4 Shining Stocks: IAMGOLD, Barrick, Boise And Fibria Celulose

Includes: ABX, BZ, FBR, IAG
by: Investment Underground

This is not quite the best season for anything other than SPDR Gold Trust ETF (NYSEARCA:GLD), but material stocks show some lucrative performance indicators in an industry traditionally characterized by low operating margins and earnings growth coupled with a strong price incentive

IAMGOLD Corporation (NYSE:IAG) With fears of the European financial crisis on August 11, gold stocks generally took less of a beating, as noted by this article. IAMGOLD was more in line with the market performance on that day, with its stock price falling 7%, due to its business operations; it is a producer of mineral resources around the world, including gold mining and royalties in diamonds. Earnings growth has been impressive, as the company increased revenues by 75% over the last year as well as increasing operating margins by 35%, overtaking the increase in non-accrual costs of 16% by a healthy margin. For further information about the performance of the stock, read this research.

Even as price to earnings are heading downwards in the industry, IAG returned a 15.38% growth of its multiple at an extremely favorable PEG of 0.25 with $7.2 billion of market capitalization. Only two other competitors posted a PEG with positive earnings, Freeport-McMoran (NYSE:FCX) and Newmont Mining (NYSE:NEM), both of which are trading closer to 1. So far IAMGOLD has been riding the middle of the wave between the other two stocks mentioned, with the outlook as high as a 64.9% increase in earnings for the year and a track record of consistently outperforming analyst expectations.

Barrick Gold Corporation (NYSE:ABX), a gold stock with a growing interest in minerals extraction and plans of acquiring Equinox Minerals Limited for $7.6 billion in cash was recently awarded the highest investment rating of 5-stars (“strong buy”) by S&P due to its strong plans for expansion, with seven new mines built in the last five years. With the last couple of weeks being a little bit of a roller coaster ride for its share price, it is currently being traded close to its 52-week high at $50.78, as investors continue to patronize the world’s largest gold mining company with over twenty five mines around the globe. Despite the firming grounding in gold, the stock is trading at a very favorable PEG of 0.4, more akin to material companies with copper production Southern Copper Corporation (NYSE:SCCO) and Freeport-McMoran Copper & Gold, Inc. (FCX). With increasingly strong fundamentals to support business strategy, Barrick Gold has pre-tax profit margins of 47.3%, and Return on Equity of 20.2%, with a good possibility of an increase in dividend payout, given its low payout ratio in the last few years.

Boise Inc. (NYSE:BZ), now headed by Alexander Toeldte, ranks in the top slot in the paper packaging industry, ranked by performance as detailed in this article, with Packaging of America (NYSE:PKG) and Bemis (NYSE:BMS) also appearing in the list. Focusing on office paper, with sales of nearly $1.5 billion and 75% of its portfolio as the the third largest manufacturer of uncoated freesheet paper products, this environmentally active Boise, Idaho, company is a likely target for acquisition according to some analysts. With insider ownership of 11.38%, and strong institutional interest in the stock, Boise stock has a very low price to sales ratio of 0.29 based on trailing 12 month sales. Coupled with a strong annual earnings growth of 25% and a decreasing long-term debt to equity ratio, the plummet in share prices puts the stock at a PEG of 0.2, as analysts agree the price of the stock is currently undervalued. The improving balance sheet and free cash flows sufficient for it to weather the storms with a low EBITDA, the stock may be suitable for both long-term positions or short-term price advantage, given a favorable market. Traditionally in low operating margin industry, Boise has a slightly better operating margin than its rival Temple-Inland (NYSE:TIN), which had an operating margin of 4.4% in the last quarter on sales of $1 billion.

Fibria Celulose SA (NYSE:FBR), a major player in the paper pulp production industry with sales of over $800 million and market capitalization of $4.1 billion, FBR has a strong relative price advantage, given its positive earning trend, its shrinking operational losses and ability to generate free cash flows at $1.74 per share. We think FBR could suprise to the upside at earnings time, and therefore, we think it is a buy.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.