7 Must-Own Gold Stocks to Combat Sticky Inflation

Stocks to buy

With the Federal Reserve aggressively targeting inflation via elevating the benchmark interest rate, gold stocks to buy represented a questionable venture to say the least. Gold typically does well under rising prices as an inflation hedge. Like other commodities, it doesn’t perform up to snuff during disinflationary cycles.

However, as The Wall Street Journal pointed out not too long ago, consumer prices have been rising faster than expected. Stated differently, inflation is sticky; that is, prices are not responding to supply and demand changes. Therefore, this dynamic could lead to persistent inflation. That’s bad news for consumers but potentially great news for gold stocks to buy.

By acquiring shares of gold mining firms and royalty/streaming specialists, investors can indirectly receive an inflation hedge without the hassles of physical bullion ownership. Further, given the red-hot labor market, it’s possible that prices can rise before they decline. If so, you’ll want to keep close tabs on these gold stocks to buy.

BHP (BHP)

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An integrated metals and mining firm, BHP (NYSE:BHP) may offer a solid canvas to tiptoe your way into gold stocks to buy. To be clear, BHP isn’t a pure-play gold miner. Yes, it features a massive projecting at its Olympic Dam underground copper mine in South Australia. Along with copper, Olympic Dam offers uranium, silver and gold.

On the positive side, with BHP stock, you’re not just getting one business – you get exposure to several. Theoretically, if one segment falters, the others can help pick up the slack. However, on the downside, investors shouldn’t expect outrageous returns from BHP. Again, it’s a name to tiptoe into the space.

For full disclosure, the company has some challenges on its hands. In the fiscal year ended June 2023, BHP posted sales of $53.82 billion, down from the $65.1 billion posted a year earlier. Also, on a trailing-12-month (TTM) basis, BHP is looking at modest sales growth of $55.34 billion.

Still, one awesome attribute is the company’s forward dividend yield of nearly 5%. That’s something to consider if you’re interested in gold stocks to buy.

Barrick Gold (GOLD)

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A mining company that produces both gold and copper, Barrick Gold (NYSE:GOLD) ranks among the gold stocks to buy, commanding a market capitalization north of $27 billion. Per its public profile, Barrick features 16 operating sites in 13 countries. As of December of last year, the company had 77 million ounces of proven and probable gold reserves.

Looking ahead to the end of the current fiscal year, analysts expect Barrick to generate revenue of $12.24 billion. If so, the tally would represent an increase of 7.4% from last year’s haul of $11.4 billion. Looking out to 2025, they project revenue to land at $13.32 billion. That would be almost a 9% lift from 2024’s estimated top line.

Even better, the most optimist target calls for sales of $13.38 billion and $14.52 billion in 2024 and 2025, respectively. Right now, shares trade at 20.75X trailing-year earnings. To be fair, that’s not exactly an absolute deal. However, it’s a significantly lower multiple than what we saw in the second quarter of last year.

Lastly, analysts peg shares a consensus strong buy with a $20.32 average price target.

Newmont (NEM)

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Although Newmont (NYSE:NEM) is a giant among gold stocks to buy, its market performance this year has been much more humbling. Still, with gold prices rising to three-month highs based on rising rate cut bets, NEM looks intriguing for speculation. After all, its website states that it’s the world’s largest gold mining corporation.

Despite a rough outing last year, analysts anticipate a recovery for this year. Specifically, they project on average for revenue to hit $21.93 billion. If so, that would be a 36.7% lift from 2023’s tally of just over $16 billion. What’s more, by the end of 2025, they estimate that sales could land at $23.38 billion. If that’s the case, we’re talking growth of 6.6% from 2024’s projected revenue.

If that wasn’t enticing enough, the most optimistic target calls for revenue of $24.25 billion and $25.11 billion in 2024 and 2025, respectively. Plus, while NEM stock isn’t exactly a sterling deal, it trades at less than 12X forward earnings. That’s slightly undervalued compared to the industry’s median value of 12.35X.

In closing, Wall Street’s experts rate NEM a consensus moderate buy with a $44.07 average price target.

