Gold jumped earlier this week as investors brace for yet another inflation report. According to Reuters, Bart Melek, head of commodity strategies at TD Securities, said that while he’s “optimistic” on gold, uncertainties regarding the Fed’s moves could keep a lid on gold’s trajectory going forward.
Stagflation Can Cause Gold Rally to Continue
Chris Mancini, Gabelli Gold Fund associate portfolio manager, recently talked to CNBC and said that there are signs of stagflation and if Americans begin to pile into gold to offset the effects of this new uncertainty, gold prices could continue to rally. Bob Parker, senior advisor at International Capital Markets Association, said while talking to CNBC that the massive demand for gold from Chinese retail investors has been a major factor behind the latest rally in gold prices. The analyst said there are rumors that the Chinese government may initiate a devaluation of the yuan, and the property crisis in the country is also causing investors to buy gold. The analyst, however, noted that gold prices could see a “setback” soon as inflation is expected to decline.
Gold Vs Stocks
Whether or not gold is a better investment when compared to stocks has been a topic of immense debate over the past several decades. Gold is volatile as its price depends on several factors. A report by Stonebridge Capital said that over the past 20 years, gold’s returns have surpassed those of stocks, albeit with higher risks. However, when we look at gold’s returns in a 50-year window, it underperformed large-cap stocks. The report also backed a common notion that gold can act as an inflation hedge, saying gold saw a “dramatic” rise in price during the high-inflation periods of the 1970s.
Gold’s Expected Movement if the Fed Doesn’t Cut Rates
Chris Gaffney, president of World Markets at EverBank, recently said during an interview with Marketwatch that upside to gold would be limited if the Fed decides to go with one rate cut or no rate cut this year. However, the analyst thinks gold could rise and outperform silver amid geopolitical triggers, especially if the conflict in Gaza expands.
Methodology
Since investing in gold mining stocks is one of the best ways for average investors to gain exposure to gold and commodities industry, we decided to take a look at some of the top gold mining stocks hedge funds are buying this year. For this article we first scanned Insider Monkey’s proprietary database of 919 hedge funds and picked 10 gold mining stocks with the highest number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Photo by Ricardo Gomez Angel on Unsplash
10. Centerra Gold Inc. (NYSE:CGAU)
Number of Hedge Fund Investors: 16
Insider Monkey’s database of 919 hedge funds shows that 16 hedge funds had stakes in the Canadian-based small-cap gold mining company Centerra Gold Inc. (NYSE:CGAU). Centerra Gold Inc. (NYSE:CGAU) posted strong Q1 results in May. Adjusted EPS in the quarter came in at $0.15, beating estimates by $0.02. Revenue in the quarter jumped 35% year over year to $305.8 million, missing estimates by $10.59 million.
Heartland Value Fund stated the following regarding Centerra Gold Inc. (NYSE:CGAU) in its fourth quarter 2023 investor letter:
“Early last year, we highlighted Centerra Gold Inc. (NYSE:CGAU), a producer of gold and copper. With the recent pivot by the Federal Reserve to an easy money policy, we thought an update of this underappreciated hard asset was timely.
Centerra continues to make progress in increasing production while lowering costs. During the third quarter, the Oksut mine restarted, resulting in earnings per share of $0.20 while throwing off cash flow in excess of $100 million. Centerra remains debt free with cash soaring to $492 million, or $2.28 per share. A new management team is focused on optimizing a diverse portfolio of assets, including a strategy to boost the value of its molybdenum business for eventual sale. With an admirable balance sheet, Centerra has the resources to fund an aggressive exploration program in North America, pay a 3.3% dividend, and embark on an 8.5% repurchase of shares outstanding.
Trading below stated book value, approximately 60% of NAV, and less than 3X EV/EBITDA, we believe Centerra remains an outstanding small cap value.”
9. Gold Fields Ltd (NYSE:GFI)
Number of Hedge Fund Investors: 18
With a dividend yield of about 2.5% and a P/E ratio of 20, Gold Fields Ltd (NYSE:GFI) is one of the best gold mining stocks to buy according to hedge funds. The South African gold mining company saw a sharp decline in shares earlier this month after the Chile’s environmental watchdog said it could not determine whether the miner had captured and relocated a population of 25 critically endangered chinchillas living in the area of the Salares Norte gold mine. As a result, Gold Fields Ltd (NYSE:GFI) would be forced to stop activities near the mine and provide proof of absence of chinchillas or face possible sanctions.
A total of 18 hedge funds tracked by Insider Monkey had stakes in Gold Fields Ltd (NYSE:GFI) as of the end of Q1.
