We recently analyzed latest 13F filings for over 900 hedge funds and analyzed the the 10 Best Gold Mining Stocks to Buy According to Hedge Funds. Since Agnico Eagle Mines is part of the list, the stock deserves a deeper look. But first, let’s see what’s happening in the gold industry.
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).
An aerial view of the 1,840 mineral claims spread out over a 274 square mile area for the Pebble Copper-Gold-Molybdenum-Silver-Rhenium project.
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.
Agnico Eagle Mines Ltd (Ontario) (NYSE:AEM) ranks 3rd in Insider Monkey’s list of the 10 Best Gold Mining Stocks to Buy Now.
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Disclosure: None. This article is originally published at Insider Monkey.
