2024 has been an interesting year so far. Despite a backdrop of higher interest rates and stubbornly high inflation, the TSX Composite Index is up 5% so far this year. Similarly, many stocks keep moving higher as they shake off macroeconomic risks and uncertainties. In this article, I’d like to discuss two hot stocks that have outperformed this year and are likely to continue to move higher.
Without further ado, here they are.
Agnico-Eagle Mines stock: +24.3% year to date
Arguably the world’s safest gold mining company, Agnico-Eagle Mines (TSX:AEM), finds itself in a favourable position these days. Years of laser focus on operational excellence and a conservative company risk profile have brought the company years of consistency, stability, and strong cash flows.
Today, the market is noticing like never before. This is because of two things. Firstly, in today’s world of increasing geopolitical turmoil and conflict, investors appreciate that Agnico is not affected by these forces. This is a function of the fact that Agnico-Eagle’s mines are all in politically safe, pro-mining jurisdictions, including places like Canada, Europe, Australia, and Mexico.
The benefits of this are innumerable. For example, Agnico’s mines operate without disruption caused by civil unrest and/or government interference. In turn, this leads to consistently stable results that are only affected by market forces and operational factors. In other words, Agnico is more of a master of its own fate versus other gold companies that have operations in unstable parts of the world.
Secondly, the gold price has rallied 8.5% so far this year. This is a function of inflation and geopolitical turmoil in the world. Gold is the safe haven for investors, after all. In fact, with persistently high inflation and continued geopolitical turmoil, the outlook for the price of gold remains bullish.
This, coupled with Agnico’s record production, has resulted in Agnico-Eagle Mines stock rallying 24.3% so far this year.
Teck: +26% year to date
Teck Resources (TSX:TECK.B) is a $34.5 billion globally diversified mining and metals company. It has operations in places such as Canada, the U.S., Chile, and Peru. Right now, the company’s operations are made up of three segments: copper, zinc, and steelmaking coal, which currently make up the biggest portion of the company’s revenue.
But this is about to change, as Teck has recently sold its coal business in two separate transactions after it was clear that shareholders did not support a spinoff of the business. The sale values the coal business at US$9 billion, which means that Teck will receive a significant cash infusion. This cash will be used for three things: debt repayment, investment to expand its copper business, and a quote “significant” return of cash to shareholders.
Once the sale of its coal business closes, Teck will emerge as a copper-focused company. The company has already been focusing its capital spend on its copper business. In fact, copper production increased 58% in Teck’s latest quarter.
Interestingly, this transformation and focus could not come at a better time. The copper market is expected to be undersupplied over the next few years, as supply disruptions and increases in demand have taken hold. As a result, copper prices have been rallying and are up 18% so far this year.
Looking ahead, with current liquidity of $7.9 billion and the $9.6 billion in cash proceeds from the coal business, Teck has the financial capability to significantly ramp up its copper operations in the next few years. This positions the company really well to benefit from the expected bullish copper market.
