Along with four-leaf clovers and anything green, another classic symbol of St. Patrick’s day is the pot of gold at the end of the rainbow.
This year, St. Patrick’s day comes at a time when gold prices are soaring due to economic uncertainty as many regional banks in the U.S. have been revealed to be unable to pay out uninsured deposits in the case of a bank run. Gold futures are up 7.69% year-to-date to about $1,988.50 as of March 17 after having climbed 9.33% over the past week since SVB Financial (SIVB), also known as Silicon Valley Bank, suddenly collapsed.
When the price of gold increases, gold stocks have a chance boost their profits significantly. Thus, using the GuruFocus All-in-One Screener, a Premium feature, I screened the market for gold stocks with high GF Scores. According to a historical study by GuruFocus, stocks with high GF Scores have typically outperformed those with low GF Scores in the past.
Franco-Nevada Corp
Franco-Nevada Corp. (FNV, Financial) is a Canadian gold-focused royalty and streaming company with a large and diversified asset portfolio and a focus on minimizing risk. While its main focus is on gold, it does have exposure to copper and nickel as well.
There were concerns about the company’s growth prospects back in February when the Panama government halted the Cobre Panama operator’s loading permissions at port, causing a halt in operations. However, operations resumed in mid-March after an agreement with the Panama government was reached.
The company has achieved strong top and bottom line growth by acquiring existing royalties and precious metal streams directly from mine operators, which helps insulate it from many of the risks associated with gold mining companies.
Franco-Nevada has a GF Score of 98 out of 100, driven by 10 out of 10 ranks for financial strength, profitability and growth and a 7 out of 10 rank for value and momentum.
The dividend yield is quite low at 0.93%. On the positive side, the company has committed to trying its best to keep the dividend growing regardless of whether gold prices are rising or falling, and it seems well-positioned to keep this commitment given its high financial strength. The three-year dividend growth rate is 10.1%.
Agnico Eagle Mines Ltd
Agnico Eagle Mines Ltd (AEM, Financial) is a Canadian gold miner that has existing operations in Canada, Finland and Mexico as well as exploration activities in the U.S. As a miner, it is exposed to operating risks and the possibility that someday, new mines won’t be able to make up for closing mines, though that doesn’t appear to be a concern at the moment.
One unique thing about Agnico is that it has a policy of not selling any of its future gold production, as it believes this hedging strategy is risky and lowers gold prices overall. “It is time that gold producers stopped selling gold short and began acting in their shareholders' best interest by restoring the gold option value in their shares,” said then-president and CEO Sean Boyd when he declared this policy back in 2000.
Agnico has been able to achieve long-term revenue growth, though as we can see in the chart below, earnings have been erratic at times due to the cyclical nature of the business.
Agnico sports a GF Score of 92 out of 100. It scores best on its growth rank, which is 9 out of 10, followed by momentum and profitability ranks of 8 out of 10 and then financial strength and value ranks of 7 out of 10.
The dividend yield is a solid 3.17%, which is more than twice the company’s historical average. Investors should note that due to the cyclicality of this stock, the dividend is often hiked during the good times and slashed during the bad times. The three-year average share buyback ratio of -24 looks atrocious at first glance, but the raise in shares outstanding was due to the February 2022 merger of equals with Kirkland Lake Gold.
Sibanye Stillwater Ltd
Based in South Africa, Sibanye Stillwater Ltd (SBSW, Financial) is the world’s third-largest gold producer as well as the largest primary producer of platinum and the second-largest producer of palladium. It has geographically diverse assets across five continents and is also a leading recycler of PGM autocatalysts (which are part of the catalyst system for gasoline engines).
The miner also reported in its 2022 MRR statement that it has maiden lithium mineral reserve of 193.6 thousand tonnes of lithium carbonate equivalent (LCE), and its lithium mineral resources increased 26% to 243.5 thousand tonnes of LCE. The demand for lithium is soaring as it’s a necessary component of electric vehicle batteries.
Sibanye Stillwater’s growth through 2021 was incredible, but the top and bottom lines both fell in 2022. A strike in its South African gold mines and flooding in its U.S. platinum operations hit results hard, resulting in the dividend being slashed. Hopefully, the resolution of these short-term issues and the rise in gold prices will bring growth bank.
The company has a GF Score of 90 out of 100, driven by a growth rank of 9 out of 10, profitability and value ranks of 8 out of 10, a financial strength rank of 7 out of 10 and a momentum rank of 5 out of 10.
The trailing 12-month dividend yield is 9.87%, but after the recent dividend cut, the forward dividend yield is 6.48%, which is lower but still very solid.
