The volatility over the last few years has had investors focused on gold and other precious metals more than usual. This market has appeal for so-called common investors because they understand there can be more security. There has also been a rash of public relations and marketing for the precious metals industry that has utilized everything from celebrity spokespeople to end-of-the-world fears to prompt investing. It is sometimes a misunderstood market, but that never changes its consistent profitability. Anyone who bought gold and other metals five to ten years ago is pretty happy with that decision right now. However, there are still many great opportunities out there. I have my eye on a few favorites.
Freeport-McMoRan (FCX) is tops on my list. The company recently released its 2012 earnings report and is considered one of the leading international mining companies. It is the world's largest publicly traded copper producer and the world's largest producer of molybdenum and has a significant gold production operation. The company owns a mine in Indonesia, which is one of the world's largest copper and gold mines. Freeport-McMoRan also owns mines in North and South America, and the Congo.
The company understands the market and takes care of its investors. Its goals include maximizing free cash flows and improving efficiency in the mines. It also focuses on building its financial profile and reducing debt, as well as growing its project pipeline. A focus on the future such as this is an important factor when buying precious metals, which is why Freeport-McMoRan ranks among my favorite buys.
Goldcorp (GG) is next on my list. Recently, Goldcorp enjoyed a bump because its quarterly earnings were less than expected. Unfortunately, but sometimes fortunately for buyers, when a minor glitch occurs, the market can react dramatically. Not reaching the earnings goals was due to some adverse ground conditions at one of the company's mines and it is expected to be a temporary situation. However, it has resulted in an opportunity for those interested in Goldcorp. It is the lower cost per ounce producer among the major options and has healthy debt/equity ratio at less than 3%. The company pays dividends, so even if you need to be patient, you can earn in the meantime. Goldcorp is also a diversified example of a precious metals option and has mining operations in Canada, the United States, Mexico Argentina, the Dominican Republic, Chile, and Honduras.
Goldcorp is currently right around its 52-week low and is trading at just slightly higher than book value at around $35. Most experts are advising it is a good buy between $35 and $40, but some believe it will be possible to get in around $25 in the coming months. If this should happen, I would advise being very aggressive. If its moment slips by and prices stick around the $35 mark, I would still make a move, but not go crazy. Once in I would stick around for awhile and aim for the top of the market. It could take patience, but some predictions have gold soaring to the highs of the late 70s and early 80s, topping out around $100.
Next up is Silver Wheaton (SLW). It is a favorite among the experts and has been one of the top performers in the silver market for the last five years or so. It has the highest market capitalization per employee of any of the US-listed companies and earns huge profits from investing, in addition to its mining operations. This means in addition to usual precious metals, the company also sees royalty payments. I think the time to get into Silver Wheaton is limited, so if you are planning to act it should be sooner than later. I think the price is about to take off, even more than it has in the first quarter of 2012, jumping from around $20 to $40 in just a few short months. The company also pays dividends and has a fairly generous dividend policy. Finally, it is a diversified company and there are plans to open at least three more mines in the near future.
I am throwing two more companies on this list of favorites, but they rank lower for me than the aforementioned three options. BHP Billiton (BHP) is the world's largest mining company and is often considered the standard bearer by the experts. What I have often struggled with when it comes to BHP Billiton is whether bigger is absolutely better, especially when there are no secrets about the steady climb of Billiton. BHP Billiton is diversified and also has its hands in aluminum, petroleum, diamonds, stainless steel materials, coal, and iron ore. If you are looking to get into precious metals for the long haul this is a great option. If you are looking to get in and out quick, look somewhere else.
Finally, on the list is Barrick Gold (ABX). It is on everyone's radar and it should be. The company focuses on gold and copper, and has more than two dozen mines, as well as projects in the Americas, Australia and Africa. At the moment, most experts are rating it a strong buy and I agree. The company is strong and looks to be strong for awhile. Most notable are the company's revenue growth, increase in net income, and strong valuation levels. It basically has everything even the most weary investor should look for in the precious metals market and could easily keep you feeling relaxed about an investment for well into the future. Barrick is a great play-it-safe option, but still a strong investment in my opinion. I would buy any of these but if pressed for just one, I am going with Freeport-McMoRan. I see the most potential and I think compared to many of the players in the precious metals market, it is slightly under the radar.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.