Gold prices have taken a hit this year, after a healthy run-up in 2020. However, the more savvy investor will consider such times as opportunities to invest in gold stocks.
The yellow metal had an incredible run last year, where its run price rose to $2,000 per ounce in August. Average prices dropped to $1,808 in February and further declined to $1,718 in March. Nevertheless, the drop represents an excellent opportunity to invest in gold stocks, which effectively served as hedges during last year’s market turmoil.
Gold is used as a hedge against an economic slump or a geopolitical crisis. Precious metals are typically considered safe-haven investments, which led to a sharp increase in prices. Naturally, investors looked at them as a viable store of value, and the supply chain disruptions added more fuel to the fire.
Gold stocks have proven to be one of the best ways to invest in gold. With lesser supply chain hiccups, they should start ramping up production again. Let’s look at three of the best gold stocks in the market right now:
- Kirkland Lake Gold (NYSE:KL)
- Franco-Nevada Corporation (NYSE:FNV)
- Sibanye Stillwater (NYSE:SBSW)
Gold Stocks: Kirkland Lake Gold (KL)
Kirkland Lake Gold is a Canadian operator of gold properties. The compoany owns two of the highest-grade gold mines in the world, including the Fosterville Mine in Australia and the Macassa Mine in Canada. The company performed incredibly well in the past year, with year-over-year revenue growth of more than 50%. Moreover, it boasts the strongest margins in the sector with an enviable balance sheet. Hence, KIRK stock’s 12-month returns are at an incredible 1,390% on the back of its stellar performance.
Kirkland kicked off the year in style, topping its production and cost guidance in the first quarter. It produced 302,847 ounces of gold in the first quarter, which comfortably surpassed its guidance of 280,000 ounces at the midpoint. Its all-in-sustaining cost (AISC) came in at $846 per ounce versus the management’s $1,000 per ounce guidance. Both of its mines exceeded expectations and expect to end the year with AISC at just $790-$810 per ounce sold. Hence, the company is in a strong position to continue expanding its revenue base, which has grown by double-digit percentages in the past several quarters.
Franco-Nevada Corporation (FNV)
Franco-Nevada is one of the safest bets in the sector due to its business model. It operates as a gold streaming and royalty company. The company buys gold from miners and offers them upfront funding. It has a pristine balance sheet with zero debt and massive forward revenue growth of 15%. On top of that, FNV stock has a long history of dividend growth, which bodes well for income investors.
Like Kirkland, it also started with a bang, increasing its gold equivalent sales to 149,575 troy ounces. This represents an almost 11% growth from the first quarter last year.
Overall revenues improved by 28% from the prior-year period. Though its average realized price was down, things should improve as gold prices start picking up again. Moreover, its net income remained stable, and without any debt, the company wouldn’t have to worry about its liquidity position.
Therefore, with a robust growth runway ahead, FNV stock is a gold stock that you can’t overlook.
Gold Stocks: Sibanye Stillwater (SBSW)
Sibanye Stillwater is a highly diversified platinum group metal producer operating in Latin America and South Africa. Moreover, it has one of the largest gold exploration activities in the industry. The company has been growing at an impressive pace in the past year, with revenue and EBITDA growth at 74.6% and 244.9%, respectively. Moreover, SBSW stock returned more than 100% in the last year.
The company was on a roll in 2020, posting a net profit of $1.78 billion, which dwarfs the $5 million generated in 2019. With the massive increase in profits, its net debt is negative at this time. Moreover, the company is one of the better gold stocks from a dividend perspective. Despite its stellar performance, SBSW is still undervalued across all major price metrics, making it a solid bet at this stage.
On the date of publication, Muslim Farooque 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
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.
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