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Barrick Gold: Buy The Breakout

Feb. 11, 2019 11:03 AM ETBarrick Gold Corporation (GOLD), ABX:CA16 Comments


  • In my article last month on Barrick Gold, I discussed how the early January sell-off was expected, and it was a great opportunity to rebuy. Since then, the stock has returned 15%.
  • The catalyst for GOLD will continue to be the rapid reduction in net debt as well as the exceptional cash flow generation from its portfolio of high-margin gold assets.
  • We have two important price levels to watch, and they are in the same vicinity. A 3% increase in GOLD clears both, which would be tough for shorts to defend.
  • Looking for more? I update all of my investing ideas and strategies to members of The Gold Edge. Start your free trial today »

Barrick Gold (NYSE:GOLD) remains one of my favorite stocks in the gold mining sector.

In my article last month (Barrick Gold: It's Time To Reload), I discussed how the early January sell-off (post-merger with Randgold) was expected, and I considered it a great opportunity to rebuy or acquire more shares of GOLD.

Since then, the stock has returned almost 15%, far surpassing the performance of the NYSE Arca Gold Bugs Index (which has also seen a strong run).

(Source: YCharts)

GOLD has been crushing it since the September 2018 lows, as it has increased by almost 40%. The HUI has generated significant returns since then as well, but GOLD has been a clear leader. As a side note, the Nasdaq is down 8% by comparison.

(Source: YCharts)

It's not too late to buy GOLD; in fact, the shares are on the verge of breaking out, which could catapult the stock. Before I discuss the technical picture, I just want to recap the strong fundamentals that support additional appreciation in Barrick's share price.

Continued Debt Repayment And Strong Margins

The catalyst for GOLD will continue to be the rapid reduction in net debt as well as the exceptional cash flow generation from its portfolio of high-margin gold assets.

Net Debt

Barrick is undervalued because investors are still pricing the stock according to where the debt load used to be, not where it's at today and certainly not where it's trending.

The Barrick/Randgold merger just closed on the 1st of this year, so we don't have official combined financial figures for the company yet. However, factoring in the cash and debt positions of both companies at the end of Q3 2018, the combined net debt stood at $3.35 billion. Compare that to the $11.85 billion figure just six years ago. This updated total also doesn't include any free cash flow

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This article was written by

SomaBull profile picture
Leader of The Gold Edge
In-depth coverage and analysis of gold and the gold mining sector

I’m a private investor with a strong track record of outperformance, and also currently work as a research consultant for high-net-worth clients who invest in the precious metals sector.

My focus was mostly on Tech/Internet when I started investing, but almost 20 years ago I became extremely interested in the gold and silver sector as I anticipated a major bull run.

I’ve been doing in-depth research on gold and silver miners since then. I'm familiar with their stories, their stock patterns, their highs and lows, their operations/projects, their successes and failures, their management teams and turnover at the top, and all other facets of these precious metal companies.

This sector is my singular focus as I expect a massive bull market will unfold. These mining stocks are the cheapest they have been in over a decade, some in fact, are near multi-decade lows as they are oversold and significantly undervalued. I expect strong appreciation in these mining stocks as the bull market in gold and silver recommences.

I believe in buying value, and not chasing the next hot stock. I use several basic investing principles, the main one being buying the balance sheet. I wait for opportunities to present themselves and then establish positions. I believe in doing your homework, and I have a very research intensive focus.

*Disclaimer* I am not a Certified Financial Advisor. My research and articles should not be interpreted as a recommendation to purchase, sell, or hold any security at any time. The accuracy, completeness, or timeliness of the information posted in my articles is not guaranteed. Do not rely on any statement that I make in my articles. All readers and subscribers should always conduct their own research and should consult a professional financial advisor when it comes to making investment decisions.

Analyst’s Disclosure: I am/we are long GOLD. 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.

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