Wheaton Precious Metals (WPM)

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A streaming specialist, Wheaton Precious Metals (NYSE:WPM) isn’t a direct mining play. Instead, the company inks an agreement with a mining firm to purchase some or all of the physical metals production. The pricing involves a predetermined discount to which both parties agree. This way, Wheaton enjoys a level of predictability that’s not often found in gold stocks to buy.

Investors will want to be aware that on March 14, Wheaton will release its fiscal fourth-quarter earnings report. For 2023, revenue is anticipated to land on average at $1.1 billion, down 5.6% from the prior year. However, earnings per share should hit $1.15, better than the last year’s EPS of $1.12.

However, in 2024, analysts see a huge expansionary year, with sales up to $1.21 billion. That would represent a 20.6% lift from 2023’s projected revenue. And while EPS may slip slightly to $1.14, the high-side estimate calls for $1.45.

Overall, the Street pegs WPM a moderate buy with a $53.94 average price target. Combined with its modest dividend and predictable business, it’s one of the gold stocks to buy.

Sandstorm Gold (SAND)

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A similar enterprise to Wheaton Precious Metals, Sandstorm Gold (NYSE:SAND) generally focuses on royalties. In exchange for an upfront payment to mining companies, Sandstrom will receive a percentage of the revenue generated from the sale of the mined metals. However, it also accepts royalties in the form of physical metal streams.

Fundamentally, the primary benefit between royalty and streaming companies are the same: superior pricing predictability. That said, Sandstorm may be the riskier idea between the two. By the end of this year, analysts project that Sandstorm’s revenue haul will be $168.68 million, down 6.1% from last year’s tally. However, in 2025, they project sales to hit $189.47 million, which may offer a nice recovery.

One factor to keep note of, though, is the valuation. Currently, Sandstorm’s trailing-year earnings multiple clocks in at 32X. That’s a significant leap higher from Q2 2023’s print of 15.52X.

Nevertheless, analysts are bullish on SAND stock, rating shares a consensus strong buy. The average price target lands at $6.80, with the high-side estimate coming in at $10.75.

DRDGold (DRD)

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Moving onto the more speculative arena of gold stocks to buy, DRDGold (NYSE:DRD) is a South African gold producer. It’s also a specialist in the recovery of the metal from the retreatment of surface tailings. Since May of last year, DRD stock has incurred one of the oddest trading patterns I’ve seen. It’s almost like a serrated downward sloping saw.

However, an inflationary environment for the dollar may be what’s needed to instill some pricing stability in DRD stock. Financially, there are plenty of reasons to be intrigued with the underlying enterprise. For one thing, the company enjoys a solid balance sheet, particularly a low debt-to-equity ratio. Also, its Altman Z-Score clocks in at 5.46, indicating little risk of imminent bankruptcy.

In addition, it’s a very profitable enterprise. DRDGold enjoys solid margins across the board. Over the past decade, it has printed nine years of net income. That helps to add credibility to its 4.69% dividend yield.

Lastly, H.C. Wainwright’s Heiko Ihle pegs DRDGold a “buy” with a $13.25 price target.

GoldMining (GLDG)

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A literal penny stock, you want to be extremely careful with GoldMining (NYSEAMERICAN:GLDG). Right now, many financial publication readers love consuming stories about speculative ideas – and I aim to please. However, please be aware that entities like GLDG are wildly volatile and unpredictable.

Financially, the gold exploration company presents a high-risk, high-reward profile. Per investment data aggregator Gurufocus, GoldMining suffers from negative EBITDA growth, along with negative free cash flow. As well, other key metrics such as return on equity and return on asset are all negative. That’s not surprising because the company doesn’t generate revenue. Again, it’s an exploration company.

Frankly, these are long-shot wagers. However, one positive I can say is that its equity-to-asset ratio lands at 0.95X, better than 79.34% of the metals and mining industry. Plus, it enjoys a sizable cash balance relative to debt.

Of course, the idea here is to speculate that GoldMining strikes it big. H.C. Wainwright’s Heiko Ihle has again expressed belief in this risky idea, rating shares a “buy” with a $4.50 price target. It could be one of the gold stocks to buy but only for gamblers.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.

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