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It’s all the rage. We’ve seen it take the headlines by storm recently, gaining never-before seen heights as this precious metal recently hit the $1,600/ounce ceiling. But then again, up to 5% falls are not uncommon for gold, so you need to know the right place to make hay when the sun shines.
One thing you have going for you no matter what, is that gold has, and always will be, seen as the undisputable standard for real value, even as central banks decide to do with their paper.
So unless you’re thinking of having an Egyptian tomb full of bullion for the afterlife, you might want to consider a more practical investment in a portfolio of the seven gold stocks presented below. Wall Street analysts predict a 15% annual earnings growth rate on these stocks over the next five years with at most 4% on the down side.
Royal Gold, Inc. (RGLD)
Headquartered in Denver, Colorado and traded on the NASDAQ Global Select Market under the symbol “RGLD,” and on the Toronto Stock Exchange under the symbol “RGL.”, Royal Gold, Inc. owns and manages royalties on gold and other precious metal production in some of the world's most prolific gold regions. This stock posted a 15% return this year and more than 90% quarterly earnings growth rate. Royal Gold Inc., has a market capitalization of $2.88 billion and a trailing P/E ratio of 75.7x. RGLD is expected to earn $0.09 per share in 2012.
As a royalty company, Royal Gold is also primarily an investor, so it painstakingly chooses its portfolio investment while eliminating the operational risks. RGLD's current stock price ($65.4) shows a positive sign as it is within 15% of the 52-week high ($67.29) and is showing good relative strength to the market. Notable strengths are low gearing and positive cash flow from operations even though ownership is mostly external to the company. Analysts refer to the stock as an ‘uncut gem’ due to its small capitalization still under the institutional buying radar, so no surprises when this stock really takes off.
Randgold Resources Ltd. (GOLD)
Randgold Resources is a gold mining and exploration company focused in Africa with listings on the London Stock Exchange and Nasdaq. Randgold has produced approximately 5.8 million ounces of gold and distributed more than $1.6 billion to stakeholders through its mining operations. This stock posted a 5% return last year but quarterly earnings declined 16.5% year on year. With market capitalization of $6.9 billion, GOLD has a trailing P/E ratio of 67.5x and is expected to earn $0.50 per share in 2012.
While we can’t completely discount the significant country and political threats despite the prevailing stability in the region, Randgold has potential for some of the most promising gold discoveries due to their concentrations in Western and Central Africa. Analysts expect earnings to grow at an average annual rate of 53.5%, even as actual stock performance continues to outperform previous estimates. With a strategy of targeting profitable gold deposits that have mineable gold reserves of three million ounces or more, Randgold already has sizable annual sales and 40.2% EPS growth over the last 10 years and strong internal financial management ratios with little reliance on debt financing.
New Gold, Inc. (NGD)
New Gold Inc. is listed on the Toronto Stock Exchange, and the NYSE under the symbol NGD. New Gold has a portfolio of global assets in the United States, Mexico, Australia, Canada and Chile as an intermediary gold producer. NGD gained 159% this year. With market capitalization at $4.5 billion, NGD shows a trailing P/E ratio of 25.3x. New Gold has a 30% interest in El Morro copper-gold Project in Chile and is expected to earn $0.21 per share next year.
Newmont Mining Corp. (NEM)
Headquartered near Denver, Colorado, Newmont Mining Corporation was founded in 1921 and publicly traded since 1925. Newmont is one of the world’s largest gold producers and is the only gold company included in the S&P 500 Index and Fortune 500. It has significant interests in the United States, Australia, Peru, Indonesia, Ghana, Canada, New Zealand and Mexico, and high standards in environmental management, health and safety and is part of the Dow Jones Sustainability World Index. NEM returned 11% during the last twelve months with a 45.5% quarterly earnings growth. It has a market capitalization of $26.7 billion and a trailing P/E ratio of 11.9x. NEM is expected to earn $2.24 per share in 2012.
Yamana Gold, Inc. (AUY)
A gold producer focused in Canada with land positions in Brazil, Argentina, Chile, Mexico and Colombia, Yamana plans to target gold consolidation opportunities with a primary focus in the Americas. AUY gained 29% during the last year with a 343.5% quarterly earnings growth rate. It has a market capitalization of $9.2 billion and a trailing P/E ratio of 20.4x. AUY is expected to earn $0.75 earn per share in 2012.
Eldorado Gold Corp. (EGO)
A Canadian international gold producer operating in China, Turkey, Brazil and Greece, Eldorado Gold Corporation is working on bringing up their production to approximately 1.5 million ounces of gold annually in 2015. The top performing S&P/TSX Composite Index in 2008 and in 2009, Eldorado Gold returned 34% last year and a 32% quarterly earnings growth. With a market capitalization of $8.9 billion it shows a trailing P/E ratio of 43x. It is expected to earn $0.52 per share in 2012.
Agnico-Eagle Mines Ltd. (AEM)
With headquarters in Canada, Agnico-Eagle is a gold producer that has been around for a while with operations in Canada, Finland and Mexico and the United States that has paid a cash dividend for 29 consecutive years. AEM gained 25% over the year and reported 83.5% growth in quarterly earnings. It has a market capitalization of $11.4 billion and a trailing P/E ratio of 34x with expectations of earning $0.55 per share. AEM, like other operators like it, are likely a better bet than ETF trust options like SPDR Gold Shares (GLD).
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
