance by investing in the fundamentally solid gold stock Alamos Gold Inc. (AGI), Barrick Gold Corporation (GOLD) and Harmony Gold Mining Company Limited (HMY) Now.
Gold prices have recently peaked record highs, currently trading above $2,100 per ounce. This increase is likely due to potential Federal Reserve interest rate cuts and continued record purchases of the bullion by central banks.
Citi's head of commodities for North America, Aakash Doshi, predicts gold prices could rise to $2,300 per ounce in the second half of 2024, especially given expectations for rate cuts during this period.
The jewelry sector, which uses gold in large quantities, is driven by high demand during festivals and weddings in countries such as China and India, creating growth prospects for the gold market. In the US, the adoption of gold wedding rings, influenced by Western European culture, increases demand and promotes market growth. Therefore, the global gold mining market is expected to reach $260 billion by 2030growing at a CAGR of approximately 3.5%.
Moreover, strong demand for tangible gold is driven by its attractiveness as a “safety asset” that attracts investors seeking diversification in the face of unimpressive returns from other asset types.
To that end, let's break down the fundamentals of three stocks worth buying Miners – Gold industry, starting with the third choice.
Stock #3: Alamos Gold Inc. (AGI)
Headquartered in Toronto, Canada, AGI sources, explores, develops and mines precious metals in Canada and Mexico. The company is primarily engaged in the exploration of gold and silver deposits.
On February 28, the AGI Board of Directors declared a quarterly dividend of $0.03 per common share, payable on March 28, 2024. The company has paid dividends for 15 consecutive years, with $334 million returned to shareholders through dividends and share repurchases, including $39 million in 2023.
AGI pays an annual dividend of $0.10 per share, which translates into: dividend rate by 0.74% compared to the current share price. The average four-year yield is 0.95%. Over the past three and five years, AGI's dividend payments have grown at a CAGR of 10.1% and 38%, respectively.
AGI's CAPEX/Sales for the trailing 12 months of 34.10% is 347.9% higher than the industry average of 7.61%. Its trailing 12-month EBIT and net profit margin of 31.09% and 20.52% are 181.2% and 308% higher than industry averages of 11.06% and 5.03%, respectively.
For the fiscal fourth quarter ended December 31, 2023, AGI's operating revenues and earnings before income taxes were $254.60 million and $71.90 million, representing year-over-year growth of 9.8% and 16.7%, respectively. In the same quarter, net income and earnings per share increased by 16% and 20% compared to the prior-year quarter, to $47.10 million and $0.12, respectively.
The Street expects AGI's revenue and EPS for the fiscal first quarter ending March 2024 to increase 8.2% and 16% year-over-year to $272 million and $0.13, respectively. The company has topped consensus EPS estimates in each of the trailing four quarters and surpassed consensus revenue estimates in three of the trailing four quarters, which is impressive.
Over the past year, the company's stock has gained 23.9%, closing at $13.62 in the most recent session. It has gained 16% in the last nine months.
AGI's solid foundation is reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy rating in our proprietary rating system. POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted optimally.
The stock has a B rating for sentiment and quality. Within Miners – Gold the industry ranks 11th out of 43 companies.
To see additional POWR ratings on growth, value, momentum and stability for AGI, click here.
Stock #2: Barrick Gold Corporation (GOLD)
Headquartered in Toronto, Canada, GOLD explores, develops mines, produces and sells gold and copper properties in Canada and abroad. The company also explores and sells silver and energy raw materials.
On March 15, GOLD paid its shareholders a dividend of $0.10 per share for the fiscal fourth quarter of 2023. The company pays an annual dividend of $0.40 per share, which translates to a dividend yield of 2.55% on the current share price. The average four-year yield is 2.79%. Over the past three and five years, GOLD's dividend payments have grown at a CAGR of 6.6% and 16.1%, respectively.
GOLD's trailing 12-month CAPEX/sales ratio of 27.08% is 255.7% higher than the industry average of 7.61%. Its trailing 12-month EBIT and net profit margin of 21.66% and 11.16% are 95.9% and 121.9% higher than industry averages of 11.06% and 5.03%, respectively.
