In this piece, we will take a look at eight cheap gold stocks to buy according to hedge funds.
Gold has been on an impressive rally in 2024, positioning itself as one of the best-performing assets of the year. This surge is largely driven by various macroeconomic factors, including central bank policies and geopolitical uncertainty. According to a report by Reuters, major banks expect the gold bull run to extend into 2025 due to a combination of strong physical demand from China and substantial inflows into exchange-traded funds (ETFs). J.P. Morgan analysts noted that the revival of large ETF inflows, which had been absent since April 2022, is crucial for sustaining the rally. The U.S. Federal Reserve’s recent decision to initiate a rate-cutting cycle is also expected to provide additional momentum for gold prices.
So far this year, gold has gained over 27%, or nearly $570 per ounce, and recently hit a record high of $2,639.95 per ounce. This marks its highest annual rise since 2010 and a stark outperformance compared to major stock indices. UBS analysts believe that despite these gains, gold has more room to grow over the next 6 to 12 months. They attribute this optimism to the Fed’s ongoing interest rate cuts and the upcoming U.S. presidential election, which could increase market volatility and further drive investors toward safe-haven assets like gold.
A second report from Goldman Sachs Research supports this bullish outlook, forecasting gold prices to reach $2,700 by early 2025. Strategists point to several factors that could push the precious metal to new heights. Firstly, central bank purchases of gold have accelerated since Russia’s invasion of Ukraine, as these institutions seek to diversify away from the U.S. dollar and mitigate the risks posed by potential U.S. financial sanctions. The bank also highlights that gold is currently their preferred near-term long position due to its potential as a hedge against financial and geopolitical risks.
In addition, strategists believe that further Fed rate cuts will likely bring Western investors back into the gold market, which has seen relatively lower participation from this group during the recent rally. Another key driver could be geopolitical shocks, such as additional tariffs or heightened debt concerns in the United States. Should the U.S. debt burden continue to rise, it could lead to increased credit-default swap spreads, enhancing gold’s appeal as a safe-haven asset.
The strong outlook for gold is echoed by various financial institutions, with several projecting prices to continue climbing over the next few years. ANZ anticipates gold to reach $2,805 by the end of 2025, while BofA sees the potential for prices to touch $3,000 per ounce. Similarly, Macquarie expects gold to hit a peak of $2,600 per ounce in Q1 2025, with a possible spike toward $3,000. Citi Research’s baseline projection ranges between $2,800 and $3,000 per ounce by 2025.
Given these forecasts, investors are increasingly looking at gold as a reliable investment option in the current uncertain economic environment. The continued interest rate cuts by the U.S. Federal Reserve, coupled with strong physical demand and robust ETF inflows, create a favorable backdrop for further appreciation in gold prices. Consequently, several hedge funds have started accumulating positions in gold mining stocks, viewing them as a cost-effective way to gain exposure to the precious metal’s rally.
In this article, we explore eight cheap gold stocks to buy according to hedge funds. These stocks offer investors an opportunity to benefit from the anticipated gold bull market at relatively lower prices. With solid financials and potential for significant upside, these gold stocks could be attractive additions to any portfolio looking to capitalize on the ongoing surge in gold prices.
Our Methodology
For this article, we utilized the Finviz stock screener to identify stocks within the gold industry that have forward price-to-earnings (P/E) ratios below 15 as of September 29. From this initial list, we focused on eight stocks that are most favored by institutional investors. These stocks were then ranked in ascending order based on the number of hedge funds holding stakes in them as of Q2 2024.
At Insider Monkey we are obsessed with 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).
08. Galiano Gold Inc. (NYSE:GAU)
Number of Hedge Fund Holders: 7
Forward P/E Ratio as of September 29: 2.45
Galiano Gold Inc. (NYSE:GAU) is a Vancouver-based gold mining company that focuses on exploring and evaluating gold properties in Canada. Its flagship asset is the Asanko Gold Mine, which spans approximately 21,000 hectares in Ghana, West Africa. The company, formerly known as Asanko Gold Inc., changed its name to Galiano Gold Inc. (NYSE:GAU) in May 2020. As of the second quarter of 2024, the stock is held by 7 hedge funds, up from 5 in the previous quarter, showcasing increased institutional interest.
