We recently published a list of 8 Cheap Gold Stocks To Buy According to Hedge Funds. In this article, we are going to take a look at where Centerra Gold Inc. (NYSE:CGAU) stands against the other 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).
Aerial view of modern machinery operating in a gold mining site.
Centerra Gold Inc. (NYSE:CGAU)
Number of Hedge Fund Holders: 17
Forward P/E Ratio as of September 29: 10.67
Centerra Gold Inc. (NYSE:CGAU)is a mining company that explores and develops gold, copper, and molybdenum properties primarily in North America and Turkey. Its key assets include the 100%-owned Mount Milligan gold-copper mine in British Columbia, Canada, and the Öksüt gold mine in Turkey. As of Q2 2024, 17 hedge funds have positions in the stock, a slight increase from 16 in the previous quarter, indicating growing interest among institutional investors.
In its Q2 2024 earnings report, Centerra Gold Inc. (NYSE:CGAU) posted robust financial results, demonstrating its solid operational performance and ability to generate cash flows. The company reported adjusted net earnings of $47 million or $0.23 per share. Sales during the quarter included 83,258 ounces of gold and 11.7 million pounds of copper. The average realized price for gold was $2,097 per ounce, while copper fetched $3.79 per pound, reflecting favorable market conditions. Mount Milligan, a cornerstone asset for the company, produced over 38,000 ounces of gold and 13 million pounds of copper in Q2 2024. Although sales were lower than the previous quarter due to shipment timing, management expects stronger sales in the second half of the year, contributing approximately 60% of annual sales.
Operationally, Centerra Gold Inc. (NYSE:CGAU) has made strategic progress at Mount Milligan with the implementation of a site-wide optimization program and a preliminary economic assessment to extend the mine’s life. The company has also advanced permitting work at the Thompson Creek mine, which will support further mining activities. The Öksüt mine in Turkey produced over 51,000 ounces of gold in Q2 2024, with expectations for stronger production in the latter half of the year.
Centerra Gold Inc.’s (NYSE:CGAU) financial health remains strong, with a cash balance of $592 million, providing total liquidity of $992 million. The company continues to prioritize returning capital to shareholders through share buybacks and dividends, repurchasing 1.4 million shares for $10 million in Q2. With stable operations, strategic growth initiatives, and a commitment to shareholder returns, Centerra Gold Inc. (NYSE:CGAU) presents a compelling investment opportunity for those seeking exposure to the gold and copper sectors.
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.”
Overall CGAU ranks 6th on our list of cheap gold stocks to buy according to hedge funds. While we acknowledge the potential of CGAU as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CGAU but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