For the fiscal fourth quarter ended December 31, 2023, GOLD's revenues increased 6.9% quarter-over-quarter to $3.06 billion, while free cash flow was $136 million.
During the same quarter, adjusted net income and adjusted net earnings per share increased 11.5% and 12.5% from the prior quarter to $466 million and $0.27, respectively. As of December 31, 2023, GOLD's total short-term liabilities were $2.36 billion compared to $3.12 billion as of December 31, 2022.
The Street expects GOLD's revenue and EPS for the fiscal first quarter ending March 2024 to increase 7.1% and 35.5% year-over-year to $2.83 billion and $0.19, respectively. The company has exceeded consensus EPS estimates in each of the four consecutive quarters.
The stock gained slightly on the day, closing the latest session at $15.81. It has gained 7.2% over the past month.
GOLD's strong prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy rating in our proprietary rating system.
GOLD is rated B for growth and quality. In the same industry it ranks 8th.
In addition to what we stated above, we also rated the stock for value, momentum, stability and sentiment. Get all GOLD ratings Here.
Stock No. 1: Harmony Gold Mining Company Limited (HMY)
Headquartered in Randfontein, South Africa, HMY is engaged in gold exploration, mining and processing. The company explores deposits of uranium, silver, copper and molybdenum.
HMY's Board of Directors has approved an interim gross cash dividend of 7.61 cents per common share for the six months ended December 31, 2023, payable to shareholders of record on April 15, 2024. The Company pays an annual dividend of $0.12 per share, which translates into a dividend yield of 1.49% on the current share price. Its four-year average yield is 0.98%.
HMY announced that total gold production for the six months ended December 31, 2023 was between 820,000 and 835,000 ounces, an increase of approximately 12-14% compared to the six months ended December 31, 2022.
HMY's trailing 12-month CAPEX/sales of 13.69% is 79.8% higher than the industry average of 7.61%. Its trailing 12-month EBIT and net profit margin of 21.29% and 15.50% are 92.6% and 208.2% higher than the industry averages of 11.06% and 5.03%, respectively.
For the six months ended December 31, 2023, HMY's revenue and gross profit were $1.68 billion and $462 million, respectively, representing year-over-year growth of 25.2% and 165.5%.
During the same period, the company's net income attributable to owners of the parent company and earnings per common share increased by 197.2% and 200% compared to the year-ago period, to $318 million and 51 cents, respectively.
The company plans to produce 1.38 million to 1.48 million ounces of gold and gold equivalents in fiscal 2024 at an all-in sustaining cost (AISC) of less than RUB 975,000/kg ($51,956.10/kg).
Street expects HMY's revenue for the fiscal year ending June 2024 to increase 19.1% year-over-year to $3.14 billion.
Over the past year, the company's stock has gained 111.3%, closing at $7.88 in the most recent session. It has gained 89.4% over the last nine months.
HMY's POWR Ratings reflect its positive outlook. The stock has an overall rating of B, which equates to a Buy rating in our proprietary rating system.
HMY has an A rating for growth and a B rating for value and quality. In the same industry it ranks 5th.
click here for additional POWR ratings for HMY (Momentum, Stability and Sentiment).
What to do next?
43-year investing veteran Steve Reitmeister just released his 2024 market forecasts along with his trading plan and 11 top picks for the coming year.
Stock market outlook for 2024 >
GOLD shares fell $0.08 (-0.51%) in pre-market trading on Friday. Year-to-date, GOLD is down -11.38% compared to the benchmark S&P 500 Index's gain of 10.21% over the same period.
About the author: Neha Panjwani
Since her school days, Neha has had a deep fascination with finance, a passion that led her to pursue a career as an investment analyst after earning a bachelor's degree in commerce. Currently participating in the CFA program, Neha is dedicated to further expanding her knowledge of investment fundamentals. Neha's main goal is to help retail investors identify optimal investment opportunities by carefully assessing key aspects of financial instruments, with a particular focus on stocks and ETFs. Its commitment is to enable individuals to make informed and strategic investment decisions in the dynamic world of finance.
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