This article is an excerpt from Barron’s 10 favorite stocks for 2021. To see the full list, click here.
Gold remains a good hedge against ultraloose monetary policies worldwide and possible higher inflation. The metal has risen 24% this year to $1,880 an ounce, but it is way behind Bitcoin, a digital alternative, which is up 220% to more than $23,000.
One of the better ways to play gold is through mining industry leader Newmont (ticker: NEM). At $60, its stock isn’t expensive, fetching 14 times estimated 2021 earnings of $4.15 a share and yielding 2.7%, against 1.6% for the S&P 500. Its shares have pulled back lately, along with gold, which peaked at over $2,000 an ounce in August. The shares would gain over 20% if they merely got back to their August high of $72.
Newmont / NEM
E=Estimate
Source: Bloomberg
Newmont boosted its payout by 60% in October under a policy tying the dividend to gold prices. The company sees annual free cash flow of more than $3 billion annually at current prices, for a 6% free-cash-flow yield.
“Our portfolio is hitting its stride,” Newmont CEO Tom Palmer told Barron’s in October. Investors worry about mines being wasting assets, but Newmont expects to maintain annual gold production of six million ounces or better for a decade—and beyond.
Joe Foster, portfolio manager of the VanEck International Investors Gold fund (INIVX), sees gold and gold stocks as alternatives to low-yielding bonds. Among alternative assets, none have gold’s “established history of a store of wealth,” he recently wrote.
Write to Andrew Bary at [email protected]
