Gold And Silver Stock Picks: How Are We Doing So Far?

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Includes: ABX, FCX, GG, GLD, GOLD, HL, NEM
by: Lawrence Williams

Summary

On December 30 we published some gold and silver investment recommendations. Now the miners have published their 2016 Q4 and full year statements. So how have we done so far?

Since the year end gold has risen 9% and silver 15%.

Some gold and silver stocks have outperformed the metal price rises, and nearly all have exceeded the much-hyped rise in the S&P 500.

Back in late December we published our gold and silver stock picks for the year ahead here on Seeking Alpha - see: 2017 Predictions - Gold, Silver, PGMs, The Dollar, Markets and Geopolitics.. We are now almost two months into 2017 and 2016 Q4 results are now in. It is thus an interesting exercise to compare the growth, or otherwise of the gold and silver stocks selected, gold and silver prices and general equities.

It is very apparent (see table below) that some of the stock picks year-to-date - and at time of writing - have outperformed the rise in the metal prices, but on average the figure is not quite so positive with silver outperforming gold yet again. Nearly all the stocks and, the gold and silver prices too, have so far substantially outperformed the heavily media-hyped growth in the major general equities indexes. But timing is everything. Had we taken the stock prices of only a week earlier the performance of the gold and silver stocks compared with the S&P Index would have been even greater - despite gold and silver prices being higher now than they were then. The markets are fickle!

Indeed on average (unweighted) the selected stocks have risen by around 9% compared with a gold price rise of a somewhat similar amount. Silver is up 15% while the S&P 500 has risen by 5.7%. But interestingly the S&P500 is at, or near, its record high, while the gold and silver stocks and metal prices are mostly hugely below their record highs which suggests there remains great growth potential, particularly in the gold and silver stocks provided that the gold price does not falter significantly - and so far it appears to be strengthening.

Table: Gold and Silver Stock Picks Dec 30 2016, Prices and S&P500

Company

Ticker

Price Dec 30th (US$)

*Price Feb 28th (US$)

% gain (loss)

Hecla Mining

NYSE: HL

5.24

5.61

7.1%

Barrick Gold

NYSE: ABX

15.98

18.82

17.8%

Newmont Mining

NYSE: NEM

34.07

34.63

1.6%

Goldcorp

NYSE: GG

13.60

16.16

18.8%

Gold Fields

NYSE: GFI

3.01

3.19

6.0%

Franco Nevada

NASDAQ: FNV

59.76

65.54

9.7%

Royal Gold

NASDAQ: RGLD

63.35

66.68

5.3%

Silver Wheaton

NYSE: SLW

19.32

20.01

3.6%

Sandstorm Gold

NASDAQ: SAND

3.90

4.21

7.9%

Randgold Resources

NASDAQ: GOLD

76.34

92.27

20.9%

Freeport McMoRan

NYSE: FCX

13.19

13.40

1.6%

Gold Price

1,151.68

1,256.55

9.1%

Silver Price

15.93

18.39

15.4%

S&P 500 Index

2,238.83

2,360.44

5.4%

*Price at time of writing

The standouts here are Randgold Resources (NASDAQ: GOLD) which at long last seems to be gaining traction among American investors despite all its mines being in Africa, Barrick (NYSE: ABX) and Goldcorp (NYSE: GG). Barrick, as the world's largest gold miner, is very much the go-to gold darling for the institutional sector when it realizes it has been horribly underweight gold and ventures into a more risky investment than that offered by the SPDR gold ETF (NYSEARCA:GLD), which effectively mirrors the metal price, while Goldcorp was a strong pick for us given we chose it as offering good recovery potential from a pretty disastrous start to the 2016 year.

The biggest disappointment for us so far has been Hecla (NYSE: HL). Although this has actually come back sharply in the past week or two for no real reason that we can see except perhaps profit taking. Medium to long term prospects would look to remain strong so we would stick with this one despite its relatively poor stock price performance year to date. It is generating decent cashflow, being able to finance its capital programs internally.

Newmont (NYSE: NEM) is the other main disappointment having underperformed its peers so far this year. It seems to see rising costs ahead which is, in part, a function of costs savings of the past few years having plateaued. If the gold price stays where it is, or rises further then Newmont could do well in 2017 despite the higher costs.

The same goes for most of our stock picks - except perhaps Freeport McMoRan (NYSE: FCX) which has been once again running into a dispute with the government of its host country, Indonesia. While FCX is a top tier gold producer in its own right, because of the high precious metals content of its Indonesian flagship mine's orebody, it is still primarily a copper producer and thus has somewhat different revenue/price parameters than the others on the list which are all primary gold or silver miners or have their revenue flows primarily tied to precious metals. We would also stick with the royalty and streaming companies which make up the balance of the list. These tend to be less volatile than the miners themselves and tend to have a lower downside should metal prices fall given the diversification of their revenue earning assets.

So overall it is early days yet in 2017. With gold and silver running higher one can anticipate another boost to revenues and earnings across the board in Q1 if metal prices are maintained - but precious metals did very well early in the year last year too, but they came back quite sharply from 2016's Independence Day before picking up again following the Christmas holiday.

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

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.