Gold stocks are frequently forgotten when it comes to investing in precious metals. While most people are knowledgeable about purchasing the bullion, bars or options, many simply overlook the mining & exploration companies that remove the metal from the ground. Many of these companies represent excellent investments, and a good trader will find ways to incorporate them into a diversified portfolio. From this list, five gold stocks with potential are Barrick Gold Corporation (NYSE:ABX), Iamgold Corp (NYSE:IAG), Goldcorp Inc (NYSE:GG), Newmont Mining Corp (NYSE:NEM) and Allied Nevada Gold Corp. (NYSEMKT:ANV)
Barrick Gold Corp
Trading around $48.50 per share, Barrick is the largest gold miner in the world. The company is well-known even outside of investment circles, as the company does a great deal of advertising. A well-managed company, ABX has an operating margin of 46.49% and a return on equity of 19.14% while increasing its profits to $1.42, a jump of 52%.
Barrick enjoys a very solid return on its investments. By keeping production costs as low as possible, the company garners near $1,400 per ounce of gold it extracts, and it had a year-to-year quarterly revenue growth of 44.90%. The company is currently bringing up several new US-based mines; this move bodes well for future expansion. The one-year target estimate is an impressive $67.54, suggesting a potential gain over nearly 40% in the upcoming year. These strong numbers keep the company positioned to be a very good investment this year.
Like Barrick, there are a number of reasons to be excited about Iamgold Corp. This Ontario-based mining & exploration company has over twenty years in the business and is currently working projects in Canada and Ecuador. The mid-cap company has a P/E of 8.02 and its shares are currently trading at $17.47, up from the last time I recommended it. With a one-year target estimate of $26.41, Iamgold is set for another strong year.
After a volatile 2011 that saw its shares trade from 14.69 to 23.88, the stock is expected to turn higher and push past the 52-week high. IAG is unique in this business sector because of its zero debt standing, a rarity in the mining business. It is likely that as production and gold prices increase, the company will see greater profits; this combination makes Iamgold Corp a strong consideration as a new holding.
Like Iamgold, Goldcorp is trading well below its moving averages, suggesting that a big climb in share price is about to occur. Currently at $45.11, this believe is backed up by its one-year target estimate of $67.86, an impressive climb of nearly 50.4%. The strong performance is being shared with the investors, as Goldcorp announced its first monthly dividend for 2012; a $0.45 per share rise that will good people interested in the company.
Goldcorp is another company that is trading below its moving averages, suggesting that expectation of additional increases is founded. The company has a P/E of 22.92, but its return on equity is only 9%. For this reason, some analysts are recommending investors consider the other companies in this group for immediate investment.
Newmont Mining Corp
Like Goldcorp, Newmont Mining Corp had a good 2011, but it is still trailing its competition as 2012 rolls around. Trading at $62.65 per share, the stock has a one-year target estimate of $79.84. The Colorado-based company has operations in the United States, Australia, Peru, Indonesia, Ghana, Canada, New Zealand, and Mexico. The price is primed to rise, as it is trading below its 50-day average and just above its 200-day total.
Like many of its competitors, Newmont had a profitable 2011, with return on equity of 19.57% and profit margin of 21.75%. The year-to-year quarterly revenue growth was a meager 5.7%, and there are some concerns about its debt to cash ratio, which has climbed over 2. Because this business sector is so competitive, these minor blips suggest that considering one of the other companies for new purchases might be a better idea at the current time.
Allied Nevada Gold Corp
A number of analysts are particularly excited by Allied Nevada Gold Corp. Based in Reno, Nevada, the company is performing well in both silver and gold, with projects based in Hasbrouck, Mountain View, Three Hills, Wildcat, Maverick Springs, and Pony Creek/Elliot Dome. Currently trading below both its 50 and 200-day moving averages at $32.58 per share, the company has a very strong one-year target estimate of $51.36, which represents an increase of 58%.
Much of the company’s optimism is based on plans to increase output by approximately 600% over the next three years. With a gaudy P/E of 115.53 and a chance to climb well past its 52-week high of $45.90, many analysts are stating that Allied Nevada Gold Corp is a strong buy.
Finding Gold Stocks with Profit Potential
While many people are unfamiliar with investing in gold stocks, they represent a potentially profitable addition to any portfolio. If a growing number of analysts is right and gold rises to $3,000 per ounce, the returns on these investments could be phenomenal. Buying gold stocks allows people to take advantage of the benefits found in the gold market, without forcing them to accept delivery of the actual metal or plan for its storage. Gold stocks trade independently from the precious metal itself, but off the chance to enjoy potentially large profits.
There are a number of mining & exploration companies, and the risks & rewards vary with each one. Among these five gold stocks with potential, Barrick Gold, Iamgold and Allied Nevada Gold are the three that show the most promise, while Goldcorp and Newmont Mining, while potentially very profitable, maybe just a step behind.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.