Is Polymetal a bargain compared to its competitors or are there better options out there? Let’s explore.

Will FTSE 100 mining stocks go higher?

Three Footsie mining stocks on my watchlist have made flying starts to 2022.

The Anglo American (LSE: AAL) share price climbed 34% following a $12bn increase in operating profit and a $1.7bn net debt reduction. Over a third of the miner’s 2021 EBITDA came from platinum group metals. Looking ahead, the company should prove resilient to geopolitical uncertainty. Anglo American, which is up 33% in a year, operates on six continents and has no Russian presence, unlike Polymetal.

Antofagasta (LSE: ANTO) is also racing ahead of the Polymetal share price, rising 22% this year (but down 10% over 12 months). As copper mining is the lifeblood of this Chilean multi-national’s business, shareholders will be encouraged by Goldman Sachs‘ 12-month copper price target of $13,000 per tonne. Antofagasta can build on a robust financial position after earnings per share rocketed by $87.80 last year.

Rio Tinto (LSE: RIO) stock completes the trio — it’s up 25% in 2022, but only up 4% in a year. Iron ore production accounts for almost 78% of its underlying earnings. In 2021, Rio Tinto generated +60% net cash and ordinary dividends per share rose 71%. Moreover, China’s iron ore imports remain stable in 2022, despite its economic slowdown. This is good news for the Rio Tinto share price.

With global interest rates rising, metal prices and mining stocks may fall so all of these shares come with risks. However, I believe the metals bull market could just be beginning as production seems unlikely to meet demand. For me, the outlook remains positive while supply side issues persist.

Will the Polymetal share price go lower?

Polymetal’s focus is precious metals, particularly gold and silver. It has operations in Russia and Kazakhstan. Although it consistently increased production over five years, the share price has been hurt by liquidity troubles caused by sanctions on Russian banks.

In further worrying signs, Polymetal postponed its decision on its 2021 final dividend payment. And Deloitte recently resigned as its auditor, threatening its London Stock Exchange listing.

Arguably, the stock’s substantial decline and a dirt cheap price-to-cash-flow ratio of 1.4 mean the risks it faces are priced in. Nascent plans to separate its Kazakh assets from the rest of the business lifted the Polymetal share price somewhat in recent days.

Nonetheless, I’m pessimistic about Polymetal shares. Headquartered in Cyprus, it avoided direct sanctions like those levied on Roman Abramovich’s Evraz. In a rapidly evolving situation, this could change.

The mining shares I’d buy now

Exposure to metals plays an important role in my diversified portfolio. I’m impressed by all three FTSE 100 stocks on my watchlist. They have strong balance sheets and are collectively spread across different geographies and commodities. I’d divide any spare cash between them.

By contrast, I see potential for further declines in the Polymetal share price. It’s simply too risky for me to buy at present, so I’m looking elsewhere for a solid gold miner.

The post Will FTSE 100 miners outshine the Polymetal share price in 2022? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Charlie Carman has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Bridgepoint: FTSE 250 bound

Private equity group Bridgepoint‘s (LSE: BPT) inclusion in the FTSE 250 looks nailed on to me. Having arrived on the market last month, shares have already rocketed from their listing price of 350p to 520p. 

Rather conveniently for a company entering the UK’s second tier, Bridgepoint focuses on investing in the mid-cap space. Already managing roughly €27bn of assets, the money raised from July’s IPO should give the company plenty of ammunition for an acquisition spree. And one could argue that there’s never been a better time to go hunting with plenty of UK firms still reeling from the pandemic. 

As a potential buyer of the stock, I’m just wondering whether we could see it lose some steam over the next few weeks as the IPO shine wears off. This is a trend we’ve seen in some stocks in 2021, most notably across the pond. Knowing that the company’s original owners offloaded a whole heap of stock as it arrived on the market, while understandable, isn’t ideal either.

Still, one can’t deny that the shares haven’t done well so far. The listing of a private equity group is also rare, giving BPT some novelty value for retailer investors like me. If FTSE 100 peer 3i Group is anything to go by, the long-term returns could be rather tasty.

On balance, though, I’m happy to sit on the sidelines for now. 

Contrarian bet

West African-focused Endeavour Mining (LSE: EDV) also looks primed to join the FTSE 250 following its recent London listing.

In addition to several promising exploration projects, EDV already has mines operating in Senegal, Cote d’Ivoire, and Burkina Faso. Collectively, these help the company to feature in the top 10 of global gold producers.

