Since the major stock market crash in March, a lot of TSX stocks have had impressive recoveries. However, some of the biggest gains on the TSX have come from gold stocks.
A lot of this is due to the massive increase in the price of gold this year. Many TSX stocks have recovered fully, and some have reached new highs.
However, with gold stocks, almost every company has rallied to new highs. This goes to show the strong performance of gold so far in this economic environment.
Since the bottom in March, the TSX has rallied about 37%, yet it’s still down 5% year to date.
The iShares S&P/TSX Global Gold Index ETF, which tracks a basket of TSX gold stocks, has rallied 80% since the bottom and is up 47% year to date.
This goes to show how well gold has performed this year, and why there’s still a tonne of potential for the rest of 2020.
TSX gold stocks taking a breather
Over the last few weeks, gold prices and gold stocks have taken a pause from the massive growth.
This is to be expected after a massive rally in the previous few months. However, just because the price of gold has plateaued in the short term, doesn’t make me change my stance on gold for the rest of the year.
In fact, I think this is working to many investors’ advantage, giving the chance to gain some exposure before the yellow metal takes off again.
Gold stocks have performed well with all the economic stimulus. Even Warren Buffett’s company just bought some shares of a TSX gold stock.
And given we are still in the thick of the coronavirus pandemic and a lot more stimulus will likely be needed, gold should continue to shine well into 2021.
TSX gold stock to buy today
Like I said, this slight pullback from gold stocks is the perfect opportunity to gain some exposure, especially to a high-growth stock like Equinox Gold (TSX:EQX), which still has a long way to reach fair value.
The stock is extremely attractive due to several factors. Firstly, the company is relatively new and only commenced production in 2018.
In the last few years, it’s been rapidly growing its production. And will continue to increase that output until at least 2023, when it has a target to produce one million ounces that year.
Growing production is always ideal for shareholders. However, when you combine that rapid increase in production over the next few years with a gold price that’s skyrocketing, the opportunity is incredible.
Furthermore, the larger and more diverse the production, the less risk the company generally has. So, smaller companies tend to trade at lower valuation multiples for this reason.
Therefore, you can also expect that another catalyst for Equinox’s growth will be the increase to the valuation multiples on its business, as it continues to grow its production.
These factors are extremely important and play a huge role in making Equinox one of the top gold stocks to buy on the TSX. That’s evident in the stock’s performance.
Compared to the gold index ETF, Equinox is up 151% from its 52-week low, more than 40% more than the basket of gold stocks. In total, for the year to date, it’s up 66% compared to the ETF, which is up 47%.
Plenty of gold stocks will provide investors with significant returns in this economic environment. However, some are better positioned than others.
You’ll want to try your best to identify these outperformers to take full advantage of the rapidly increasing price of gold.
Investors who wait may miss out on Equinox, but if you’re looking to buy a TSX gold-stock today, Equinox is one of the best bets.
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 Daniel Da Costa owns shares of EQX.