It may seem like $1,000 is not enough money to buy a stock. But if that’s all you have right now, it’s plenty. Practically speaking, buying blocks of stocks with a minimum value of $500 to $1,000 is totally reasonable. With this being said, I’d like to discuss what I think is the best gold stock to invest $1,000 in today.
The price of gold rallies
As you know, gold prices and gold stocks have performed well in the last few years. This is due to an increasingly shaky macro-economic environment, as well as elevated geopolitical risks and rampant inflation. It has powered gold higher to the tune of 85% in the last five years.
Thusly, the price of gold is 17% higher year to date. Gold’s value as a safe haven has been re-established as investors flock to gold and gold stocks.
Looking ahead, I think that gold will remain a valuable asset as the financial and political turmoil continues. For example, inflation has been stubbornly high for a while now, with the initial belief that inflation would be transitory proven to be dead-wrong. Also, the geopolitical climate remains fraught with conflict, war, and uncertainty. These are all factors that would suggest that the price of gold will remain strong.
Agnico-Eagle: My go-to gold stock
In a world where the risks are glaringly obvious, gold stands out as an excellent store of value. Currencies can be volatile, while gold is much steadier.
What I really like about Agnico-Eagle Mines Ltd. (TSX:AEM) is its company-specific risk profile, which is quite low. This has been the case for this company since its inception, and is by design. The decision to focus on politically stable, pro-mining jurisdictions was one that was made early on in the company’s history. As a result, Agnico’s operations are concentrated in regions in Canada, Europe, Australia, and Mexico.
This simple decision has resulted in many good things. For example, Agnico’s operations have not been disrupted by violence, political instability, or social unrest. This is a risk that many gold companies face due to the location of their operations. Instead, Agnico has enjoyed many years of stability.
Operational and financial excellence
Agnico has a long history of solid operational and financial management. This has translated into relatively low costs, strong cash flows, and strong shareholder returns.
We can see this evidenced in Agnico’s first quarter 2024 results. Production increased 8% to a record 879,000 ounces, and earnings per share (EPS) increased to $0.76 compared to consensus expectations that were calling for $0.65. This compares to $0.57 last year and amounts to a 33% growth rate.
Looking ahead, Agnico-Eagle is expected to continue to benefit from strong production and operational performance. Estimates for this year have already been going up, a reflection of the low expectations (and valuation) that investors have put on the stock. At this time, 2024 EPS is expected to come in at $2.94 versus $2.23 in 2023, for a 32% growth rate.
The bottom line
Finally, investing $1,000 in Agnico-Eagle Mines stock will buy you 10 shares of the company. Not a lot, but some exposure is better than no exposure. Agnico stock will give you relatively low-risk gold exposure and access to a strong and growing dividend. In fact, Agnico’s annual dividend per share increased 143% in the last five years to $2.17. This represents a very healthy compound annual growth rate, or CAGR, of 19.5%.