8. Wheaton Precious Metals Corp (NYSE:WPM)
Number of Hedge Fund Investors: 27
Canadian-based precious metals and streaming company Wheaton Precious Metals Corp (NYSE:WPM) has been paying dividends without a break since 2011. As of the end of the first quarter of 2024, 27 hedge funds had stakes in Wheaton Precious Metals Corp (NYSE:WPM). Earlier this month, Wheaton Precious Metals Corp (NYSE:WPM) posted Q1 results. Adjusted EPS of $0.36 crushed estimates by $0.06, while revenue in the quarter increased by 38.4% to $296.81 million, beating estimates by $13.3 million.
7. Alamos Gold Inc (NYSE:AGI)
Number of Hedge Fund Investors: 30
Canadian-based gold mining company Alamos Gold Inc (NYSE:AGI) is one of the best gold mining stocks to buy now according to hedge funds. Alamos Gold Inc (NYSE:AGI) has been one of the top performers in 2024, with about 31% in YTD gains through May 29. In April, Bank of America upgraded the stock to Buy from Neutral. BofA also increased its price target on the stock to $20 price target from $15.75. BofA likes Alamos Gold Inc’s (NYSE:AGI) asset base quality, operational performance and geopolitical risk profile.
Of the 919 hedge funds tracked by Insider Monkey, 30 funds reported having stakes in Alamos Gold Inc (NYSE:AGI).
Alamos Gold Inc (NYSE:AGI) produced about ~135,700 ounces of gold in the first quarter, which was a 6% increase from the year-ago period. Alamos Gold Inc (NYSE:AGI) is also expanding its footprint. It recently acquired Argonaut Gold’s Magino Mine which would give Alamos Gold Inc (NYSE:AGI) Tier-1 scale mining complex in Ontario, Canada. Analysts expect Alamos Gold Inc (NYSE:AGI) to generate about $720 million in free cash flow in FY2028, thanks to its upbeat production in PDA (Mulatos), Young-Davidson, the Island Complex (Island/Magino), and Lynn Lake. Based on these catalysts, Wall Street analysts are bullish on the stock.
6. Kinross Gold Corp (NYSE:KGC)
Number of Hedge Fund Investors: 31
Kinross Gold Corp (NYSE:KGC) earlier this month touched 52-week highs after crushing past analyst estimates. Net earnings in the March quarter jumped to $107 million, a 16% YoY increase. Production in the quarter increased 13% on a YoY basis.
Over the past one year Kinross Gold Corp (NYSE:KGC) shares have jumped 75%. While investors cheered the stock’s new highs, some circles are voicing valuation concerns. Kinross Gold Corp (NYSE:KGC) Price/NAV ratio of 1.2X makes it overvalued when compared to industry peers. The stock is also trading near its 12-month Wall Street price target of $8.5, which shows there isn’t much upside left to Kinross Gold Corp (NYSE:KGC) shares based on current earnings estimates and catalysts.
Insider Monkey’s database of 919 hedge funds updated for the first quarter of 2024 shows that 31 hedge funds reported owning stakes in Kinross Gold Corp (NYSE:KGC).
5. Royal Gold Inc (NASDAQ:RGLD)
Number of Hedge Fund Investors: 31
Colorado-based Royal Gold Inc (NASDAQ:RGLD) is a notable name in the precious metals streaming and royalty industry, with a dividend yield of about 1.22%. Royal Gold Inc (NASDAQ:RGLD) has increased its dividend for 23 consecutive years, an achievement few could match in the gold mining industry. It’s one of the best gold mining stocks to buy according to hedge funds since 31 funds tracked by Insider Monkey reported owning stakes in Royal Gold Inc (NASDAQ:RGLD) as of the end of the March quarter.
Earlier this month Royal Gold Inc (NASDAQ:RGLD) posted Q1 results. Adjusted EPS in the quarter came in at $0.91, missing estimates by $0.02. Revenue in the quarter fell 12.6% year over year to $148.9 million, missing estimates by $4.14 million.
Royal Gold Inc (NASDAQ:RGLD) talked in detail about its 2024 guidance in its latest earnings call:
Analysts believe Royal Gold is attractively valued based on its Net Asset Value (NAV), a common valuation metric using in the gold streaming industry. The stock is currently trading at around 18 times FY’2024 FCF , well below its average free cash flow multiple of 22. This makes Royal Gold an attractively valued gold mining stock.
4. Franco-Nevada Corp (NYSE:FNV)
Number of Hedge Fund Investors: 36
Canadian gold mining company Franco-Nevada Corp (NYSE:FNV) was trending recently after Franco-Nevada Corp (NYSE:FNV) posted upbeat Q1 results. Adjusted EPS in the quarter came in at $0.76, surpassing estimates by $0.05, while revenue fell 7.1% on a YoY basis to $256.8 million, surpassing estimates by $7.77 million.
