In this article, we will take a look at the 11 most undervalued gold stocks to buy according to hedge funds. To see more such companies, go directly to 5 Most Undervalued Gold Stocks To Buy According To Hedge Funds.
Gold is almost always in the spotlight as investors tend to flock to the precious metal amid geopolitical unrest, rising inflation, recession fears, and other uncertainties. Ever since the stock market turmoil started on the back of rising inflation and the Federal Reserve’s subsequent rate-hike spree, investors have been keeping gold stocks on their radar.
In December 2022, Juerg Kiener, managing director and chief investment officer of Swiss Asia Capital, said in an interview with CNBC that gold prices could reach between $2500 to $4000 sometime in 2023. The analyst said at the time that he was expecting a mild recession in the first quarter of 2023, which would cause many central banks to slow the pace of interest rate hikes and make gold even more attractive.
The analyst also said that if inflation persists, gold will gain more traction all over the world because the analyst thinks it’s a “good inflation hedge, a great catch during stagflation and a great add onto a portfolio.”
After strong jobs report and signs that inflation is not declining in the US, the rally in gold prices that we saw during the start of the year collapsed as investors expect the Federal Reserve to continue its rate hikes. When interest rates rise, investors cling to yield as gold doesn’t pay anything. A stronger dollar is also making it difficult for foreign investors to buy gold. Near the end of 2022 analysts were predicting that gold will make a strong recovery in 2023 based on their expectations that inflation will fall and the Federal Reserve will pause its rate hikes. But those expectations fell flat. But gold price is now on the rise ever since the banking sector started wavering. Some analysts hope that the Federal Reserve can put brakes on its rate-hike spree to avoid more problems for the banking sector. On March 17, spot gold jumped about 3.1% to $1,977.89 per ounce, which was its highest level since April 2022. U.S. gold futures also jumped 2.6% to settle at $1,973.50 as of March 17.
Another latest catalyst for gold prices came when the ECB went ahead with rates hikes despite the latest crisis in the banking industry. The decision of the ECB caused the euro to gain and the dollar to lose value, ultimately helping gold prices. Analysts believe the latest cracks in the banking system have caused investors to yet again flee to gold, the ultimate safe haven asset.
The latest market situation does provide an opportunity for long-term investors to pile into gold stocks that are currently undervalued.
Photo by Ricardo Gomez Angel on Unsplash
Our Methodology
For this article, we scanned Insider Monkey’s database of 943 hedge funds and their holdings as of the end of the fourth quarter of 2022 and picked the top 11 gold stocks with PE ratios less than 20 as of February 24 that have the highest number of hedge fund investors. The list is ranked in ascending order of the number of hedge fund investors. We have also mentioned PE ratios for each stock.
Most Undervalued Gold Stocks To Buy According To Hedge Funds
11. i-80 Gold Corp. (NYSE:IAUX)
Number of Hedge Fund Holders: 4
P/E ratio: 3.78
As of the end of the fourth quarter of 2022, 4 hedge funds had stakes in i-80 Gold Corp. (NYSE:IAUX). The total value of these stakes was about $75 million. In November, i-80 Gold Corp. (NYSE:IAUX) posted its third-quarter results. Adjusted EPS in the period came in at -$0.06. Revenue in the period jumped about 96% on a YoY basis to reach $16.07 million. Gold sales in the period came in at 9,332 ounces.
10. DRDGOLD Limited (NYSE:DRD)
Number of Hedge Fund Holders: 6
P/E ratio: 9.92
South African gold company DRDGOLD Limited (NYSE:DRD) ranks 10th in our list of the most undervalued gold stocks to buy according to hedge funds.
At the end of the fourth quarter of 2022, 6 hedge funds had stakes in DRDGOLD Limited (NYSE:DRD), according to Insider Monkey’s database of over 940 hedge funds and their holdings.
9. Equinox Gold Corp. (NYSE:EQX)
Number of Hedge Fund Holders: 13
P/E ratio: 2.43
Equinox Gold Corp. (NYSE:EQX) is in the spotlight after posting Q4 results and issuing guidance. Equinox Gold Corp. (NYSE:EQX) said its adjusted EPS in the period was $0.02. Revenue in the quarter fell about 32% on a YoY basis to reach $259.3 million. Equinox Gold Corp. (NYSE:EQX) produced 150,439 ounces of gold in the quarter. Adjusted EBITDA in the period came in at $74.7 million.
For 2023, Equinox Gold Corp. (NYSE:EQX) expects production and cost guidance of 555,000 to 625,000 ounces of gold at cash costs of $1,355 to $1,460 per oz and AISC of $1,575 to $1,695 per oz.
