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Summary

  • There is turmoil in the world right now, with a number of "hot spots" that have the potential to heat up further.
  • With geopolitical risks mounting, gold stocks are rising in my rankings.
  • Randgold Resources is a gold stock I just started buying.

There is turmoil in the world right now, with a number of "hot spots" that have a potential to heat up further. And with geopolitical risks mounting, it is no wonder that many precious metal stocks, and in particular gold stocks, have started to move up.

Gold stocks in general have underperformed the market the last few years. Looking at the historical performance of the SPDR Gold Shares ETF (NYSEARCA:GLD) as a proxy for gold stocks, it has significantly underperformed the S&P 500 Index by a huge margin on a 3- and 5-year basis. And last year, while the U.S. stock markets were on a tear, gold stocks declined more than 28%.

(Data from Best Stocks Now app)

However, given the increased geopolitical risk in the world, particularly in the Middle East and Ukraine, gold stocks are starting to move up in my rankings and there are several names that I'm starting to warm up to.

One name that looks interesting to me is Randgold Resources (NASDAQ:GOLD). As you can see from the chart below, the stock just recently broke out to the upside.

(click to enlarge)

Randgold Resources Ltd. is a British ADR headquartered in St. Helier, Channel Islands. Randgold explores and develops gold deposits in sub-Saharan West Africa. Despite some investor wariness about investing in Africa, West Africa has been a very stable mining jurisdiction and has a lot of unexplored lands which contain high-grade gold deposits.

The company is also very focused on profitability and low-cost production. Unlike many of its peers, Randgold did not have to write down any of its reserves in 2013 given its more conservative price projections. It also has no debt, and has been prudent with its acquisitions. These superior management traits have resulted in strong performance relative to its gold stock peers.

So let's take a closer look.

Gunderson Capital Best Stocks Now Analysis

(Data from Best Stocks Now app)

Randgold Resources is a mid-cap stock with a market capitalization of $8 billion. On a valuation basis, the stock has a trailing P/E of 29 and a forward P/E of 19, which makes it look expensive, but keep in mind that valuation is based on a low earnings base which is likely to improve, should gold prices continue to increase. But for now, Randgold has a Value Grade of D-.

(Data from Best Stocks Now app)

As mentioned previously, Randgold's stock price performance has been much better than most of its gold stock peers. Its average annual returns on a 3- and 5-year basis are better than those of the GLD ETF. Its 10-year average total return is 25%, which is actually better than the S&P 500 Index.

(Data from Best Stocks Now app)

The stock's recent returns have been impressive, giving it a Momentum Grade of A-. The stock is up more than 39% year-to-date. The stock is currently ranked #613 out of 3,800-plus stocks in the universe, but is moving up quickly in the rankings. It currently earns a Stock Grade of B+.

(Data from Best Stocks Now app)

I have recently established a new position in Randgold shares. The Metals/Mining sector currently rates a C+, and gold as an asset class rates a B. But should political instability in the world worsen, gold may move into favor in the coming weeks. And Randgold Resources looks like an interesting name among gold stocks.

Disclosure: The author is long GOLD. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.

Source: Why I'm Buying Gold Stocks Right Now