Gold mining stocks are back in demand. As a classic hedge against market downturns, these companies are time-tested safe havens. We’re heading into unfamiliar territory, with historically high-interest rates and signs of structural weakness in the economy. Now might be a good time to consider these gold mining stocks as hedges against a potential recession.
There are also other uses for investing in gold mining stocks. Not only does gold have defensive qualities, but the companies that mine the precious metal often pay juicy dividends and have a solid total return trajectory. Gold is an essential component in electronics, and its demand is set to rise with the growth of semiconductors.
So here are the best gold mining stocks you should add to your portfolio today.
Barrick Gold (GOLD)
Barrick Gold (NYSE:GOLD) is one of the world’s largest gold mining companies. It has a strong track record of solvency and EPS growth.
Barrick Gold’s recent quarterly earnings showed a mixed bag: it beat EPS estimates but missed on revenue, with modest profitability metrics like a 1.06% net margin and a 3.46% ROE. Despite this, institutional investors, who hold about 55.45% of the stock, have been actively increasing their stakes, signaling long-term confidence in the company.
Still, there are great reasons to add Barrick to your portfolio or at least your watchlist. For one, it’s undervalued on a forward P/E basis which stands at just 18. Also, Wall Street gave the company a $14.10 price target recently, which implies a significant upside potential.
All in all, it’s a top gold mining stock that you should pay attention to.
Wheaton Precious Metals (WPM)
Wheaton Precious Metals (NYSE:WPM) is not a traditional mining company but a gold streaming company. The corporation provides upfront capital to miners and secures a stream of precious metals in return. This model could offer a hedge against the operational risks associated with mining.
The company exceeded Q2 earnings and revenue estimates, posting $0.31 EPS and $264.97 million in revenue. Despite underperforming the S&P 500 this year, the stock has more than doubled over the past five years. The company’s future performance hinges on management’s outlook and its current consensus analyst rating is Hold, suggesting it’s expected to perform in line with the market.
The company also announced a quarterly dividend with a yield rate of 1.40% and a payout ratio of 44%, indicating a commitment to returning value to shareholders. This means WPM offers a stable dividend as well as a strong outlook for future growth.
Franco-Nevada (FNV)
Similar to Wheaton, Franco-Nevada (NYSE:FNV) also operates in the streaming space. It has a diversified portfolio that includes not just gold but also other precious metals, providing an additional layer of safety.
The company reported a decline in Q1 2023 revenue to $276.3 million, down from $338.8 million in Q1 2022. The company attributed the decline to production disruptions and lower energy prices, with precious metals revenue contributing $212.2 million and energy revenue adding $64.1 million.
Despite the setbacks, the company ended the quarter with a strong cash balance of $1.25 billion and anticipated stronger precious metal deliveries in Q2.
Sometimes, when a company shows a marginal weakness, it presents buying opportunities for contrarian investors. Buying a stock when it performs strongly quarter-to-quarter comes with the downside of buying the stock when it is high and hoping to sell higher later. There’s also the case that a company may perform strongly for several years before its results tumble, leading to negative growth for investors’ capital.
I’m confident that FNV’s weaknesses are only temporary, so it might be a good idea to pick up shares now while they are still cheap.
On the date of publication, Matthew Farley did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