This month’s Q2 update suggested the company was firing on all cylinders. Gold production rose 18% in the previous quarter while costs fell. As a result, EDV now thinks it can hit the top half of full-year guidance. 

While the shares haven’t performed as well as those of BPT, some in the market are very bullish. Broker Berenberg, for example, has a target price of 2,800p on the stock. That would be a rise of 60% from today’s share price. Although an ambitious goal, inclusion in the FTSE 250 won’t do the firm’s profile any harm.

Then again, one does need to be conscious of the risks. As any Fools who remember what happened in 2016 will know, mining can be a highly cyclical sector. In addition to the difficulties and costs encountered in digging up precious metals in politically sensitive regions, those doing so are never in control of how much the shiny stuff sells for. And, over the last few months, the gold price has performed poorly despite concerns over inflation. 

Given that I already have exposure to gold miners via a low-cost exchange-traded fund, EDV is not for me right now. However, an improving balance sheet (net debt fell by $85m during the quarter to $77m) and dividends make it one I’ll keep an eye on.

The post FTSE 250 reshuffle: time to buy these stocks? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

A hidden mountain of wealth

As previously stated, SolGold is a young mining business that’s still firmly within its exploratory phase. It operates primarily within Ecuador at the Andean copper belt. But it also has operations in Australia and the Solomon Islands.

What makes the company quite unique is its Alpala project. Despite its youth, it’s secured the rights to a site that sits directly on top of a vast copper, silver and gold deposit. The management team has already proclaimed it to be among the world’s best-underdeveloped locations, with an estimated mining lifetime of 55 years. And based on the preliminary results, I’d certainly agree.

The multi-billion-dollar project is estimated to contain up to 9.9 Mt of copper, 21.7 Moz of gold and 92.2 Moz of silver. Needless to say, that’s a mountain of wealth to be extracted. So, given the enormous opportunity this project presents, why is the SOLG share price behaving like it’s on a rollercoaster?

SolGold’s volatile share price

It seems there remains quite a bit of uncertainty surrounding the Alpala project. There have been consistent delays in the completion and publication of the company’s pre-feasibility study. Consequently, it’s unlikely SolGold will be able to take advantage of current high commodity prices.

However, the business of metals exploration is fraught with risk. And while delays are frustrating, the additional due diligence of the management team does seem a prudent decision, in my opinion.

But delays raise costs. So far, the Alpala project’s expenses are estimated to be between $2.4bn and $2.8bn. This is particularly troublesome as SolGold currently has no revenue stream. That means the company is entirely dependent on external funding, which created some problems for Cornerstone Capital Resources.

The Canadian firm owns a 15% stake in the Alpala project as well as an 8% interest in SolGold itself. And unfortunately, the two firms have a conflict of interest. The first wants to sell the project, while the second intends to develop it. The situation only got worse after a failed hostile takeover, adding even more uncertainty to the SOLG share price.

The bottom line

There’s no denying the Alpala project is an enormous opportunity for this business. And if executed correctly, I believe the SOLG share price could explode in the next few years. However, early-stage mining companies are already exceptionally risky. And seeing stakeholders in the project have significantly different strategies on how to proceed raises some alarm bells.

As big as this opportunity may be, the level of uncertainty and discord gives me pause. Therefore, I’ll be keeping SolGold on my watch list for now. At least until more information becomes available.

The post Is the Solgold share price about to explode? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Zaven Boyrazian does not own shares in SolGold. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

2020 was a tough year for many mining companies as the pandemic brought most operations to a halt. And yet, the share price of Greatland Gold (LSE:GGP) surged from 1.8p to 36.9p. That’s a massive 1,950% increase in the space of 12 months!

But since the start of 2021, the GGP share price has been on a downward trajectory and has halved to 18.9p. Why did the stock price explode in the first place? Why is it falling now? And is this a buying opportunity for my portfolio? Let’s take a look.

The rising GGP share price

Covid-19 has had virtually no impact on GGP’s business. Why? Because the mining company isn’t actually mining anything yet. It is still firmly within its exploratory phase of development and does not have any active sites. So what caused the share price to surge?

The GGP share price began its climb in early 2020 following the release of preliminary drilling results for its Havieron project. It confirmed the discovery of a massive gold and copper deposit starting from a relatively shallow depth of 600 meters. By comparison, the average mining depth is around 1,000 metres, indicating a potentially cheaper operation once the site becomes active.

