The Canadian mining stocks might be a wise addition to your portfolio ahead of the new year, especially with valuations that still appear to be on the low end. Undoubtedly, in a market that’s on the pricier side of the historical range, it’s only natural to be somewhat concerned about the risk of overpaying for a stock. Even a wonderful company can lose you money if you buy shares at too much of a premium.
While the TSX Index is just off close to 2% from its own high, after consolidating since the fourth quarter began, I’d argue that it’s not time to bail on the broad markets as the momentum slows into the year’s end, but perhaps get a tad pickier about the types of stocks one chooses to stash in their portfolios.
TSX Index flatlines for months: Time to go bargain hunting?
Undoubtedly, if we are headed for a lengthy period of consolidation or a “sideways correction” of sorts for another couple of months or even quarters, going for those much-cheaper names might be a smart move. And in the mining scene, I see no shortage of bargains that long-term investors might wish to take advantage of, especially if you’re of the belief that the prices of the underlying commodity are ready to continue their run in the next 18 months or so.
Indeed, the Canadian market is rich with commodity prices, many of which can help investors score a return that’s far less correlated to the tech scene, which is the source of the volatility these days. Although it’s hard to predict which firms will come out ahead of the TSX Index in any given year, I’ll attempt to make a call with one notable name.
Agnico Eagle Mines
Agnico Eagle Mines (TSX:AEM) stock has risen over 91% year to date, thanks in part to strength in gold prices and smart management moves that are finally starting to pay off. Though gold has run into a correction, the shiny yellow metal has since been solid in the face of the AI pullback, which might be one of the worst shockers for investors since the spring days that surrounded President Trump’s Liberation Day tariffs. It’s impressive to see how far stocks have climbed since those uncertain, panicky days.
Either way, shares of AEM, like the price of gold, have entered correction territory, now down over 13% from all-time highs. Gains from that incredible October spike have been given back in a hurry, providing investors an opportunity to top up, as various cryptocurrencies tank, essentially bringing their “new-age gold” label into question. Personally, I don’t think gold has a good substitute, especially for those seeking relative outperformance in bear markets.
Today, AEM stock is going for a fair price of 23.5 times trailing price-to-earnings (P/E). Could it be that a 13–16% dip in the name is the best we’ll get in terms of sales as markets roll into Black Friday?
It’s hard to tell, but I think the low-cost gold producers represent a great asset to diversify a TFSA over the long run. While I don’t think AEM shares are a table pounder at over $225 per share, I wouldn’t mind nibbling a bit if you’re looking for less correlation (0.64 beta on AEM shares), a growing dividend (1% yield), and a hedge against market trouble (yes, including an AI bubble bursting).
Safety in the face of AI bubbliness?
Given the odds of an AI bubble (stop me if you’ve heard this term one too many times this past week!), perhaps going for gold (miners) isn’t such a bad idea, even if you’re paying close to double for shares of AEM compared to just over a year ago. It stings to miss such a move, but investors should focus on the road ahead, not the road already travelled.
