U.S. markets are looking forward to today's meeting in Turkey between the two foreign ministers of Russia and Ukraine, Sergei Lavrov and Dmytro Koeleba, under the auspices and mediation of Turkish Prime Minister Recep Tayyip ErdoÄŸan.
The sharp drop in oil prices shortly after the announcement of the first diplomatic talks between the two countries since the start of the conflict was interpreted by the stock market as a signal that hostilities may be about to end. Stocks were higher on Wednesday. Also positive for U.S. stock prices was the news about the United Arab Emirates' intention to persuade the rest of the OPEC organization to export more barrels of crude oil, which could dampen inflation spikes to record levels.
The fact is, however, that the upward effect on energy and food prices, which was already in place before the geopolitical crisis in Eastern Europe, has become much more urgent with the raging war in Ukraine, raising concerns about economic growth and bringing more volatility to the markets.
Already the picture is very uncertain and, to make matters worse, there are fears that the continued tightening of sanctions designed to weaken Russia could have a boomerang effect on Western economies.
Investors do not tolerate uncertainty from any source and do not like heightened volatility, particularly those who hold assets in portfolios for the medium to long term. As a countermeasure, they then seek shelter in safe-havens assets. Among the assets hedging against the headwinds of the current geopolitical turmoil, gold could prove to be an excellent solution.
Since the start of the conflict in Ukraine on Feb. 24, when the Russian invasion began, gold futures due April 2022 are up more than 4.5% to $2,000.50 an ounce at the time of writing.
Not to disappoint some market traders, but regardless of the outcome of the talks in Turkey, this crisis appears to be a long-term issue, giving gold prices a solid bullish catalyst as the factor incentivizes the demand for the precious metal for hedging purposes.
As such, gold is likely to continue to rise, so investors may want to take advantage of the bull market from listed U.S. gold operators as these stocks tend to grow faster than the commodity itself.
My pick is a gold company that is different from many others in the industry, as this operator, called Wheaton Precious Metals Corp. (WPM, Financial), is not a miner, but is registered as a precious metals streaming company.
The company does not mine gold, thereby avoiding mining and other associated costs, but instead receives the metal as a percentage of someone else's throughput at the mine and then resells the ounces on the market.
In exchange for a lower purchase price paid at the mine, typically based on a long-term agreement, Wheaton Precious Metals participates in funding exploration and development activities on mineral properties by making upfront payments to mining companies seeking capital.
The lack of mining costs allows Wheaton and other operators of this type to achieve high margins much faster than precious metals producers, even those of giants like Barrick Gold Corp. (GOLD, Financial).
This aspect is not trivial as the impact on the stock in terms of potential price increases can be large.
Throughout 2021, as the ounce held above $1,800, mimicking the 2011 bull market, Wheaton's operating margin surged to over 50%, beating Barrick by about 15 percentage points and topping the industry average of 6.3%. This led to a sharp 29% rise in the stock price, beating Barrick's 27% and edging out the VanEck Vectors Gold Miners ETF (GDX, Financial) by over 10%.
Currently, Wheaton is enjoying a strong performance at the world's fifth-largest open-pit silver mine, the Peñasquito Polymetallic Mine in Mexico, the large open-pit copper and zinc mine The Antamina in Peru and at the Voisey's Bay Mine, a nickel mine in Canada.
As a result, the streamer predicts attributable production of a staggering 735,000 gold equivalent ounces for 2021, no less than 810,000 GEOs per year for the next five years to 2025 and no less than 830,000 GEOs per year for the next 10 years to 2030.
These levels represent growth of at least 10.4%, 20.5% and 23.5% from 2020 production.
The company has an extremely robust balance sheet as GurusFocus has assigned a maximum financial strength rating of 10 out of 10. This provides the opportunity to fund more than 30 gold production streaming agreements and participate in silver and palladium resources.
Priced at $48.23, which wasn't cheap in early Thursday trading versus a 200-day moving average of $42.81, this stock has such upside potential that it looks like an intriguing investment opportunity anyway, assuming gold continues to climb higher.
The stock has a market cap of $21.75 billion, an enterprise value-Ebitda ratio of 24.97 (versus an industry median of 9.32) and a dividend yield of 1.19% (versus the industry median of 2.11%).
The 14-day relative strength index of 71 suggests shares are closer to overbought levels than oversold levels.
Wall Street issued a median buy recommendation rating and has established an average target price of $54.07 per share.
