As far as I’m concerned, Kirkland Lake Gold (TSX:KL) is the best gold company in the world. That’s right, a mid-cap Canadian gold miner not many may have heard of, is the best gold company in the world.
In this article, I’m going to discuss the many factors that play into this assessment. I think this is a stock that is ultra-cheap given its 35% drop from its peak. I think this is easily a $100 stock. Accordingly, this dirt-cheap stock is simply too attractive to ignore right now.
Fundamentals are best in class
I haven’t seen another gold producer show the broad fundamental strength of Kirkland Lake — ever.
This company generates extremely consistent and growing cash flows. More importantly, Kirkland Lake has done this without using high levels of debt. The company’s balance sheet is essentially iron-clad, as far as gold miners go. Indeed, many investors have steered clear of gold miners in recent years because of historically poor performance in terms of capital management in the past. That said, Kirkland Lake has one of the best management teams and track records of its peers.
Accordingly, on a fundamentals basis, this stock is perhaps one of the best on the TSX right now, never mind the precious metals sector. The recent sell-off we’ve seen in this stock only represents a buying opportunity, in my mind.
Operations are global, but focused on “safe” regions
Geopolitical concerns are often one of the headwinds gold miners face. Various developing jurisdictions face geopolitical issues all the time. Other miners have to put up with political regime changes, wars, or other headwinds that can create turbulence for its corporate objectives.
In the case of Kirkland Lake, its operations are focused in safe jurisdictions: namely, Canada and Australia. Indeed, this factor is extremely important for those cautious about the idiosyncratic risks miners pose relative to owning the underlying commodity — a factor which is currently severely undervalued by the market.
Kirkland Lake has reserves of around $850 million to use to create value for its shareholders, potentially spurring investments in additional production in its core markets. For gold bulls who believe the price of gold is unfairly depressed right now, as I do, this adds to the already great growth thesis for this stock long term.
Accordingly, Kirkland Lake is the only gold miner I would recommend investors consider. At a 35% discount, this stock is a steal!
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 has no position in any of the stocks mentioned.