Hedge fund sentiment for Equinox Gold Corp. (NYSE:EQX) jumped in Q4, as 13 hedge funds tracked by Insider Monkey reported owning stakes in the company, up from 7 hedge funds in the previous quarter. The biggest hedge fund stakeholder of Equinox Gold Corp. (NYSE:EQX) was Eric Sprott’s Sprott Asset Management which had a $23.3 million stake in the company.
8. New Gold Inc. (NYSE:NGD)
Number of Hedge Fund Holders: 14
P/E ratio: 5.81
New Gold Inc. (NYSE:NGD) recently posted Q4 results which showed that the company swung to a loss in the quarter and its revenue fell about 20% on a YoY basis. However, New Gold Inc. (NYSE:NGD) gave a strong guidance for 2023. New Gold Inc. (NYSE:NGD) expects its gold production to come in the range of 280000 to 320,000 oz, compared to 271,373 gold oz in 2022. Copper production is expected to come in between 38 million to 48 million lbs, compared with 31.1 million lbs in 2022.
At the end of the fourth quarter of 2022, 14 hedge funds reported owning shares of New Gold Inc. (NYSE:NGD). The total value of these stakes was about $40 million. The biggest stakeholder of New Gold Inc. (NYSE:NGD) during this period was Eric Sprott’s Sprott Asset Management which has a $13.4 million stake in the firm.
7. B2Gold Corp. (NYSE:BTG)
Number of Hedge Fund Holders: 15
P/E ratio: 14.73
A total of 15 hedge funds out of the 943 funds tracked by Insider Monkey as of the end of the fourth quarter of 2022 had stakes in Canadian gold mining company B2Gold Corp. (NYSE:BTG). The total value of these stakes was about $183 million. The most notable stakeholder of B2Gold Corp. (NYSE:BTG) during this period was Jean-Marie Eveillard’s First Eagle Investment Management which has a $102.1 million stake in the company.
Recently, B2Gold Corp. (NYSE:BTG) reported its fourth-quarter results. Adjusted EPS in the period came in at $0.11, missing estimates by $0.02. Revenue in the quarter jumped about 12.6% on a YoY basis to total $592.47 million, missing estimates by $0.78 million. Total gold production in the fourth quarter was 367,870 ounces, which was a quarterly record. B2Gold Corp. (NYSE:BTG) said its total consolidated cash operating costs in the quarter came in at $468 per gold ounce produced.
B2Gold Corp. (NYSE:BTG) is also a solid dividend payer. Recently, it declared a quarterly dividend of $0.04 per share, in line with the previous dividend. Forward dividend yield at the time came in at 4.91%. The dividend is payable on March 17 to shareholders of record as of March 8.
6. SSR Mining Inc. (NASDAQ:SSRM)
Number of Hedge Fund Holders: 16
P/E ratio: 15.33
SSR Mining Inc. (NASDAQ:SSRM) ranks 6th in our list of the most undervalued gold stocks to buy according to hedge funds. SSR Mining Inc. (NASDAQ:SSRM) recently posted its fourth quarter of 2022 earnings results. Adjusted EPS in the quarter was $0.12, in-line with the consensus estimates. Revenue, however, fell 24.9% on a YoY basis to total $306.38 million, missing estimates by $15.42 million. SSR Mining Inc. (NASDAQ:SSRM) posted 182,655 Gold Equivalent Ounces production for the quarter. Operating cash flow in the quarter totaled $118 million.
As of the end of the last quarter of 2022, 16 hedge funds had stakes in SSR Mining Inc. (NASDAQ:SSRM), according to Insider Monkey’s database of 943 hedge funds. The total value of these stakes was $200 million.
Here is what Palm Valley Capital Management has to say about SSR Mining Inc. (NASDAQ:SSRM) in its Q3 2022 investor letter:
“We also purchased SSR Mining (NASDAQ:SSRM) during the quarter. SSR Mining is a precious metals mining company that we previously sold in November 2021 after it reached our valuation. SSR Mining’s stock has fallen significantly this year due to lower precious metal prices and the temporary closure of its Copler mine. We repurchased its shares in late September after the Copler mine restarted on schedule, since the stock remained depressed. SSR Mining should generate significant free cash flow at current gold and silver prices and has a very strong balance sheet with over $600 million in net cash and $4.1 billion in stockholders’ equity. While we expect the stock to remain volatile, we believe the company is selling at an attractive price relative to its asset-heavy balance sheet and our net asset valuation.”
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Disclosure: None. 11 Most Undervalued Gold Stocks To Buy According To Hedge Funds is originally published on Insider Monkey.
