The market roller-coaster is starting to give investors whiplash as the markets are off to the worst start of the year ever. By now, as the financial media juggernaut begins to trot out all the bears for their negative opinions, investors start to worry if a crash is possible. The bottom line is the impetus behind this sell-off is not economic data or possible recession, it’s headline driven. When you combine a market meltdown in China with North Korea nukes, and you toss in some Middle East friction, markets get queasy.
One thing investors should do, regardless of the current situation, is to have at least a percentage of their portfolio dedicated to gold and silver. Between central government purchasing and emerging market demand, prices while range bound have probably bottomed. A new report from the analysts at RBC maintains that while gold stocks will remain volatile this year, investors should look for trading opportunities around core gold and silver equity holdings.
Two of the firm’s top stocks to buy trade on U.S. exchanges and make good sense, not only for the current volatile markets, but for patient long-term investors looking to hedge stock portfolios some. Both are rated Outperform at RBC.
Agnico Eagle Mines
This top stock to Buy has remained a long-time RBC favorite. Agnico Eagle Mines Ltd. (NYSE: AEM) is a senior Canadian gold mining company that has produced precious metals since 1957. Its eight mines are located in Canada, Finland and Mexico, with exploration and development activities in each of these regions, as well as in the United States and Sweden. Agnico Eagle Mines and its shareholders have full exposure to gold prices due to its long-standing policy of no forward gold sales. And the company has declared a cash dividend every year since 1983.
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Agnico Eagle Mines was the most successful year over year in reducing its all-in sustaining costs in 2015. It came in 29% lower, at $810 per ounce. The company also lowered its cash cost guidance for the second time this year to $850 per ounce (mid-point) from $880 per ounce. The upgrades have mainly been due to higher-than-expected grades and currency tailwinds from the Canadian dollar and the Mexican peso.
The stock is one of the top picks at RBC as it fits the firm’s objectives of having quality mining assets with attractive margins, and the company sports a very solid balance sheet.
Agnico Eagle Mines investors are paid a 1.1% dividend. The RBC price objective for the stock is set at $34, while the Thomson/First Call consensus price target is $33.31. The stock close Thursday at $29.99 per share.
Silver Wheaton
This is another top gold stock that the RBC team has stayed positive on for some time. Silver Wheaton Corp. (NYSE: SLW) is the largest pure precious metals streaming company in the world. Based on its current agreements, forecast 2015 estimated annual attributable production is approximately 44.5 million silver equivalent ounces, including 230,000 ounces of gold. By 2019, estimated annual attributable production is anticipated to increase significantly to approximately 55 million silver equivalent ounces, including 325,000 ounces of gold. This anticipated growth is expected to be driven by Silver Wheaton’s portfolio of low-cost and long-life assets, including precious metal and gold streams on Vale’s Salobo mine and Hudbay’s Constancia project.
Silver Wheaton has 18 long-term purchase agreements and one early deposit long-term purchase agreement associated with silver and gold relating to 27 various mining assets. It has silver and gold interests are primarily in the San Dimas, Zinkgruvan, Yauliyacu, Stratoni, Los Filos, Peñasquito, Keno Hill, Neves-Corvo, Cozamin, Minto, Barrick, Aljustrel, 777, Salobo and Sudbury mines, as well as the Rosemont, Loma de La Plata, Constancia and Toroparu projects.
Again, the company fits into the RBC metrics for quality assets and royalty streams, and it has the kind of balance sheet that has protected it from the pitfalls of miners with huge capital expenditures.
Silver Wheaton shareholders are paid a solid 1.6% dividend. The RBC price target is $20, and the consensus is right in line at $19.99. The stock closed Thursday at $13, up 6.21% on the day.
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Proper asset allocation should always include a single-digit percentage holding of precious metals like gold and silver. Not only do they hedge over the long term, they can really help if the market does go into correction or bear market mode, as they tend to trade inverse to markets trading down.
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