As the S&P/TSX Composite Index continues to sustain its momentum near new all-time highs, the high valuations in the market also present the worrisome potential of a major downturn in the stock market.
If you are scared of a market pullback, it would be wise to prepare your portfolio by looking at hedges that you can add to your portfolio and protect your wealth. Precious metals have always been considered safe-haven assets during volatile market environments. Assets like gold tend to appreciate when the broader economy declines.
Whenever there is the slightest sign of volatility in the market suggesting a significant downturn, investors flock to gold or gold-related stocks.
Barrick Gold (TSX:ABX)(NYSE:GOLD) is one such stock that you could buy right now if you are worried about a downturn on the horizon. Being one of the largest gold mining companies worldwide, seeking exposure to a company that relies on producing the precious yellow metal to generate most of its revenues makes sense.
Today, I will discuss why the top gold miner is an ideal stock for you to consider for your portfolio.
Gold prices are hovering around the US$1,800 mark. The higher gold prices have benefitted gold mining companies by providing them with more significant profit margins. Barrick Gold has had a fantastic year in 2021 so far. The company’s second quarter for fiscal 2021 saw profits exceeding US$411 million — a significant improvement from its profits in the same quarter last year at US$357 million, even though gold prices were higher during that time.
Barrick Gold has increased its production, and the company continues to streamline its expenses. Despite a decrease in the company’s year-over-year revenues, Barrick Gold’s higher profits in Q2 2021 indicate that the gold producer’s cost-reduction strategies are paying off very well. Should the gold prices start going on an upward trend, Barrick Gold’s higher profit margins could provide a further boost for its future prospects.
The next quarter could be a massive period for the company. Gold prices are likely to remain higher due to the rising volatility and inflation rates. At writing, Barrick Gold stock is trading for $24.98 per share, and the stock boasts a 1.81% dividend yield. With its share prices down by 20% on a year-to-date basis, it could be the ideal time to buy Barrick Gold shares before its price starts appreciating.
Barrick Gold is a massive gold mining company with geographically diversified mines, impressive revenues, and a remarkable production capacity. The company’s management team has done a wonderful job of improving its balance sheet, as it boasts a cash balance in excess of $5 billion from being weighed down with billions in debt just a few years ago.
Given its position right now, Barrick Gold stock could be an ideal investment to have in your portfolio should market volatility rise further and drive gold prices further up.
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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.