Investments in gold have always remained a safe bet amongst believers of trade. Since time immemorial, the glitter of gold has always attracted man resulting in establishment of gold standards even in currencies. At the time when the world is undergoing a financial turmoil, gold has provided a safe haven for those who want to see a secure future. This has led to an unbelievable rally in favor of the precious metal over the last couple of years. Even in the current year the analysts have predicted higher rallies courtesy of the fact that the speculators have been busy consolidating their positions in the market. It is further opined that countries like India, which is the largest consumer of gold, are likely to generate more wealth and disposable income resulting in enhanced appetite for the yellow metal. My research brought me to five highly regarded gold stocks, which I will examine for potential investment opportunities.
Yamana Gold Inc (NYSE:AUY)
AUY is engaged in production, development and exploration of gold in Brazil, Argentina, Chile, Mexico, and Colombia. The company is showing increasing profits over the past few quarters due to its increase in production and a surge in bullion prices. Factors like the European crisis in continuation with minimal U.S. recovery have added to the glitter in the stock.
This company has a lower P/E ratio of 19.18 as against a sector average of 22.10 and an EPS of about $0.76. It also has a low beta of less than 1 implying a relatively low volatility of the stock vis-à-vis the market. Moreover, the company has also increased its dividend payout last year. It also generated huge amounts of cash flow allowing it to expand its business without accumulating debt. Hence, low debt, low volatility and high business growth makes the stock attractive for investors who are looking for safe bets in the stock markets.
Kinross Gold Corporation (NYSE:KGC)
KGC is in the business of exploration, acquisition, development and operation of gold-bearing properties in U.S., Russia, Africa, and Chile. The main commodities are gold and silver in the form of ore. The company again enjoys a beta of well under 1 making it a stable and low-risk venture for the shareholders. The company's EPS is as high as $0.57 with a P/E of 12.87, which better than the sector average. Further, the current quarter's EPS for Q4 of 2011 is expected to be about $0.22. The stock is currently trading near its 52-week low due to the high acquisition price that the company paid for M/s Red Back Mining. Most analysts are therefore moderately positive on the stock. Due to the company's growing sales, income and cash flow, the stock surely can find a place in an investor's portfolio since it is expected to give moderate returns with low risks.
New Gold Inc (NYSEMKT:NGD)
NGD is an intermediate gold producer having assets in the United States, Mexico, Australia, Canada, and Chile. The company has an estimated yearly EPS and P/E ratio of about $0.44 and 24.93 respectively, which are little poorer than the sector averages. However, it is expected to report earnings per share of $0.10 for the quarter, according to consensus estimates in Q4 of 2011. Though the company has not delivered any dividend in the recent past, it has shown a decent growth in its sales and income in Q3 of 2011. Further, in December 2011, it acquired Silver Quest Resources Ltd. and Geo Minerals Ltd. and has therefore expanded operations. The beta of the stock is well above 1 making it susceptible to the market fluctuations. However, the stock is recommended as a buy by most analysts due to its presence in the bullion market, its positive growth and business expansions. An investor with moderate-to-high appetite for risk can consider buying the stock with a medium- or long-term horizon.
AngloGold Ashanti Limited (NYSE:AU)
AU is a mining company, which has a presence in 10 countries spread over four continents operating both open-pit and underground mines and surface metallurgical plants. The company has managed to post higher profits and has given a healthy forecast for 2012 in its 2011 Q4 earnings. Further the company has a healthy P/E of 15.38 against an industry average of 21.87 and a high EPS of $2.91, generating an ROE and ROI of almost 29% and 15% respectively.
The beta of the stock is well under 1 making it an ideal stock for investment in this sector. In addition it is also showing a constant growth in its sales and income figures due to the ever-rising price of gold. Because the company has been regular with dividend payouts, it is a lucrative option for investors. Hence, the stock is highly recommended as a "buy," both with medium as well as long-term outlook.
Goldcorp Inc (NYSE:GG)
GG is a gold producer operating, exploring, developing and acquiring precious metal properties in Canada, U.S., Mexico and Central and South America. The company has an EPS of about $2.54 and a P/E of about 23, which is considerably high compared with the industry average. However, the earnings growth of the stock has been negative over the past year and can therefore be considered as such.
One of the points, which are in favor of investment for the stock, is its positive price-to-sales multiple, which is significantly higher than the other stocks in the industry. Further, the stock has been recommended as a "buy" or an "outperform" by a majority of the stock analysts due to its strong management and a heavy balance sheet. Hence, it is recommended that investors may invest in this stock with an understanding that the price of gold is only going one way, that is north.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.