While most stocks have recovered from the pandemic now and are setting all-time highs, gold stocks have been on sale for some time, trading extremely cheap.
One of the reasons gold fell out of favour earlier this year was that investors no longer needed as much of a safe haven investment. The opportunity cost of leaving capital invested in gold stocks meant missing out on other high-quality businesses recovering from the pandemic, such as those stocks in the energy industry.
Today, with so much uncertainty lately, investors don’t know whether or not gold prices can rally soon or continue to trade rangebound.
With that being said, though, there are certainly many catalysts for gold’s price to rally in the short term.
So I’d use this opportunity to buy gold stocks while they are still trading undervalued. And while there are plenty of value stocks you can find in the sector, these are two of the best to consider today.
A top large-cap gold stock
Kirkland Lake is one of the best gold stocks to buy as it’s highly profitable in addition to being predictable and consistent. In addition, the company has massive operations in Canada and Australia, two countries where there is little political risk.
The company reported earnings earlier this week and once again beat analyst expectations. Kirkland Lake reported earnings per share for the quarter of $0.92, compared to consensus estimates of $0.87.
Much of this incredible profit it generated was due to record gold production for Kirkland Lake in the quarter. However, its low costs played a significant role too.
And although this is only a single quarter of data, it perfectly demonstrates Kirkland Lake’s ability as one of the top gold producers in the country.
So while it trades this cheap, I’d be looking to take a position. High-quality gold stocks like Kirkland Lake can play an important role in your portfolio.
One of the cheapest stocks in Canada
B2Gold is slightly riskier than Kirkland Lake. The company is not as large, and its operations are spread out in more countries, especially in Africa, where there are significant political risks to be aware of.
Nevertheless, B2Gold is still one of the top operators in the industry. It has incredibly low costs of production, which make it highly profitable.
So even though gold prices have been falling lately, B2Gold should still have plenty of margins to earn a considerable profit. The company earns so much cash flow that its massive dividend nearly yields 4% now.
From a price-to-earnings standpoint, though, it’s clear just how cheap B2Gold is. Currently, the top gold stock trades at a forward price-to-earnings ratio of just 8.8 times, and that’s at the current gold price, which has been falling.
So not only is B2Gold trading extremely cheap, but it could also have significant upside potential if gold prices start to rally again.
So if you want to take advantage of these high-quality companies trading cheap, B2Gold is one of the top gold stocks to consider.
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 B2GOLD CORP. The Motley Fool has no position in any of the stocks mentioned.