Galiano Gold Inc. (NYSE:GAU) second-quarter earnings report highlights the company’s strong financial performance. The company recorded an adjusted EBITDA of $120.3 million, a notable increase from $114.3 million in the first quarter of 2024. Galiano’s net income stood at $62.5 million, translating to earnings per share of $0.31. This compares to a net income of $65.4 million and earnings per share of $0.33 in the first quarter. The adjusted net profit rose to $63.4 million with adjusted earnings per share of $0.32, up from $58.4 million and earnings per share of $0.29 in Q1.
Operationally, Galiano Gold Inc. (NYSE:GAU) continued to execute its fleet renewal strategy, which includes selling older Panamax vessels at attractive prices to maintain a modern and efficient fleet. The company has locked in a solid time charter equivalent (TCE) rate for its Capesize and Panamax vessels, achieving rates of $28,000 per day and $15,700 per day, respectively. This robust performance has enabled Galiano to declare a dividend of $0.30 per share for Q2 2024.
From a financial perspective, Galiano Gold Inc. (NYSE:GAU) operating expenses remained relatively stable at $66.3 million compared to $62.6 million in Q1, despite increased drydocking activities. The company’s balance sheet is strong, with cash and cash equivalents of $103.1 million at the end of the quarter and $150 million in undrawn credit facilities. Additionally, Galiano Gold Inc. (NYSE:GAU) total debt decreased by approximately $33 million quarter-on-quarter, reflecting a conservative leverage strategy with a loan-to-value (LTV) ratio of around 34%. With its modernized fleet, solid cash flow, and a strong dividend yield, Galiano Gold Inc. (NYSE:GAU) presents an attractive investment opportunity for those seeking exposure to the gold sector at a relatively low price point.
07. DRDGOLD Limited (NYSE:DRD)
Number of Hedge Fund Holders: 7
Forward P/E Ratio as of September 29: 9.91
DRDGOLD Limited (NYSE:DRD) is a South African gold mining company engaged in the surface gold tailings retreatment business. With a history dating back to 1895, the company focuses on exploration, extraction, processing, and smelting of gold in the Witwatersrand Basin. A subsidiary of Sibanye Gold Limited, DRDGOLD Limited (NYSE:DRD) recovers gold from surface tailings in the Gauteng province, positioning itself as a key player in sustainable mining practices. As of Q2 2024, the company had 7 hedge fund holders, slightly lower than 8 holders in the previous quarter.
In its Q4 2024 earnings report, DRDGOLD Limited (NYSE:DRD) reported a strong financial performance, driven by a favorable gold price environment and efficient cost management. The company’s revenue increased by 14% year-over-year to over ZAR6 billion, while operating profit also saw a 14% jump to just over ZAR2 billion. The consistent upward trend in revenue and profit, despite production challenges, underscores DRDGOLD Limited (NYSE:DRD) ability to capitalize on favorable market conditions.
DRDGOLD Limited (NYSE:DRD) operational efficiency was highlighted by its achievement of 93% of its targeted gold production for the year, despite only reaching 84% of its throughput target. This was made possible through innovations and strategic management, ensuring the company remained competitive even with lower volumes. The company’s decision to invest in a 60-megawatt solar plant, coupled with 60 megawatts of battery storage, is expected to provide long-term energy cost savings and reduce dependency on traditional power sources.
The company’s commitment to sustainability was further demonstrated by a 58% decrease in water consumption, with 95% of the water used being recycled. This focus on sustainability not only reduces costs but also supports environmental regeneration efforts, which are integral to DRDGOLD’s long-term strategy.
From a valuation standpoint, DRDGOLD Limited (NYSE:DRD) offers a solid investment opportunity, backed by its robust balance sheet and consistent dividend payments. For the 17th consecutive year, the company paid a dividend, reflecting its strong cash flow and commitment to returning value to shareholders. With continued investments in infrastructure and innovation, DRDGOLD Limited (NYSE:DRD) is well-positioned for future growth, making it an attractive option among cheap gold stocks to buy according to hedge funds.
