In this piece, we will take a look at the 12 most undervalued gold stocks to buy according to hedge funds. If you want to skip our overview of the gold industry and some recent developments, then take a look at the 5 Most Undervalued Gold Stocks To Buy According To Hedge Funds.
The gold industry is one of the most interesting sectors on the stock market. This is because while most industries, save the banking sector, deal with the needs of either financial or non financial customers, gold companies sell their products for both investment and general use purposes. Gold is one of the oldest safe haven assets in the world, with its rarity and use in jewelry ascribing it a higher price than other metals such as copper. Its use as a financial assets has also made the gold industry quite important these days, particularly after the significant financial turmoil that we've seen in global equities and bond markets.
This turmoil has come in the wake of rapid interest rate hikes by central banks to clamp down on inflation. The interest rate increases are nothing short of historic, and they have continued to cause disruption in the bond market as securities issued during an era of lower rates have dropped in value. Since global central banks hold U.S. Treasury bonds as their assets, this rapid drop in value has seen them scurry to diversify their portfolios and ensure that the value does not significantly fluctuate.\
Data from the World Gold Council shows that as of September 2023, central banks had bought 35 tons of gold on average per month year to date. This means that the banks have bought 315 tons this year, and leading the pack are Asian and European countries. The bulk of these purchases come from developing or emerging markets, and the top three central bank gold purchasers in September were Chinese, Polish, and Uzbekistani banks. However, among these, only China and Poland remained net purchases while Uzbekistan rebuilt some of its gold assets that it has continued to sell this year. So far, China has added roughly 200 tons to its portfolio, and with 2023 coming to an end, it'll be interesting to see how one of the biggest economies in the world closes out its gold holdings.
One of the key reasons why central banks buy gold is when the U.S. dollar surges in value and causes their own currencies to depreciate. In a high interest rate era, the dollar is the ultimate safe haven asset even though gold might be shinier. This is because while gold might be a store of value, it does not pay interest which naturally leads to stronger demand for the dollar. Yet, since not everyone can benefit from higher interest rates offered by U.S. Treasuries or bank accounts, the demand for gold naturally remains high when economies are slowing down. Gold now accounts for 4% of China's reserves, and data also shows that a large portion of the gold bought by the country comes from regular people who are looking to protect their wealth amidst a weak Chinese economy and a depreciating currency.
The tight link of gold with global financial markets also makes it a barometer of sorts for global risk appetite. While the dollar reigns supreme in a high rate environment, as soon as investors sniff rate cuts, it drops and gold starts to rise. This is also the case at the tail end of November, as gold prices have now hit a six month high to trade at $2,013.99 ahead of a crucial inflation report that is widely believed to cement the end of the era of interest rate hikes.
With gold prices rising and central banks piling into the metal, gold companies are also making billions. For instance, here's what the management of Kinross Gold Corporation (NYSE:KGC) shared during its latest earnings call:
In the first nine months, we generated nearly $1.2 billion of operating cashflow, and after reinvesting in our operations and project pipeline, we generated over $400 million of free cashflow. With respect to our operations, in the third quarter, Tasiast, Paracatu, and La Coipa, all continued to deliver excellent results, accounting for approximately 70% of our production, with an attractive AISC of just over $1,000 per ounce. Tasiast had a record production quarter, producing 171,000 ounces, was once again our highest cashflow operation. Paracatu also performed well in the third quarter, and as planned, had its highest production quarter of the year. La Coipa was once again our lowest cost operation and also generated strong cashflow. Switching to the US, our operations performed well, with production at each site higher than the prior quarter.
With these details in mind, let's take a look at some undervalued gold stocks. Some notable picks are Kinross Gold Corporation (NYSE:KGC), Agnico Eagle Mines Limited (NYSE:AEM), and Franco-Nevada Corporation (NYSE:FNV).
12 Most Undervalued Gold Stocks To Buy According To Hedge Funds
A close-up of a technician using advanced geological-surveying equipment, evaluating a gold deposit.
Our Methodology
To compile our list of the most undervalued gold stocks to buy, we first made a list of 21 gold companies with the lowest price to trailing earnings ratio. Then, the number of hedge funds that had bought their shares during Q3 2023 was determined via Insider Monkey's 910 fund database. Following this, firms with a P/E ratio greater than 50 were eliminated. Out of the remainder, those gold stocks with the highest number of hedge fund investors were selected.