Following four sets of drilling tests, each with increasingly positive results, the company confirmed that an estimated 3.4Moz of gold and 160 kilotons of copper are available for extraction. Based on today’s market value of these metals, this represents a gross value of £5.26bn. So I’m not surprised that the GGP share price exploded on the news. 

Some risks to consider

When the GGP share price was trading at its highest point in December last year, the market capitalisation stood at just over £1bn. Today it’s closer to £740m. Why did it fall? This appears to be linked to both copper and gold’s contracting prices since the start of the year. Let’s not forget that mining companies have no pricing power. And so, if the market value of these metals declines, then profit margins get squeezed.

The reduced price does look enticing. However, to fund the mining operation that has yet to begin, GGP formed a joint partnership with Newcrest Mining. It will provide a one-off payment of $65m to help get things started. In exchange, Newcrest is entitled to 70% of all extracted resources from the Havieron project. That means GGP will only receive an estimated £1.58bn of the potential £5.26bn. That’s still more than double the current market capitalisation of the firm. But constructing the mining site and extracting these resources is a multi-year process during which the value of these metals may decline, taking the GGP share price with it.

The bottom line

The Havieron project is undoubtedly a fantastic opportunity for GGP and will likely enable the firm to thrive in the future. But there is still a long road ahead, and I think investors may have been a bit over-excited.

The average profit margin of a developed gold mining company is around 35%. This would indicate a rough estimate of £552m net income from the Havieron project over its multi-year lifespan. GGP does have other projects in its portfolio that could provide additional income. However, just like Havieron, none have yet begun any mining, so the firm currently has no revenue.

All things considered, I’m waiting to see how the company performs once it begins its mining operations. And so I’m not adding GGP to my portfolio today. But I will be watching it closely.

The post The GGP share price is crashing. Should I buy now? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Zaven Boyrazian does not own shares in Greatland Gold. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Top of the FTSE 100

Silver and gold miner Fresnillo (LSE: FRES) is the best performing stock in the FTSE 100 in 2020 to date. Based on yesterday’s closing price, it’s up 80% since January. If I’d invested £5,000 at the beginning of January, my stake would now be worth a superb £9,000 (ignoring costs). For comparison, the index is still down 14% over the same period!

This result demonstrates just how much money I can potentially make in the market by stock-picking rather than tracking an index like the FTSE 100. It also shows just how safe precious metals are perceived to be in times of trouble. Tellingly, gold rose above $2,000 for the first time ever in August. Silver hit a seven-year high one month earlier. 

As the world’s largest producer of silver and the second biggest gold miner in Mexico, the economic havoc caused by the coronavirus has been a clear boon for Fresnillo. Even so, the FTSE 100 member’s gains pale in comparison to those achieved by the one-time small-cap miner Greatland Gold (LSE: GGP).  

Greater gains 

GGP’s share price is up a stonking 1,700% since the beginning of 2020. I don’t think it’s an exaggeration to say that it’s likely brought forward the retirement plans of many early holders.

What’s particularly noteworthy is that Greatland’s valuation has continued rising throughout the year. That’s despite the gold price losing some of its shine in the last six months.

Much of this appears to be down to further excellent drilling data from its world-class Havieron gold-copper deposit in Western Australia. This has led the £1.3bn cap to sign new agreements with venture partner Newcrest with a view to expanding exploration activities. The appointment of new CEO Shaun Day has also been well-received by the market. 

More to come?

Naturally, it’s hard to say what will happen to Fresnillo, Greatland Gold, and related commodity-focused stocks in 2021. A successful global vaccination programme could herald a return to normality. In such a scenario, investors may rotate away from precious metals and back into beaten-down value plays.

Then again, it’s possible that markets could get back to their choppy ways in the event of distribution setbacks. We can’t rule out a third coronavirus wave either. Both of these would likely cause the prices of gold and silver to lurch back up. The latter could also benefit from a return of manufacturing, refining, and processing activity. Electricals, medicine, and consumer product use silver, so it’s much more useful than gold.

One other potential catalyst is the return of inflation. This is a particular issue if Joe Biden approves another stimulus package in the US. Historically, gold has a particularly good record of maintaining its value when governments are forced to increase the money supply. 

If I’ve learned anything from the performance of the FTSE 100 member and Greatland this year, it’s that it can be far riskier to sit on the sidelines in cash.

As we say at the Fool UK, the best way to grow wealth remains via the stock market.

