With such a volatile industry as mining, the best stocks are of companies that, through dedication and fortitude, have managed to be consistently, if not insanely, profitable over the past five years.
Though it’s tempting to invest in startup gold stocks that have the potential for massive returns, the sober and more reliable investments are with companies that have proven their ability to hold firm in a whirlwind of an industry, and which are presently undervalued:
To that end, the top of the list of gold stocks to buy now is occupied by Newmont Mining Co (NEM). A stalwart of the mining community, Newmont is the second largest gold producer in the world, with operations ranging from the United States to Indonesia. With a market cap of 28.8 billion, a price to earnings ratio below 12, healthy balance sheet, and a return on equity that has leveled out at 15% over the past three years, Newmont has transformed into the Gold industry’s biggest little secret. Their revenue stream has steadily increased over the past ten years, and while their net income has been volatile, due to expenses, that is standard for the Gold industry. They have enough free cash flow to weather out any significant financial lapse.
The Eldorado Gold Corporation Ltd. (EGO) is another stock to look out for. Presently, the stock is too overvalued with a price to earnings ratio over 40. However, Gold mining is such a hectic industry that this Vancouver-based company with prospects in Brazil, Turkey, and China, which is growing its net income year after year at a blistering rate, could experience enough of a price dip that its PE ratio would practically demand that shares be bought. Presently, the return on equity is not as strong as Newmont’s, but as a relatively smaller company with a market cap of 9.6 billion, it’s not expected to have the same kind of reliable ROE. To be sure, this stock qualifies as more of an informed speculation than a standard investment.
At this time, the only Gold stock other than Newmont and Eldorado that qualifies as a sound investment is Yamana Gold Inc. (AUY), a Canadian company with prospects in Central and South America. With market cap 7.7 billion, it hasn’t been around long enough to post a reliable balance sheet, but it’s growing rapidly and needs only a few more years to solidify itself.