Investors seeking defensive exposure in this market may turn their attention to mining socks. These companies, involved in locating, extracting, and processing valuable minerals vital for global industries, play an essential role as a growth engine for the global economy. Without various important base metals, entire industries wouldn’t be possible. Indeed, these companies may be viewed as pick-and-shovel play into various long-term secular growth trends.
That said, there are reasons why some investors may not want to go all-in on this sector right now. If we are indeed headed into a recession, demand for various metals and minerals will undoubtedly decrease. And while the names listed below are among the best relative options in their sectors, this thesis generally holds true.
Thus, the mining stocks below are ones I think are solid long-term bets, but much more attractive at lower levels. While I wouldn’t back up the truck right now, investors may want to make room on their trucks to add these stocks at more depressed levels.
Newmont Mining (NEM)
Newmont Mining (NYSE:NEM) is a major player among top dividend gold stocks, also producing copper, silver, zinc, and lead. With a strong global portfolio, Newmont operates in favorable mining areas across multiple continents. However, despite its significance, NEM’s equity value declined by over 15% recently.
Newmont anticipates a $400 million rise in free cash flow with every $100 increase in gold price, potentially leading to a $2 billion annual increase with a $500 gold price surge. For those bullish on such a move materializing, Newmont would certainly have much-improved dividend, credit, and valuation metrics. The company’s recent $20 billion agreement to acquire Newcrest Mining will bolster its gold reserves, and diversify the company into copper production without straining Newmont’s credit profile.
For daring investors, Newmont presents an opportunity to grab a leading dividend gold stock at an appealing markdown. While the Covid-19 crisis affected its business and led to losses from lower gold prices, Newmont maintains a solid 11.1% operating margin, outperforming most peers.
Nutrien (NTR)
Nutrien (NYSE:NTR), the world’s largest fertilizer company, reported an 88% Q2 profit drop to $448 million. This attributes to lower fertilizer prices and weak potash sales abroad. Earnings per share fell to 89 cents from $6.51 year over year, proving a big drop.
The company foresees continued negative impacts on earnings and sales due to low prices and demand through mid-2024, possibly influenced by a global economic downturn. NTR stock declined 23% in the past year.
Nutrien navigated war-induced volatility, with crop nutrient sales surging due to Ukraine conflict disrupting exports. However, stable factory operations led to price decline. While NTR’s EBITDA forecast slightly lowered for 2023, the stock shows potential for around $20 upside. As a global commodities leader, it offers portfolio inflation protection. Consider owning it for potential market inflation ahead.
Teck Resources (TECK)
Teck Resources (NYSE:TECK) stands out as a consistent and impressive performer, delivering positive returns amid market uncertainties. With a 129% rally in the past three years and an 11% increase in 2023, Teck stock currently trades at $56.27 per share, outperforming the TSX Composite benchmark’s 3.8% year-to-date rise.
TECK opened at $41.94, presenting an appealing diversification opportunity with a $21.47 billion market cap and price-earnings ratio of 16.98. The company’s resilience to market shifts is evident with a beta of 1.07, aligning its movement with the broader market for stability.
In 2023, commodity market weakness impacted mining’s profitability. Teck’s Q2 EBITDA fell 55% to $1.48B, revenue dropped 39.2% YoY to $3.52B. Macroeconomic volatility may further impact commodity prices and Teck’s short-term results. Despite these challenges, Teck is a strong TSX stock for long-term investment, with a solid financial position and enduring fundamentals.
On the date of publication, Chris MacDonald 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.
