Simply setting aside some money each month and hiding it under your mattress might seem like a safe way to save for your retirement nest egg. However, any money that you leave idle simply cannot retain its value, let alone grow more valuable over time. Why? Inflation will deteriorate the value of that money.
Persistently rising consumer prices can erode the value of all the hard-earned savings. However, investing your money in the right areas within the stock market can be the answer to the inflation problem. Instead of letting your money sit idly, you can put it to work in the market, allocating it to assets that can deliver inflation-beating returns.
When thinking of safe-haven assets, people typically think of gold. Today, I will discuss a stock you can consider if you are bullish on gold but want the flexibility and ease of liquidity of stock market investing as you hedge your bets.
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Agnico Eagle Mines
Agnico Eagle Mines (TSX: AEM) is a Toronto-headquartered, $82.44 billion market capitalization company that engages in gold exploration and production. The company has long been a top pick of mine in the Canadian gold mining industry, and for good reason. The company’s acquisition of Kirkland Lake allowed Agnico Eagle to become a significant competitor to Barrick Gold, which has been dominating the industry for a while.
The company’s recent financials reflect the improvement in its performance after the acquisition, and a look at the chart above also shows it. The recent uptick in AEM stock share prices comes in after the company’s financials painted a pretty picture for fiscal 2024. The company posted $2.1 billion in cash flow, a new record for itself. The company expects its earnings per share this year to double from 2024.
Rising gold prices have been a major boost to gold mining companies like Agnico Eagle. The higher the price of gold, the better the margins for gold-producing companies. That said, the price of gold tends to fluctuate a lot, and there’s only so much a company can leverage rising gold prices. For now, Agnico Eagle Mines looks well-positioned to remain a top player in the industry.
Foolish takeaway
As of this writing, Agnico Eagle Mines stock trades for $163.99 per share and pays its shareholders US$0.40 per share every quarter, translating to a 1.35% dividend yield. Up by 38.90% year to date, it has shown an impressive performance on the stock market in the last few months. In the same period, Barrick Gold is up by 26.21%.
The performance of AEM stock compared to Barrick shows it has the potential to outperform other players in the sector. If you want to hedge against inflation, exposure to a safe-haven asset like gold can be an excellent play.
By investing in a gold-producing company’s shares in the stock market, you can leverage rising gold prices while enjoying the flexibility of stock market investing. To this end, AEM stock can be an excellent holding to consider for your self-directed investment portfolio.
