[cnxvideo id=”509260″ placement=”ros”]The market is starting to get nervous, and so are some major investors. Carl Icahn recently came out with some very bearish commentary, and he isn’t alone. Risk assets have been bid up huge since the lows of 2009, and in less than a year we have had two 10% declines, after not having one in the previous three years. So the question is what can investors do to protect their assets without selling everything and settling for money market yields?
One idea that makes sense is to add some gold to a portfolio, and adding some of the top stocks in the sector can help to protect a portfolio should we see a drastic sell-off. One of the best in covering the sector is RBC, which is right in the middle of is Global Mining and Materials conference. The firm has four top stocks rated Overweight that make good additions to growth portfolios.
Agnico Eagle Mines
This top stock has remained a long-time Wall Street 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. The company and its shareholders have full exposure to gold prices due to its long-standing policy of no forward gold sales. Agnico Eagle has declared a cash dividend every year since 1983.
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The company posted outstanding results at the end of April, with adjusted earnings per share more than double the Merrill Lynch estimate. Agnico Eagle also noted that it now expects 2016 production to be at the top end of guidance, and that could continue to bode well for earnings.
The company remains one of the top picks on Wall Street as it fits the objectives of having quality mining assets with attractive margins, and it sports a very solid balance sheet.
Agnico Eagle investors are paid a 0.7% dividend. The RBC price objective is $46 and may be going higher soon. The Thomson/First Call consensus price target is $45.94. The stock closed Wednesday at $51.26 per share.
Kinross Gold
More aggressive investors may want to consider this smaller cap company. Kinross Gold Corp. (NYSE: KGC) engages in the acquisition, exploration, development and production of gold properties. The company’s gold production and exploration activities are carried out principally in Canada, the United States, the Russian Federation, Brazil, Chile, Ghana and Mauritania. It also produces and sells silver.
As of December 31, 2015, the company’s proven and probable mineral reserves included 34.0 million ounces of gold, 41.0 million ounces of silver and 1.4 billion pounds of copper.
Kinross posted first-quarter numbers that were essentially in line with consensus estimates. The company also announced that it is assessing the potential suspension of Maricunga mining activity by the end of October, but for now, the operating guidance remains unchanged.
The RBC price target is $6, and the consensus target is much lower at $4.89. The shares closed most recently at $5.22.
Newmont Mining
This is one of the largest mining companies and a solid buy for more conservative accounts. Newmont Mining Corp. (NYSE: NEM) is a leading gold and copper producer. The company employs approximately 29,000 employees and contractors, with the majority working at managed operations in the United States, Australia, Ghana, Peru, Indonesia and Suriname. Newmont was founded in 1921 and has been publicly traded since 1925.
The company posted mixed first-quarter results. While the earnings per share missed the Wall Street estimates, the revenues actually came in above estimates. The company has lowered debt almost 19% since the beginning of 2015, a huge positive for investors.
Newmont generated free cash flow (FCF) of $756 million in 2015, and that is expected to continue this year. Most of the increase was due to cost and productivity improvements. It has been self-funding projects and dividends, unlike many of its peers. This solid FCF flow is a huge plus for investors looking to add a company with a solid balance sheet and conservative accounting standards.
Newmont investors are paid a small 0.38% dividend. The RBC price target is $40, and the consensus stands at $35.35. The stock closed Wednesday at $36.24.
Royal Gold
This another solid company for investors looking for a gold presence. Royal Gold Inc. (NASDAQ: RGLD) is a precious metals royalty and stream company engaged in the acquisition and management of precious metal royalties, streams and similar production-based interests. The company owns interests on 193 properties on six continents, including interests on 38 producing mines and 24 development stage projects.
The royalty type companies make sense for investors wanting to avoid the actual mining aspect of sector. Buying precious metals streams grows Royal Gold’s business, and means it could mean the company exits this downturn with a stronger profile, and more production, than when it went in.
RBC has a $66 price target on the stock, and the consensus target is posted at $64.69. The shares closed Wednesday at $67.82.
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Proper asset allocation should always include a single-digit percentage holding of precious metal like gold and silver. Not only do they hedge over the long term, they can really help if the market does go in to correction or bear market mode, as they tend to trade inverse to markets.
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