On December 25, The Wall Street Transcript conducted a roundtable forum on investing in gold with Victor Flores (Senior Analyst, HSBC Securities), John H. Hill (Citigroup Global Markets) and Paul O'Brien (Raymond James & Associates). Some key excerpts with their stock picks:
TWST: What are some of the names that you would put at the top of your list?
Mr. O'Brien: Names like Yamana (AUY) and Agnico-Eagle (AEM) would be two at the top there. Eldorado (EGO) just started another mine recently. They just announced a gold pour. Those are our growth type names going forward.
TWST: Victor, are there any names that you would like at this point, or is the neutral pretty much across the board?
Mr. Flores: The neutral is the view on the group as a whole. Within that, there are obviously individual names that we would highlight. A few names that I would like at these prices are Gold Fields Limited (GFI), the big South African producer; Randgold Resources (GOLD), which is another mid-tier growth story like the ones that Paul tends to like; and one Canadian company that has a growth profile, Centerra Gold (CG). These are names that we overweight at this point in time, although overall our view on the sector is neutral.
TWST: Why Gold Fields? South Africa seems to be problem ridden.
Mr. Flores: I don't know that South Africa is anymore problem ridden than any other part of the world, quite frankly. Yes, the mines are deep, but that's something that these companies have been dealing with for a long time. The cost structure right now, given where the currency is, is somewhat higher than the global peer group, but not as high as you would think. When you look at the costs that are being reported by the likes of Newmont and Barrick, Gold Fields isn't at that much of a disadvantage. To the extent that the currency does weaken from these levels, and it has show the propensity to do that, you could see margins come up quite rapidly. Moreover, a company like Gold Fields has the types of assets that will keep it in business for a long time and, in fact, they won't be forced into making the types of acquisitions that we have seen from some of the other senior producers. So I am quite happy with Gold Fields as a South African producer. But, in fact, it has a fairly decent international portfolio to boot, so it is not an exclusively South African company.
TWST: John, what names are at the top of your list now?
Mr. Hill: We are actually restricted on a lot of the gold names that we cover, so really the only one that we are at liberty to discuss is Newmont Mining (NEM), which is a great company. It has had some execution issues. We would be buyers of Newmont, and of course there are many other interesting companies out there as well.
TWST: What is it about Newmont that's appealing at this point, given the problems that they have had?
Mr. Hill: We see value in the stock. We think that it is attractively valued, and we think that they are generating very strong margins and will get past the current operating headwinds to a period of stronger production. Again, we are not necessarily arguing that it's the single best gold company in the world; we're saying it's the only one we're not restricted on. We like gold. We think execution will improve. We like Newmont.