If you have a bit of a contrarian leaning, now might be an excellent time to start looking at precious metals stocks. The metal price has gone down quite a bit over the past several weeks and stocks have come down with it. It’s starting to get to the point once again where even the best companies are becoming attractive.
With all the geopolitical risks, at this point it may be wise to look into companies in the precious metals space that have less geopolitical risks attached to them than some of their peers. Companies that operate primarily in North America, or gold and silver streaming companies that do not suffer from substantial operational risks, may be the way to go. There is no shortage of companies, but here are three companies that are starting to look good.
Having most of its operations in Canada, Agnico-Eagle has the potential to be one of the most politically stable gold-focused mining operations in Canada. With everything happening in the world today, this stability may appeal to investors who want to be sheltered, or even benefit, from political instability. This company has a respectable balance sheet, with a large amount of cash on the books. Agnico-Eagle also pays a dividend of 1.7% at the current share price.
The company operates in the Americas, with most of its operations and exploration projects being in Canada and the United States, although it does have projects in areas outside of North America in places such as Argentina. SSR Mining has an excellent balance sheet with almost double the amount of cash that it has in debt. It also produces solid free cash flow, even at these reduced prices. The company does not have a dividend, which might bother some investors, but its solid operational track record and balance sheet should make up for the lack of a payout.
If you aren’t particularly pleased or excited about miners, then a good streamer might be appropriate for you. Wheaton Precious Metals, previously called Silver Wheaton, used to be primarily focused on silver. As the name change indicates, the company is now focused on many different precious metals, including a greater focus on gold. It also pays a dividend of around 2% at the current share price, which might make it more attractive to dividend investors.
Losing its luster?
It takes a strong stomach to buy when everyone else is selling. Unfortunately, the times of maximum negativity are where the best deals are often found. Gold still faces negativity from a number of fronts. Rising rates give alternative savings vehicles to gold, a strong US dollar is usually inversely relational to gold prices, and alternatives such as cryptocurrencies have drained some of the cash that may have found its way into gold investments. There is also the fear of peak gold — the thought that all the gold will be found in a few years.
Nevertheless, many financial planners and investors believe that gold deserves a place in investors’ portfolios. Given gold’s status as a safe haven investment, it may pay to have a portion of your investments allocated to it. And by picking solid companies such as the ones listed above, you can leverage gold’s potential recovery to get excellent returns from your gold holdings.
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 Kris Knutson has no position in any of the stocks mentioned. Wheaton Precious Metals is a recommendation of Stock Advisor Canada.