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 Franco-Nevada 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.
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).
Aerial view of a gold mine revealing the immense scale of operations of the company.
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.”
Franco-Nevada Corp (NYSE:FNV) ranks 4th 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.
