Market Vectors Gold Miners ETF (GDX), Barrick Gold Corporation (USA) (ABX): Buy This Golden Anomaly

How to take advantage of this opportunity

There are various ways you can benefit from this price anomaly. One way is to buy the whole gold mining sector via an ETF – the Market Vectors Gold Miners ETF (NYSEARCA:GDX). After a 40% crash in its price, this cheap ETF is comprised of companies with an average price-to-earnings of only 11x with an average dividend yield of 1.8%. That’s a bargain.

If you wish to dig in more with a search of specific companies — you have two other fantastic options. One is to go with the 300 pound gorilla in the room — Barrick Gold Corporation (USA) (NYSE:ABX). Barrick Gold Corporation (USA) (NYSE:ABX) is a giant $32 billion miner trading at a forward price-to-earnings and price-to-book ratio of only 5.5 and 0.8, respectively. It also rewards its shareholders with a hefty 4% dividend yield while they wait for the share price to reflect value again.

The other, safer option, is to invest alongside a company that isn’t a gold miner, but a gold royalty company. In a world of dirt-cheap gold stocks, Seabridge Gold, Inc. (USA) (NYSE:SA) is the cheapest around. The company has two primary mining projects in Canada. It’s sitting on a mountain of 44 million ounces of proven and probable gold reserves, 214 million ounces of silver, and over 10 billion pounds of copper. That’s more than $72 billion in reserves… Yet Seabridge Gold, Inc. (USA) (NYSE:SA)‘s entire market capitalization is just $550 million.

But, Seabridge Gold, Inc. (USA) (NYSE:SA) will never mine its gold. It’ll never take an ounce of it out of the ground. That’s up to someone else to do. You see, Seabridge Gold, Inc. (USA) (NYSE:SA) is a gold-exploration company. It searches for gold, then partners up with a gold miner that will do the grunt work. And at such a ridiculously cheap valuation, there shouldn’t be any shortage of partners.

The Fool thinks gold

Opportunities like the one above don’t come very often. Giant dividend paying companies trading at ridiculously low prices will eventually rebound. You now have a golden opportunity to take advantage of this beaten sector. So, don’t let that opportunity pass you by.

The article Buy This Golden Anomaly originally appeared on Fool.com is written by Shmulik Karpf.

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