There are two huge contrarian trades now, and precious metals, especially gold, is one of them. The gold sell-off has now been going on for more than three years, and that has pretty much washed out all the bullish former investors. A new report from Deutsche Bank takes the road rarely traveled now and becomes more positive on the beaten-down gold stocks.

Despite the pounding, and an ugly pall that still hangs over the sector, the Deutsche Bank team makes the solid point that the top companies in the industry have solid upside to current prices, improved balance sheets and continuing capital expenditures and cost-outs that are both company and macro driven, where they cite dollar strength and oil.

The analysts upgrade two stocks to Buy: Barrick Gold Corp. (NYSE: ABX) and Newmont Mining Corp. (NYSE: NEM). Patient long-term investors may have an opportunity to carve out not only a nice hedge in their portfolio, but perhaps a large gain as well.

Barrick Gold

This top company in the sector has been absolutely eviscerated over the past three years. Barrick produces and sells gold and copper. It is also involved in exploration and mine development activities. The company conducts mining, development and exploration, and other activities in various countries, including the United States, Canada, Australia, Argentina, Chile, Peru, Zambia and Saudi Arabia. Its principal properties include Cortez, Goldstrike, Pueblo Viejo, Lagunas Norte, Veladero, Zaldívar and Lumwana mines, and its Pascua-Lama project. As of December 31, 2014, the company had proven and probable mineral reserves of 93.0 million ounces of gold and 9.6 billion pounds of copper.

The Deutsche Bank analysts point out that Barrick is not the world’s largest gold-mining company but also has solid exposure to copper and silver, and it holds interests in a nickel project in the Democratic Republic of the Congo. The company has slashed the dividend and continued on a strong cost-cutting course, which includes the sale of its Australian Cowal gold mine for $550 million to the Australia-based Evolution Mining. Along with Cowal, Barrick has also put up its Porgera mine in Papua New Guinea for sale. These mine sales are in line with the company’s goal of reducing its debt burden by close to $3 billion by year end.

The bottom line for investors willing to take a shot is that with tremendous cost-cutting and a sheer will to survive, the company most likely still can be solid with gold trading down to as low as $1,050 per ounce. Plus, any reversal in global growth and demand increases, especially from China, and the tide for Barrick and the industry could turn fast.

Barrick investors are paid a small 1% dividend. The Deutsche Bank price target for the stock is $12, and the Thomson/First Call consensus target is $10.77. Shares closed most recently at $7.77.

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Newmont Mining

This is another market leader that has been crushed since the gold bear market took hold. Newmont is the world’s second-largest gold-mining company and produces copper as a by-product. It has mining operations in the United States, Canada, Peru, Australia, New Zealand and elsewhere. Newmont is the only gold producer listed in the S&P 500 index. The company recently completed the acquisition of the Cripple Creek & Victor gold mine in Colorado from AngloGold Ashanti for $820 million, plus a 2.5% net smelter return royalty on potential future gold production from underground ore.

Like Barrick, the company is expected to generate a large amount of 2016 revenue from gold sales, has cut the dividend drastically and has made huge capital expenditure adjustments to help mitigate costs and free cash flow. Also as with Barrick, the Deutsche Bank team feels comfortable that the company can deal with the spot price of gold dropping down to the $1,050 level.

Newmont investors are paid a tiny 0.57% dividend. The Deutsche Bank price target is a whopping $27, and the current consensus price objective is $25.91. The shares closed Thursday at $17.49.

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In the report, the Deutsche Bank team also raised silver producers Pan American and Hecla to a rating of Buy, given the two companies’ solid gold exposure (26%, 38%, respectively). They also cited the significant non-U.S. cost-exposures and favorable risk-reward in the stocks.

Clearly, like energy, this is the most contrarian trade that investors can put on now. But remember, after the housing collapse in 2008, so was buying the home builders and banks in 2009, when many were trading at single-digit levels. Unless you think gold goes drastically lower, this may be an investment to consider, especially with the two top companies profiled by Deutsche Bank.

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