Inflation has me nervous right now. The Federal Reserve says the recent jump is temporary, so there’s no need to raise interest rates or pull back on stimulus, cautions Frank Curzio, editor of Curzio Research Advisory.
But the Fed is focusing on the wrong things. It’s a dangerous situation when you consider prices are surging for everything from lumber to gasoline to food.
It’s not time to sell everything, but you need to position your portfolio for inflation. And my new recommendation is in a great position to benefit from inflation.
After years of cutting costs, this mining company’s profits will explode as production grows 20% over the next couple years. And if inflation triggers a surge in gold prices, the stock could rocket higher.
Kinross Gold (KGC) is the fifth-largest gold miner in the world, with production of 2.37 million ounces in 2020. In short, the company has an amazing portfolio of assets, including mines on four different continents.
Over the past four years, Kinross cut its production costs by 13%, from just under $2 billion in 2016 to $1.73 billion in 2020.
More importantly, the company is ready to grow. Over the next two years, Kinross expects to boost production to 2.9 million ounces. That’s a 20% increase—pretty substantial for a large-cap miner.
Almost all of this increase comes from expanding existing mines, including Tasiast (in Mauritania, Africa) and La Coipa (in Chile, South America). Looking further down the road, Kinross has multiple additional catalysts from development-stage projects like Chulbatkan (Russia) and Manh Choh (Alaska).
The company is in great financial shape, with over $1 billion in cash and another $1.6 billion in available credit. Best of all, Wall Street isn’t focused on Kinross’ growth profile. The stock is down about 25% from its September 2020 highs. Most of that decline matches the pullback in gold prices.
But the stock is generally out-of-favor right now, especially compared to a name like Newmont (NEM), which is up about 14% since the start of the year. I expect that to change soon. As I mentioned above, Kinross has a bunch of growth catalysts that should generate more attention over the next couple years.
It’s good that Wall Street is sleeping on Kinross. It means we can buy the stock at a fantastic price. Shares are trading around six times (6x) forward earnings estimates.
I can’t remember ever seeing a company this cheap… especially when it’s still growing. And remember, Kinross cut its costs over the past few years. That means earnings and cash flow will explode higher as revenue starts to rise.
Analysts expect Kinross to post earnings per share (EPS) of $0.62 this year, followed by EPS of $0.91 in 2022. That’s a nearly 50% jump. This growth could continue for years into the future as the company develops its existing projects or acquires new ones.
Keep in mind, I haven’t mentioned gold prices at all so far. We’re seeing a massive jump in inflation right now… which could be just the start.
Historically, gold is one of the best ways to protect yourself from inflation. But gold prices are only up about 6% over the past 12 months—it’s one of the worst-performing commodities recently. If gold prices rise over the next year-plus, Kinross’ growth profile becomes even better.
As always, be sure to check out this month’s video for my detailed analysis of Kinross. We’re getting in at a great price here… and it’s a stock that offers a fantastic risk/reward profile, especially in an inflationary environment.
Action to take: Buy Kinross Goldup to $8.50 per share. Use a 35% hard stop from your cost basis.
