Gold is all the rage lately as investors seek refuge amid in an economy that is seeing a weaker dollar and facing the threat of inflation from all the stimulus that has been pumped into the economy to help pull us out of a recession. Traders are also driving gold higher as scramble to take advantage of the recent upswing.
What we are seeing now may be a short-lived fad in gold. However, allocating a portion of your portfolio to gold is always a good idea since it can serve as a hedge against inflation and be a safe haven in a troubled economy.
With gold being the trend de jour, I used the Research Wizard to screen for gold miners. In searching for solid picks, I made sure the fundamentals were strong and pointing to outperformance over the long-term. In other words, I looked for stocks that weren't just benefiting from the recent "gold rush" but also have the potential to be a boon for a well-diversified portfolio.
3 Golden Opportunities
Agnico-Eagle Mines Ltd. (AEM) explores, develops, and produces gold in Canada, Finland, Mexico, and the United States.
AEM saw a solid second quarter, noting that production growth continues as second quarter gold production increased 76% over the second quarter of 2008.
Earnings per share of 11 cents topped the previous year's 6 cents. The company did miss the Zacks Consensus Estimate by 8% for the quarter but beat ahead of the Zacks Consensus Estimate by an average of 6.5% over the past 4 consecutive quarters.
Analysts polled by Zacks are bullish on earnings going forward. The full-year forecast of 71 cents per share was increased from 69 cents over the past 2 months. For 2010, earnings are projected to grow by an impressive 204% to $2.17 per share, which is above the 2 months-ago level of $2.08.
Earnings per share are expected to grow by 59% over the next 3 - 5 years, which is well ahead of the industry average of 14.5%. The company boasts a net profit margin of 23%, versus the industry average of 6%. AEM also offers a 5-year average return on equity (ROE) of 8%.
Barrick Gold Corporation (ABX), which primarily explores, develops, produces and sells gold worldwide, also sports strong fundamentals.
The company's 5-year average return on equity (ROE) stands at 9%. ABX net profit margin of 8% surpasses the industry average of 6%. Barrick Gold also rewards shareholders with an industry-leading dividend yield of 1%.
The full-year Zacks Consensus Estimate for earnings is at $1.82 per share, compared to the 2 months-ago forecast of $1.72.
For 2010, analysts polled by Zacks are calling for $2.16 per share, above the 2 months-ago level of $1.91 and 19% higher than 2009 expectations.
In late July, Barrick Gold posted second-quarter earnings per share of 49 cents, below last year's 55 cents but 32% ahead of the Zacks Consensus Estimate.
Goldcorp Inc. (GG ) explores, develops and operates precious metal properties in Canada, the United States, Mexico, as well as central and South America. The company explores primarily for gold, silver, copper, lead, and zinc ores.
The company delivered second-quarter earnings of 14 cents per share, eclipsing the previous year's 12 cents and missing the Zacks Consensus Estimate by a penny. During the past 4 straight quarters, earnings were, on average, 9% ahead of the Zacks Consensus Estimate.
Analysts polled by Zacks see 2009 earnings of 66 cents per share, slightly below the 3 months-ago estimates of 68 cents. For the following year, analysts see growth of 43% as evidenced by the Zacks Consensus Estimate of 95 cents, an increase from the 3 months-ago level of 83 cents.
The company's net profit margin of 54% towers over the industry average of 6%. Goldcorp also has a 5-year return on equity (ROE) of 8%.