Whatever 2021 brings, my strategy is still to keep buying shares!

The post Wow! If I’d invested £5,000 in this FTSE 100 share in January, here’s what I’d have now appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Fresnillo. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Today — 14 months later — I’m taking another look. 

Greatland Gold: a lucky punt?

Now, let’s be clear from the outset — there was an awful lot of luck in my call. Investing in any miner, let alone a minnow, is fraught with risk.

First, there’s no guarantee it’ll find what it’s looking for, or be able to extract sufficient quantities of what it does find to make the business profitable. Second, mining can be an expensive business. Many companies go bust before they’ve a chance to make their mark. Third, miners have no control over the prices of the commodities they extract. Fourth, mining shares have a tendency to ‘pop and drop’, catching unwary investors on the price spike.

All that said, Greatland Gold has certainly done all it can to put itself in a great position to continue rewarding investors. Recent news has only served to boost the investment case further.

Good progress

In August, the company announced it has commenced drilling at its delightfully-named Scallywag prospect in the Paterson region of northern Western Australia.

As CEO Gervaise Heddle commented, many of the targets in this region “display similar geophysical characteristics” to Greatland’s stunning Havieron gold-copper discovery “where ongoing drilling under a Farm-in with Newcrest has returned a series of outstanding results.” This certainly bodes well. 

Speaking of Havieron, the company has also announced it had secured a mining lease relating to the project. Assuming GGP is able to get it into production, this could eventually become one of the most valuable gold mines in the world.

On top of this progress, Greatland Gold has benefited hugely from the surge in the price of the precious metal since the coronavirus struck. Despite coming off the boil in recent months, the value of gold has still soared around 25% since the beginning of 2020!

Sell or hold?

Regardless of whether the GGP share price would be where it is in the absence of the pandemic, the fact remains that a lot of early holders will be sitting on big profits. What now? 

For me, an optimum strategy for existing owners might be to bank some profit and keep the rest invested.  After all, such an incredible return over such a short period shouldn’t be taken for granted. Greatland Gold remains a company in its infancy and a lot could still go wrong. Notwithstanding, keeping some money invested will allow holders to benefit from any further positive news on drilling. 

Naturally, no one knows where the gold price will go in the short term either. Since there are simply too many factors that could impact sentiment, one potentially great destination for GGP profits, in my opinion, would be VanEck Vectors Junior Gold Miners ETF.

Diversified across 80 small- and mid-cap miners, this fund ensures investors have exposure to the gold price without the risk the comes from owning just one stock. The ongoing charge is a reasonable 0.55%. 

The post The Greatland Gold share price is up 1,200%! My call was right, so what would I do now? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Why are people investing in gold?

Gold is a hedge against uncertainty and inflation. Traditionally in volatile markets, investors pile in and buy the metal because it’s considered to maintain its store of value if the value of money drops. Currently, the economic uncertainty surrounding Covid-19 is stimulating gold demand.

In addition, persistently low bond yields reinforce this response to uncertainty and inflation. With inflation rising, investors in gilts and other government bonds will likely lose money over the longer term. Hence, gold is a very attractive investment. And with $14t of global debt carrying a negative yield, many investors believe gold prices will continue to climb.

Moreover, if the gold price is high, so are the margins of mining stocks. The Greatland Gold share price explosion is a good example. And investing in gold miners offers advantages over buying the commodity directly.

The advantages of mining stocks

Mining stocks have three main advantages over buying physical gold.

Firstly, their strategies can be adapted to suit the changing environment. Gold production can be ramped up or down as required.

Secondly, profitable gold miners may pay a dividend, whereas gold transportation and storage cost money.

And thirdly, mining businesses produce financial statements, strategy reports, and other documentation that enable analysis and sound decision-making. In contrast, there is limited data about gold demand.

So, how does Greatland Gold stock weigh up as an investment case when measured against these advantages? 

How does the Greatland Gold share price stack up?

Firstly, Greatland Gold isn’t yet producing any gold. Consequently, its production processes can’t be altered accordingly, and its margins won’t grow with increasing gold prices. In addition, it doesn’t even seem to be setting itself up for gold production.

Recently, Greatland commenced systematic drill testing at its Scallywag prospect area in the Paterson region of Australia. And things are looking good.

But, according to its farm-in agreement, if it manages to develop its product, it could sell it to its partner Newcrest. Alternatively, it could process the mined deposits at Newcrest’s nearby Telfer mine. Outputs from this mine go to the Perth mint, or are shipped as cheaper copper-gold concentrates to East Asia. Whichever route it chooses, Greatland Gold producing gold directly is unlikely.