Most Undervalued Gold Stocks To Buy According To Hedge Funds
Equinox Gold Corp. (NYSE:EQX) is a Canadian gold company with exploration properties in the U.S., Brazil, and Mexico. The firm updated investors about progress on a new gold mine in Canada, which is slated to produce more than five million ounces during its life. According to Equinox Gold Corp. (NYSE:EQX), the mine is 96% complete and pre production mining operations should be ready by Q1 2024.
During Q3 2023, 13 out of the 910 hedge funds part of Insider Monkey's database had held a stake in Equinox Gold Corp. (NYSE:EQX). Out of these, the firm's largest shareholder is Eric Sportt's Sprott Asset Management since it owns $35.4 million worth of shares.
Along with Agnico Eagle Mines Limited (NYSE:AEM), Kinross Gold Corporation (NYSE:KGC), and Franco-Nevada Corporation (NYSE:FNV), Equinox Gold Corp. (NYSE:EQX) is an undervalued gold stock that hedge funds are buying.
Gold Fields Limited (NYSE:GFI) is a South African company with operations all over the world. Its shares are rated Buy on average and analysts have set an average share price target of $14.70.
By the end of this year's third quarter, 13 out of the 910 hedge funds surveyed by Insider Monkey were the firm's shareholders. Gold Fields Limited (NYSE:GFI)'s biggest investor in our database is William B. Gray's Orbis Investment Management due to its $69.5 million stake.
10. Harmony Gold Mining Company Limited (NYSE:HMY)
Number of Hedge Fund Investors In Q3 2023: 13
Latest P/E Ratio: 14.33
Harmony Gold Mining Company Limited (NYSE:HMY) is a South African mining company that focuses on producing gold but also works with other minerals and metals such as uranium. The firm is currently looking to make a move in the lucrative copper market and is looking at ways to balance it out with a CEO succession.
Insider Monkey's September quarter of 2023 survey covering 910 hedge funds revealed 13 Harmony Gold Mining Company Limited (NYSE:HMY) investors. David Iben's Kopernik Global Investors owned the largest stake among these which was worth $68.8 million.
SSR Mining Inc. (NASDAQ:SSRM) is an American gold company with production sites in the U.S., Canada, and Argentina. The firm's shares were under a lot of pressure in November 2023, after Bank of America slashed its share rating to Underperform from Buy and reduced the share price target to $12.5 from $17.
During this year's third quarter, 14 out of the 910 hedge funds polled by Insider Monkey had invested in SSR Mining Inc. (NASDAQ:SSRM).
Sibanye Stillwater Limited (NYSE:SBSW) is a diversified South African precious metals mining company. The firm's shares tanked in November after it announced plans to raise more debt through convertible bonds creating worries about its shares losing their luster if the bonds are converted.
By the end of 2023's September quarter, 16 out of the 910 hedge funds tracked by Insider Monkey were the firm's investors. Sibanye Stillwater Limited (NYSE:SBSW)'s biggest hedge fund investor is Cliff Asness' AQR Capital Management since it owns $31 million worth of shares.
B2Gold Corp. (NYSE:BTG) is a Canadian gold company headquartered in Vancouver, Canada. It was out with some good news for investors in November 2023 as not only did it reiterate 2023 production guidance but also forecast that costs will be lower than initially expected.
Insider Monkey scoured through 910 hedge funds for their third quarter of 2023 shareholdings and found that 19 had bought and owned B2Gold Corp. (NYSE:BTG)'s shares. Jim Simons' Renaissance Technologies was the largest shareholder due to its $86.5 million investment.
Royal Gold, Inc. (NASDAQ:RGLD) is a small American company that makes money by holding gold property interests. The firm hasn't been doing well on the financial front lately as it has beaten analyst EPS estimates in only one out of its four latest quarters.
23 out of the 910 hedge funds profiled by Insider Monkey had held a stake in the company. Royal Gold, Inc. (NASDAQ:RGLD)'s biggest hedge fund investor is Jean-Marie Eveillard's First Eagle Investment Management as it owns 3.6 million shares that are worth $385 million.
Kinross Gold Corporation (NYSE:KGC), Royal Gold, Inc. (NASDAQ:RGLD), Agnico Eagle Mines Limited (NYSE:AEM), and Franco-Nevada Corporation (NYSE:FNV) are some top hedge fund undervalued gold stock picks.
