Top 2 Gold Stocks for Beginners

Gold stocks like Barrick Gold (TSX:ABX)(NYSE:GOLD) could shield your portfolio from inflation.

| More on:

Gold stocks could be a potential target if you’re worried about inflation. Theoretically, tangible precious metals like gold appreciate in value as currencies lose value. That’s a tailwind for gold mining companies. These stocks could outperform other sectors of the market if the current trend continues. 

Here are the top two gold stocks for beginners in 2022. 

Barrick Gold

Barrick Gold (TSX:ABX)(NYSE:GOLD) is a classic gold stock. The miner has given back a good chunk of the gains accrued early in the year, as gold prices spiked to highs of US$2,049 an ounce. The stock now appears to be deep in oversold territory.

Gold retreating to lows of $1,839 an ounce is one factor that has accelerated Barrick gold’s steep selloff. However, disappointing first-quarter results acted as fuel that accelerated the selloff. The company produced 990,000 ounces of gold during the quarter, down from 1.1 million produced in the same quarter last year.

Despite production declines, costs skyrocketed to highs of $1,190 per ounce produced compared to $1,073 per ounce last year in the same quarter. The company was able to offset part of the high costs with a realized gold price of $1,876 compared to $1,777 last year in the same quarter. Nevertheless, the gold miner delivered earnings per share of $0.26 down from $0.29 last year.

Amid the weak Q1 results, Barrick gold ended the quarter with net cash of $743 million. The company also confirmed a new dividend of $0.15 a share, translating to a dividend yield of 2.03%. It has also confirmed plans to spend up to $1 billion in stock buybacks.

Following the recent deep pullback, Barrick Gold appears to be trading at a discount with a price-to-earnings multiple of 17. As long as gold prices remain above the $1,800 an ounce level, Barrick gold remains well positioned to generate free cash flow for shareholder distribution.

Kinross Gold

Kinross Gold (TSX:K)(NYSE:KGC) also delivered disappointing first-quarter results. As a consequence, the stock has nosedived over 24% year to date. While the stock has shown signs of bottoming out, it remains under immense short-selling pressure.

The selloff in recent weeks has been fueled by gold prices declining from highs of $2,049 an ounce early in the year to current lows of about $1,840 an ounce. Amid the decline in gold prices, Kinross Gold sentiments have been hurt by weak Q1 results, whereby production fell 6% to 505,700 ounces. In addition, costs rose to $1,245 an ounce, higher than the $1,052 rate for the same quarter last year.

A spike in costs and lower production explains why the stock remains under pressure. However, management expects production costs to decline to $1,150 an ounce in the second quarter.

While gold prices have plunged below the $2,000-an-ounce level, Kinross Gold could benefit greatly from the average realized gold price coming in at $1,875 in the second quarter. This should be able to offset any margin compression.

However, the stock is trading at a premium with a price-to-earnings multiple of 24. Kinross could be an ideal target if it lives up to its cost targets or if the price of gold moves higher. For now, it’s best to keep this stock on your watch list. 

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 Vishesh Raisinghani has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

More on Metals and Mining Stocks

todder holds a gold bar
Metals and Mining Stocks

Canadian Mining Stocks: Buy, Sell or Hold?

Investing in quality gold mining stocks that trade at a reasonable valuation could help you beat the TSX index over…

Read more »

People walk into a dark underground mine.
Metals and Mining Stocks

Is First Quantum Minerals Stock a Buy?

Let's dive into whether First Quantum Minerals (TSX:FM) is worth buying at current levels, or if investors should sit this…

Read more »

nugget gold
Metals and Mining Stocks

Competitive? Beat the Market With These 2 Dividend-Paying Growth Gems

Investors looking to beat the market buying dividend stocks right now need to focus on this right sectors. Here are…

Read more »

nugget gold
Metals and Mining Stocks

A Canadian Billionaire Investor Sold Micron Stock and Bought This TSX Company Instead

Prem Watsa focuses on value over short-term growth.

Read more »

Concept of multiple streams of income
Metals and Mining Stocks

Is Franco-Nevada Stock a Buy for Its 1.2% Dividend Yield?

Gold royalty stocks represent a niche in the precious metals industry. They have different dynamics from mining stocks.

Read more »

todder holds a gold bar
Metals and Mining Stocks

The 1 Mining Stock Canadians Should Buy and Hold Forever

Newmont is a gold mining stock that trades at a cheap valuation, making it a top investment choice for those…

Read more »

Metals and Mining Stocks

Top Canadian Gold Stocks to Buy Now

Canadian gold mining stocks such as Barrick Gold and Kinross Gold are two top investments in October 2024.

Read more »

todder holds a gold bar
Stocks for Beginners

Is the Worst Over for SSR Mining Stock?

SRR Mining stock has been rising higher after recent earnings performance that made a bit of a comeback. So is…

Read more »