Analysts believe Franco-Nevada Corp (NYSE:FNV) is less volatile than traditional gold miners since it’s a royalty and streaming company, providing upfront money to miners in exchange for discounted returns and rights to own gold production at lower costs. Franco-Nevada Corp (NYSE:FNV) is also diversifying its asset base. It has over 400 assets. In 2023, Franco-Nevada Corp (NYSE:FNV) added new royalty interests in Canada, Chile, Australia and the US. In 2024, Franco-Nevada Corp (NYSE:FNV) expects to produce 540,000 GEOs (gold equivalent ounces), which would represent a 10% organic growth.
Franco-Nevada Corp’s (NYSE:FNV) mean average analyst price estimate is $143, which presents a 15% upside from the current levels.
White Falcon Capital Management stated the following regarding Franco-Nevada Corporation (NYSE:FNV) in its first quarter 2024 investor letter:
“Due to the rally in gold, the weight of precious metal royalty companies is on the higher side of our typical 10-15% allocation to them. We recently wrote an article for the Globe & Mail on Franco-Nevada Corporation (NYSE:FNV), a portfolio company, that can be accessed on our blog. We believe that royalties are a better way to express an opinion on gold as they pay a dividend and have optionality on both the price of gold as well as additional discoveries by operating companies. With debt and deficits increasing by the minute and the central bank’s inability to control inflation, we believe that it is prudent to have an ‘outside the system’ asset in the portfolio that can protect our purchasing power over time.”
3. Agnico Eagle Mines Ltd (NYSE:AEM)
Number of Hedge Fund Investors: 46
Another Canadian-based dividend-paying gold mining company in our list, Agnico Eagle Mines Ltd (Ontario) (NYSE:AEM) has a dividend yield of over 2.3%. Last month Agnico Eagle Mines Ltd (Ontario) (NYSE:AEM) reported Q1 results, beating past estimates for both EPS and revenue, which jumped 21.2% on a YoY basis.
Analysts believe Agnico Eagle Mines Ltd’s (Ontario) (NYSE:AEM) All-In Sustaining Costs (AISC) is lower than its competitors like Newmont and Barrick Gold. Last year Agnico Eagle Mines Ltd’s (Ontario) (NYSE:AEM) AISC came in at $1,117/oz in 2023, and Agnico Eagle Mines Ltd (Ontario) (NYSE:AEM) expects the metric to be about $1,225/oz in 2024.
However, Agnico Eagle Mines Ltd (Ontario) (NYSE:AEM) valuation has raised some alarms recently. The stock’s P/E has reached 72 after the stock’s 37% jump over the past one year. Assuming 2024 revenue at $8 billion and an EBIT margin of 30%, net income for the year comes out to be $2.4 billion. Excluding financing costs and tax rates the net income figure totals around $1.35 billion. Based on the current stock price, Agnico Eagle Mines Ltd’s (Ontario) (NYSE:AEM) forward P/E ratio is around 26, which is still high when compared to the gold mining industry peers.
2. Barrick Gold Corp (NYSE:GOLD)
Number of Hedge Fund Investors: 51
Barrick Gold Corp (NYSE:GOLD) shares are down 2% so far this year. Barrick Gold Corp (NYSE:GOLD) posted weak Q1 results amid lower production and issues at some of its assets and facilities. However, analysts believe the stock’s set for long-term growth. Barrick Gold Corp (NYSE:GOLD) expects growth at its Dominican Republic gold mine Pueblo Viejo starting the second half of 2024. Barrick Gold Corp (NYSE:GOLD) also sees improvement in copper production, with higher grades expected later in the year. Estimates suggest Barrick Gold Corp (NYSE:GOLD) would generate about $1.1 billion in free cash flow in 2024 and up to $2.5 billion in free cash flow in FY2025. This makes Barrick Gold Corp (NYSE:GOLD) an attractive stock to buy on the dip.
Barrick Gold Corp (NYSE:GOLD) is one of the best gold mining stocks to buy according to hedge fund investors. As of the end of the first quarter of 2024, 51 hedge funds reported owning stakes in Barrick Gold Corp (NYSE:GOLD).
1. Newmont Corporation (NYSE:NEM)
Number of Hedge Fund Investors: 55
Newmont Corporation (NYSE:NEM) posted strong Q1 results last month, with revenue in the period increasing 50% on a YoY basis. Newmont Corporation’s (NYSE:NEM) results were helped by higher metal prices and increased gold-equivalent ounces sold. Newmont Corporation (NYSE:NEM) bulls believe Newmont Corporation’s (NYSE:NEM) planned cost cuts and working capital discipline would give a boost to FCF, assuming gold price in the range of $2,100-$2,200. The stock’s forward P/E ratio stands just over 12, which shows the stock is undervalued when compared to industry peers.
Wall Street analysts have a $63.37 price target on Newmont Corporation (NYSE:NEM), which shows it has a 50% upside potential from the current levels.
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