If you’re looking for a stock to add to your gold portfolio, or need your first exposure to the precious metal, Barrick Gold (TSX:ABX)(NYSE:GOLD) is looking like a surefire hit right now. From a recovered balance sheet to a wide economic moat, here are some of the top reasons why this top tier gold stock could make a lot of patient investors rich in the long term.
Barrick Gold is a major player in the Canadian mining industry
Observers of the metals and mining industry may have taken note of April’s finalization Nevada Joint Venture (JV) between Barrick Gold and the newly merged mega-miner, Newmont Goldcorp. The Nevada JV is closing in on productivity of close to two million ounces for the latter half of the year. Split 38.5% to 61.5%, Barrick Gold has the greatest stake in the mining complex, and therefore has some serious incoming cash flow on the way.
Nevada Gold Mines LLC, as the JV is called, is almost single handedly the best reason to buy Barrack Gold stock today, with its much improved balance sheet (and hence lower risk) as a very close second. A third great reason to get invested would be Barrick Gold’s stable market share as a world leader in gold mining. To top it all off, seeing as we’re listing reasons to buy here, a gold bull run could be on its way if investors continue to seek out low risk assets.
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Barrick Gold could become “too big to fail”
Barrick Gold is a solid investment with or without a gold bull run. Its share price will continue to get driven up by investors seeking exposure to gold no matter what happens to the economy, thanks to its sheer size. But if a sustained period of uncertainty pushes gold prices higher, Barrick Gold stands to rake in some serious revenue, with the side effect of near-exponential rise in its share price.
Perhap the most reassuring aspect of Barrick Gold, however, is the way it’s brought its debt under control over the years. A stubborn misconception persists that holds Barrick Gold as a high-debt liability, but this hasn’t been the case for some time now. And the value investor has something to smile about here, too, with the kinds of current fundamentals that would shake out with considerable upside along the tracks.
With gold prices breaking highs last seen six years ago, the contrarian market for gold may flip over into the mainstream later in the year, with stocks like Barrick Gold poised to reward capital gains investors with dizzying upside.
Long gone are the assumptions that a sustained gold bear would cause affected stocks to grind lower for years to come – now that the interest in cryptocurrencies is losing steam and the Sino-American trade war rumbles on, it’s a very different story.
The bottom line
With climbing gold prices and no end in sight to various geopolitical flashpoints, it’s not beyond the realms of possibility that Barrick Gold could reward capital gains traders within a very short turnaround. However, going long on Barrick Gold may be an even better play, considering how productive its operations are likely to be, and the fact that investors are now returning to gold as a safe haven.
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 Victoria Hetherington has no position in any of the stocks mentioned.