For the naysayers, listening to arguments for investing in precious metals stocks can sound like a broken clock. They may eventually be right, but at times there have been better short-term investment options. Particularly when investors are attempting to manage through higher for longer interest rates.
The purpose of this article isn’t to change your mind. The price of precious metals like gold and silver haven’t moved as much as investors expected even in the face of inflation that reached 40-year highs in 2022.
However, the price of a troy ounce of gold is at an all-time high. And it’s holding that value even as the pace of inflation begins to slow. Central banks across the globe are buying gold which, for a commodity that has a limited supply, will help sustain the current price.
The other most common precious metals: silver, platinum, and palladium are not at all-time highs, but the outlook for all three remains bright for investors looking for tangible assets with no counterparty risk. Much like owning physical metals themselves, precious metals stocks don’t need to take up a lot of room in your portfolio. But if you’re looking to get involved, or just looking for some watchlist candidates, here are three names to consider.
Newmont Gold (NEM)
It can seem like investing in mining stocks requires special knowledge. It can’t hurt, but in the long run, you’re investing in a company. This means that the fundamentals matter. That’s a reason why Newmont Gold (NYSE:NEM) is first on this list of precious metals stocks.
In its third quarter 2023 earnings report, Newmont issued a forecast for producing 5.3 million ounces of gold from all its operations. That number is with an all-in sustaining cost of $1,400 an ounce.
During the quarter, the company benefited from higher gold prices and lower direct operating costs to deliver adjusted earnings per share of 36 cents per share which was 10% higher on a year-over-year (YOY) basis.
Newmont also generated $397 million in free cash flow and has $3.2 billion of cash on the balance sheet despite going through a period of significant investment in its business. The company’s rock-solid balance sheet is backed up by an A- rating from Fitch, the first such rating for the company. Those are solid fundamentals. And the company pays a dividend that currently yields 4.28%.
Agnico Eagle Mines (AEM)
The Canadian-based miner Agnico Eagle Mines (NYSE:AEM) is definitely smaller in scale than Newmont. The company generated $1.64 billion in revenue in the last quarter, far shy of Newmont’s $250 billion. However, the company did generate earnings per share of 44 cents.
Although that number was lower YOY, it beat analysts’ estimates by one cent. Furthermore, the company is forecasting earnings growth of 10% in the next 12 months.
What Agnico lacks in revenue, it makes up for in valuation. The company has a trailing 12-month P/E ratio of around 9.4x. And the company’s forward P/E ratio of 23x compares favorably to Newmont which has a forward P/E ratio of 21x.
Analysts are bullish on AEM stock, giving it an average price target that is 40% higher than the closing price on November 21, 2023. And with that capital growth, investors get an attractive dividend with a payout ratio of just 30% and a yield of 3.23%.
abrdn Standard Physical Precious Metals Basket Shares ETF (GLTR)
Let’s say you want exposure to precious metals, but you’d prefer to own the physical metal itself. On the other hand, you have concerns about storing it. This is a common concern about owning precious metals. If it’s a concern you share, the abrdn Standard Physical Precious Metals Baskets Shares ETF (NYSEARCA:GLTR) may be a nice compromise among precious metals stocks.
Nearly 80% of the fund’s assets are in physical gold and silver. It also invests in platinum and palladium. This means the movement of the fund will track closely with the price of the underlying metals. This could be good news or bad news depending on your perspective.
In 2023, the GLTR fund is up a little over 6%. However, when you look at the fund’s performance over the last five years, you’ll see that it’s gained 49%. That’s an average annual gain of almost 10% during that time. And you get that with an expense ratio of just 0.60%.
On the date of publication, Chris Markoch 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.
