Franco-Nevada: Royalty Gains

09/06/2017 2:57 am EST

Focus: COMMODITIES

Michael Cintolo

Vice President of Investments and Chief Analyst, Cabot Heritage Corporation

Gold is among the most emotional of commodities, and the current enthusiasm for the metal is lifting companies like Franco-Nevada (FNV) to new all-time highs, notes Mike Cintolo, editor of Cabot Top Ten Trader.


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Franco-Nevada is a Canadian company that invests in royalty and streaming interests and currently has leveraged exposure to the rising price of gold without the expense of exploration or actual mining operations.

Franco-Nevada appeared on our list in 2016 after a $500 million deal acquired Glencore’s production of gold, silver and copper from one of its very productive mines in Peru.

The recent spike in the price of copper just adds to the value of that new streaming deal, which is forecast to deliver as many as 80,000 ounces of gold per year over the next five years.

The company enjoyed a 38% jump in revenue in 2016, with Q1 revenue growth coming in at 31% and Q2 growth dipping to 8%.

Analysts expect Franco-Nevada to grow earnings by 6% in 2017 and 11% in 2018, but if the price of gold and other metals continues to rise, those increases will fall directly to the bottom line. If you want some gold exposure, Franco- Nevada is a diversified and leveraged way to get it.

With FNV a bit extended over its 25-day moving average (now at $78), you should wait for a pullback of a point or two to initiate a position. But with world politics creating plenty of anxiety, a bit of gold might be a good bet. Use $75 as a stop-loss guideline.

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