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Harmony Gold: An Inferior Way To Buy The Dip

Taylor Dart profile picture
Taylor Dart


  • Harmony Gold is down more than 45% from its Q3 2020 highs, massively underperforming the Gold Miners Index.
  • This sharp correction can be attributed to the company's industry-lagging margins, with Harmony announcing FY2022 guidance which projects operating costs above $1,540/oz.
  • At a share price of $4.10 with annual EPS of $0.60, Harmony is cheap, but I would argue that it's cheap for a reason, and higher risk than its peers.
  • Given that several high-quality names with industry-leading margins are also on sale and sitting near oversold levels, I see Harmony as an inferior way to buy the sector-wide dip.

Africa shaped from golden glitter on black (series)

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Investors in the Gold Miners Index (GDX) have had to endure a volatile year, with most of the volatility being to the downside. This is evidenced by a 13% decline year-to-date in the ETF, with some producers sliding

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Taylor Dart profile picture
"A bull market is when you check your stocks every day to see how much they went up. A bear market is when you don't bother to look anymore."- John Hammerslough You can access more in-depth research, my current portfolios, new positions I am entering/exiting, and proprietary sentiment indicators for gold miners in my newsletter below.  Returns Link: https://imgur.com/a/6fcWjD6Subscription Link: https://buy.stripe.com/3cseV37nl9Y7dUcaEI - Disclosure: I am not a financial advisor. All articles are my opinion - they are not suggestions to buy or sell any securities. Perform your own due diligence and consult a financial professional before trading or investing.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of AEM, GLD either through stock ownership, options, or other derivatives. 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.

Disclaimer: Taylor Dart is not a Registered Investment Advisor or Financial Planner. This writing is for informational purposes only. It does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Taylor Dart expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing. Given the volatility in the precious metals sector, position sizing is critical, so when buying precious metals stocks, position sizes should be limited to 5% or less of one's portfolio.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (13)

Very informative, thanks. But if margins are so thin, why does yahoo finance list dividend as 2,6%, high among miners with avg being 1%? Or is listing wrong as Zacks has dividend at 0.7%?
Taylor Dart profile picture
Hi David,

I would have to double-check, but as for the average, the average dividend yield among million-ounce producers last week was 2.65%, so 2.6% would be below the average. It's not useful to use the average across the peer group, since many are smaller and don't pay dividends, dragging down the average.
@Taylor Dart thanks what are you showing for your average dividend for harmony? Because I need to know whether Yahoo finance or is Zacks is unreliable.
Taylor Dart profile picture
Hi David,

In my last updates, I had Harmony paying $0.015, so $0.06 per year. At $4.00, it's 1.5%. I would generally not trust Yahoo Finance or Zacks, they just pull data from sources, they don't go through each one and vet the numbers, and you can really see some issues from names in South Africa, where sometimes they will pull the wrong currency and apply it to USD. With anything online, I would try and double-check it first just to be safe, or you're always welcome to ask me if something looks off, I cover the sector pretty closely.
Thanks for the analysis. Why do you like aem? What about GFI?

AEM and GFI are too expensive now. I like GFI when it is less expensive. Here is a chart of the ratio of GFI divided by the gold price. When the ratio is under .005 GFI gets interesting. With gold at $1795 now, the .005 ratio is at an $8.98 price for GFI. As for HMY, it is now around $3.50 and I bought some today. Yes, HMY is riskier than some other gold mining stocks, however at the current price of around $3.50, and the ratio of HMY/gold well below its 200 day moving average, it seems worth the risk to buy some HMY. If you don't own any, I suggest buying some SBSW shares.

HMY at $3.50 is very different than at $4.10. Some would say buy at around $3.50 and sell at around $4.10.


Taylor Dart profile picture
Hi David,

I've written extensively on AEM and GFI, you can read my articles. Don't mind 6228371, he has zero clue what he's talking about. AEM is the cheapest it's been since March 2020 and is a steal at $52.00 or lower.
AtalantaPonos profile picture
@Taylor Dart Thanks very much for the insight into HMY, and Happy New Year! As an owner of a few miners, I may have to follow you. To say the least miners can be very disappointing. In the past, when gold finally starts to move in the right direction, the miners' costs start to chip away at the profits. Perhaps things will be different this time. You did mention some possible positive catalysts for HMY, so I will keep these in mind. The markets may be entering a period where physical assets are properly valued. The long standing reason to avoid gold is the cost of storage, however there a plenty of ways to invest in gold without worrying about storing gold.
Taylor Dart profile picture
Hi Atalanta,

Thank you & happy new year to you too!

I try to be as conservative and objective as possible and provide good depth of research across 100+ names to those looking for ideas. Good luck!
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