Secondly, Greatland Gold hasn’t yet turned a profit, meaning there is no dividend either. This is in stark contrast to Buffett’s choice of gold stock, Barrick Gold.

Greatland did, however, produce the right documentation for me to weigh all this up!

So, although there is a market demand for investing in gold, I don’t think Greatland Gold is in the best position to take advantage of it. But, it’s this same gold-optimism that appears to be driving the Greatland Gold share price explosion. Consequently, this is one mining stock I won’t be buying into.

The post Is now the right time to buy the Greatland Gold (LSE: GGP) share price? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Rachael FitzGerald-Finch has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Buffett buys gold

On Friday, it was revealed that the greatest investor since the Second World War had bought gold. To be precise, the Sage of Omaha has added the world’s second-largest miner of the shiny stuff — Canada-based Barrick Gold Corp — to Berkshire Hathaway’s portfolio in Q2.

In all, Buffett bought 20.9m shares, or 1.2% of the company. Based on the closing price at the end of last week, this amounts to a stake worth $564m.

That may be a drop in the ocean for Berkshire Hathaway (market value: $500bn) but it still represents a significant development.

Why significant?

Buffett’s purchase of Barrick matters because the master investor has previously never rated gold. The precious metal, he once said, “doesn’t do anything,” thereby violating his rule to only invest in stuff that’s actually useful.

The fact he’s now willing to invest in a company like Barrick when its shares are already at a seven-year high shows just how much the pandemic has impacted his strategy and where he now sees value. 

And who can blame him? With more money-printing likely in the US (further devaluing the dollar), investors will be looking for ways to hedge against inflation. This will likely push the price of gold even higher (beyond the record high hit earlier this month), which also increases the profit margins of those who mine it.

In addition to this, the shiny stuff also tends to rise in value when stocks crash, which could still happen in the event of a second Covid-19 wave later in 2020. We’re certainly not in the clear yet!

Should I buy Barrick too?

Following Buffett into Barrick is certainly an option. Just know that you’ll probably end up paying a far higher price than he did.

Unsurprisingly, Friday’s news sent the miner’s share price rocketing in after-hours trading. As word of Buffett’s deal continues to spread, I wouldn’t bet against it going even higher this week. 

Another thing worth mentioning is that any UK investors wanting to buy US shares must first complete a form with their broker before doing so. 

An alternative way of getting exposure to the miner is via a fund. The iShares Gold Producers UCITS ETF is one example.

Despite having 55 stocks in its portfolio, just over 9% of this passive fund’s assets are tied up in Barrick.

The only company it has more exposure to is Newmont — the world’s biggest producer of the precious metal. The fund has an annual charge of 0.55%. It’s up 37% year to date.

Other stocks to consider

If you’d rather stick to large, London-listed stocks however, there’s always the option to buy stakes in FTSE 100 miners Polymetal International and/or Fresnillo instead.

Polymetal has nine gold- and silver-producing mines across Russia and Kazakhstan. Fresnillo is the world’s largest producer of silver but also the second biggest gold miner in Mexico. If you’d bought either stock during the market crash in mid-March, you’re probably very close to doubling your cash by now. 

If you agree with Buffett that demand for gold is likely to rise for the foreseeable future, there could be even more gains on the way.

The post Warren Buffett buys gold! Should you? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Paul Summers owns shares in iShares Gold Producers UCITS ETF. The Motley Fool UK has recommended Fresnillo. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Why might gold keep rising?

Last week, the US Federal Reserve implied that it was ready to inject further stimulus into its economy via another bout of money-printing. This ‘whatever it takes’ strategy, and the possibility of other central banks following suit, increases the risk of inflation picking up. 

Inflation isn’t known as the ‘silent killer’ for nothing. The rise in the cost of things means the spending power of any money you have is reduced. Investors try to counter this by moving into assets that tend to hold their value.

Another, related reason that gold might continue to soar is the possibility that we’ll get a second wave of the coronavirus, perhaps coinciding with seasonal flu. This could bring forth another bout of volatility in stocks, making it more likely that investors will seek solace in things that are negatively correlated with equities.

On top of all this, you have growing tension between China and US and the forthcoming election across the pond.

With these hurdles and no definite vaccine in sight, demand for the shiny stuff is unlikely to fall away any time soon.

