Investors seeking reprieve from market volatility, or at least a place to hide that may be safe from the broader market indices, certainly have a difficult task. The stock market selloff we’ve experienced in early March is the worst selloff in more three decades. One must wonder if we’ve really hit bottom now.
In this article, I’ve highlighted four options for defensive investors.
Barrick Gold is a gold miner which seemingly always finds its way to my top picks list. There are a number of reasons why I like Barrick Gold. Barrick is one of the largest gold producers one can own. Barrick’s top-tier mines and massive reserves base increases in value over time as the price of gold increases. (At least in theory, as gold bugs will note we haven’t we haven’t seen an expected rise in the spot price of gold in this recent market turmoil).
If one believes we’re about to see U.S. dollar depreciation and/or a run to safe havens like gold, as I do, then Barrick Gold is perhaps the best place to start one’s research.
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Similar to Barrick, and all other gold-focused mining companies out there, Oceana Gold has felt the pain of relatively muted gold prices and a lack of investor exuberance in the gold mining sector overall. Oceana has a great management team and solid assets. Despite this, Oceana has been punished by the market for concerns around some of the company Philippines-based assets. These concerns seem to have driven gold investors to larger names like Barrick in recent quarters.
Oceana is perhaps a higher-risk, higher-reward option for enterprising investors willing to take on risk in this risk-off market.
A royalty streaming company, Sandstorm Gold (TSX:SSL)(NYSE:SAND) provides investors access to the royalty business, which fuels gold exploration and mine development. These are key drivers of early stage growth for a range of mining companies. As I’ve mentioned in the past, royalty plays like Sandstorm truly represent unique opportunities in this environment.
Royalty-based revenue and earnings are far more stable than top- and bottom-line numbers reported by gold miners. In addition, royalty streams are not linked to the price of gold at all but rather to production volume (typically).
Furthermore, as debt markets dry up, and/or investor confidence around equity issuances in this space wanes, mining companies may be more eager to do royalty deals with companies like Sandstorm at more favourable terms.
A base metals player, Ivanhoe Mines (TSX:IVN) focuses mainly on the production of copper, zinc, palladium, and platinum. Unfortunately for those who put their hard-earned cash into Ivanhoe previously, these metals generally do not perform well in an economic downturn. Therefore, shares of Ivanhoe have underperformed of late.
That said, for those betting on long-term global growth, base metals players like Ivanhoe do tend to perform well over long periods of time. That makes this company an attractive potential opportunity for an investor with a long enough time horizon.
Stay Foolish my friends.
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 Chris MacDonald does not have ownership in any stocks mentioned in this article.