Golden Buys: Goldcorp and Newmont
11/11/2016 8:00 am EST
Although our overall portfolio is up 13.5% so far this year, precious metals have been our Achilles' heal; despite this, we remain bullish on two of our gold holdings, explains Jack Adamo, editor of Insiders Plus.
Our portfolio stocks are up 13.5% and 6.2% for the Main Portfolio and High Income Portfolio.
Goldcorp (GG) delivered a stellar 3rd quarter report. Despite revenues falling nearly 17%, EPS came in much higher at 7¢ per share, versus a 23¢ loss last year.
The bottom line was helped all the way down the page by lower expenses in all production categories.
Meanwhile, the company is well on it's way to making its operations super efficient, having achieved over 60% of its targeted $250 million in sustainable annual efficiencies. The rest should be fact by 2018 when a lot of new production will also be coming on line.
That is undoubtedly why the stock is selling at such a high multiple of expected 2016 earnings. The P/E is 44, but earnings growth is expected to be more than 100% in 2017 and indeterminately higher in 2018.
Goldcorp is an excellent buy at current levels. It may take a few years to work out, but from its P/E it's clear that the smart money is buying early here, as is usually the case with gold.
Newmont Mining (NEM) reported GAAP net income from continuing operations of $169 million, or $0.32 per share in its latest quarter, compared to $159 million, or $0.30 in the prior year quarter.
It produced 1.25 million ounces of gold versus 1.21 million ounces in the prior year's quarter. Costs applicable to gold sales were $706 per ounce compared to $645 per ounce last year.
Despite higher expense, I'm very bullish on Newmont. New operations are coming on line and should help earnings immensely going forward.
Analysts expect Newmont to earn $1.73 this year (adjusted) and $2.00 next year. That's a current P/E of 20 with about 16% growth next year. That's a nice price/earnings-to-growth ratio.
The company doubled its fourth quarter dividend to $0.05 per share and announced an enhanced gold price-linked dividend policy.
Newmont is a great buy with its relatively low P/E, new production coming on line and a long history of delivering returns to investors.
The company is still thriving after two world wars, the outlawing of the ownership of gold by Americans, a worldwide depression and several worldwide near depressions. I'm raising my buy range for the stock to $38.
By Jack Adamo, Editor of Insiders Plus