How to play the gold rush

There are plenty of ways for Foolish investors to get involved. That said, the most appropriate option will depend on your financial goals, investment horizon and risk tolerance. 

Perhaps the least ‘dangerous’ way of tapping into gold’s popularity is via a fund that tracks its price. The iShares Physical Gold ETC is one of the most popular options available. 

For those looking for bigger gains, a diversified fund specialising in gold miners could be the way to go. The iShares Gold Producers UCITS ETF is one I hold.

For the brave…

If you really want to a leveraged play on the gold price however, you’ll need to buy single company stocks. You could buy a large, established miner like Polymetal or Centamin. You could also look for promising minnows.

A quick glance at the share price graph of a company like Greatland Gold shows just how profitable the latter strategy can sometimes be. Those who invested around the time that I first wrote about the company last August would have made a killing. Its shares are up 700% since then!

With recent talk of “exceptional” results from its ongoing drilling programme in Western Africa, IronRidge Resources could be next to jump. So too could be Hummingbird Resources, which has operations in Mali and Liberia. It wouldn’t surprise me if either were bid for at some point. 

As always, those tempted to invest in stocks like these need to be aware of what they’re getting into. Expect regular double-digit percentage share price moves in both directions due to their lack of liquidity. A large bid-offer spread (the difference between what you can buy and sell a stock for) means you’ll also need to make a decent gain after buying just to get back to break-even. 

Mining stocks are also no place for impatient investors. Many don’t make it into production because of the costs involved. For those that can sit on their hands, however, the wait could be worth it. 

The post The gold price is on a tear. I think those buying now could still strike it rich appeared first on The Twelfth Magpie.

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Paul Summers owns shares in iShares Physical Gold ETC and iShares Gold Producers UCITS ETF. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

This being the case, I think it’s more essential than ever that investors ensure they hold a properly diversified portfolio. Today, I’m looking at two FTSE 250 stocks from very different sectors that could help provide the recession protection they’re looking for.

“Exceptionally strong” trading

This morning’s trading update from general merchandiser B&M European Value (LSE: BME) goes some way to explaining why its share price has already recovered to pre-crisis levels. 

The company experienced a great end to its financial year thanks to what it describes as an “exceptionally strong” performance in Grocery in March. Like-for-like revenues rose 6.6% over the 13 weeks to 28 March as the great stockpiling rush ensued. 

The trend has continued into the new financial year with like-for-like revenues soaring 22.7% in the first eight weeks. Although people were making fewer trips to the stores, they were spending a lot more than normal. DIY and gardening-related items were particularly sought after. This makes sense given the lovely weather we’ve been experiencing and the fact that rival retailers were shut. Even so, revenue was still up a very healthy 10.3% if these categories are excluded.

All this has come at a cost, of course. The need to enforce social distancing and decision to pay higher wages to its workers during the pandemic means that operating costs have been higher than usual. 

There’s also no getting away from the fact that the bounce in sales will likely prove temporary as things get back to ‘normal’ (whatever that looks like). The uncertainty over whether the coronavirus has been defeated or not makes providing guidance on trading rather tricky as well.

Nevertheless, I suspect B&M will fare better than most retailers during a recession as consumers become increasingly careful with their cash, even when it comes to staple goods. This makes the company a fairly defensive pick, in my opinion.

Sure, some of today’s good news already looks priced-in to the shares. At less than 17 times earnings, however, the valuation isn’t excessive. 

Recession-proof

Another way of diversifying a portfolio in preparation for a hard recession is to get some exposure to gold. The precious metal is regarded as a safe haven in troubled times due to its tendency to be negatively correlated with global markets. It’s also a hedge against inflation and a weakening US dollar.

FTSE 250 African-focused explorer Centamin (LSE: CEY) looks a good play on this. The £2bn cap miner has a presence in Egypt, Burkina Faso and Cote D’Ivoire. It began producing from its main asset — the Sukari Gold Mine — 11 years ago. 

Is an investment in Centamin devoid of risk? Of course not. The gold price can be volatile. Any drop also tends to be magnified in the stocks of those mining for it.

At 15 times forecast earnings based on current projections, however, the valuation still looks decent to me. The company has zero debt on its balance sheet and almost $350m in cash. At $172.9m, post-tax profit also came in 13% higher in 2019 than in the previous year. I’d buy it as a recession looms.

The post Recession fears? I think these FTSE 250 stocks could offer protection appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of B&M European Value. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.