Why I’m Bullish on Goldcorp Inc.

Gold seems to be having a great start to the year. If you are contemplating investing in the sector, here’s why Goldcorp Inc. (TSX:G)(NYSE:GG) is a great bet.

The Motley Fool

I strongly believe this is the year for gold. I know most investors are sick of hearing that, and I don’t blame them. This is the third year in a row that gold has closed lower, in spite of several experts calling a rebound in the once-loved commodity.

But hear me out. While I can’t (and don’t even try to) predict where gold prices will go by the end of the year, what I can say is that the metal is having a great start to 2015.

Over the past month, the S&P/TSX Gold sector has jumped an impressive 25.2%. That’s after the last six months of 2014 saw the S&P/TSX Gold sub-industry return -28.6%. On June 30, 2014, gold was at US$1,325.75/oz and within five months it lost another 13% and ended the year at US$1,199.25/oz — lower for the third straight year.

However, one month into the new year, gold is performing incredibly well. It has almost wiped out all loses from 2014 and the price of gold now sits proudly at US$1,286/oz. Of course, it still has a long way to go, compared to its all-time high, but this is a start.

I’m not entirely sure what is triggering the rally. There are several factors that can be attributed to the run including the escalating war against terror (with ISIS). Moreover, gold miners are finding it increasingly hard to locate gold deposits, and so, demand-supply fundamentals could be working in favour of gold prices too.

In December 2014, I said gold was a sector to watch for 2015. Besides being bullish on gold, I’m also positive on one gold company in particular: Goldcorp Inc. (TSX:G)(NYSE:GG). I believe Goldcorp will do well this year and if you are looking to enter the gold sector, this is one company worth considering.

Goldcorp has been a market darling in the North American gold sector for ages. It is a quality company that is very well run, has a strong balance sheet, and has high quality assets. The company recently purchased Probe Mines Ltd. (TSXV:PRB) in an all-stock deal worth $526 million. This deal makes a lot of sense for Goldcorp, in spite of it looking expensive on the surface; the biggest being the synergies due to the proximity of the two mines. In fact, Goldcorp Chairman Ian Telfer recently said in a Globe and Mail interview that the only way mining companies can grow and survive is through acquisitions.

Goldcorp has been performing exceptionally well too, compared to the rest of its peers. It hit record gold output in the last quarter of 2014 and expects to grow by 20% this year as several of its new projects begin production.

However, the stock currently hovers around its 52-week high at $30.69, which is a tad expensive. But Goldcorp has earned this premium and its past record proves it is worth its price tag.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Sandra Mergulhão has no position in any stocks mentioned.

More on Metals and Mining Stocks

Metals
Stocks for Beginners

Steel Is in Demand: 2 Canadian Stocks That Should Benefit

Steel stocks are making a comeback, with 2024 and 2025 marked as huge years for the industry. And these two…

Read more »

Dice engraved with the words buy and sell
Metals and Mining Stocks

Canadian Mining Stocks: Buy, Sell, or Hold?

Teck Resources is a Canadian mining stock that likely has a bright future due to the company's focus on copper.

Read more »

Paper airplanes flying on blue sky with form of growing graph
Tech Stocks

2 Soaring Stocks I’d Buy Now With No Hesitation

Sure, these soaring stocks have already climbed by immense amounts. But I would all but guarantee these companies have more…

Read more »

Gold bullion on a chart
Metals and Mining Stocks

If Gold Prices Continue to Climb, These 3 Stocks Could Skyrocket

Not all gold stocks might ride the sector-wide bullish momentum similarly. Some might catapult to new heights, while others may…

Read more »

A worker wears a hard hat outside a mining operation.
Metals and Mining Stocks

1 Canadian Mining Stock to Buy and Hold Forever

Here's why investors can consider investing in this blue-chip TSX mining stock right now.

Read more »

a person prepares to fight by taping their knuckles
Dividend Stocks

These 2 Stocks That Struggled in 2023 Could Make a Big Comeback in 2024

After almost one-and-a-half years of fluctuations, the TSX is consistently rising, and many beaten-down picks of 2023 might emerge as…

Read more »

Gold bullion on a chart
Tech Stocks

2 Canadian Mineral Stocks That Are Glittering (but Aren’t All Gold)

Gold stocks are climbing as the price rises higher and higher, and these are already reaping the rewards.

Read more »

A worker wears a hard hat outside a mining operation.
Metals and Mining Stocks

Copper Stocks Are Surging: Here Are 2 Good Ones to Buy

Copper stocks have been rising higher as the price of the material continues to climb, so here's how to get…

Read more »