Gold Developers At A Discount

It’s been an exciting year for the Gold Miners Index (GDX) with the index up 12% year-to-date and significantly outperforming the S&P-500 (SPY) for a second consecutive year.

This strong performance can be attributed to the recent strength in the gold price, with the metal launching 10% higher over the past month to hang out near psychological resistance at $2,000/oz.

The recent strength is a big deal for the average producer, which up until January suffered from considerable margin compression with a flat gold price since 2020 yet inflationary pressures across the board.

Unfortunately, for investors hanging out in the gold developer space, the returns have been dismal. Not only have the developers massively lagged the producers and many are scraping along the lows of their multi-year ranges, but they’re under-performing this year despite already lagging by 2000+ basis points last year as well.

This is obviously quite disappointing for investors and in some cases it may be leading to some irrational or forced selling as some investors are tired of not participating in the gold price move and choose to dump their shares.

In this week’s update, we’ll look at two names that continue to trade at massive discounts to fair value that offer a way to get leverage to gold without chasing names already up substantially year-to-date.

i-80 Gold (IAUX)

i-80 Gold (IAUX) is a $840 million market cap gold developer that has a resource base of ~15.0 million ounces of gold in the state of Nevada.

This is an enviable position to be in given that Nevada is one of the top-ranked jurisdictions globally for mining with an abundance of resources, access to a considerable workforce, and favorable permitting historically.

The company differentiates itself from its peer group for several reasons, with the main one being that it has the #1 growth profile sector-wide, with a plan to grow its production profile from ~30,000 ounces in FY2023 to ~250,000 ounces by H2 2026, with the potential to grow to 400,000 to 450,000 ounces long-term. Continue reading "Gold Developers At A Discount"

2 Small-Caps For Your Watchlist

It’s been a choppy start to the year for the major market averages and while many large-caps have begun new uptrends, several small-cap names remain stuck in the mud, unable to gain much upside traction.

In some examples, this underperformance is justified with many businesses not being worth owning and or having weak balance sheets.

However, there are a few small-cap names with solid business models and decent balance sheets generating free cash flow, and contrarian investors are being presented with an opportunity to invest in these stocks at a very reasonable price, especially given that they have robust growth plans.

In this update, we’ll look at two stocks worthy of adding to one’s watchlist:

MarineMax (HZO)

MarineMax (HZO) is a small-cap name ($600 million market cap) in the Retail-Leisure Products industry group, and is the world’s largest lifestyle recreational retailer of boats and yachts plus yacht concierge and superyacht services.

The company was founded in 1998 in Clearwater, Florida, and has grown through strategic acquisitions to now control a footprint of 125 locations globally, including 57 owned and operated marinas and 78 dealerships.

Some of the company’s recent acquisitions include and Boatzon, Fraser Superyacht Services, MidCoast Marine Group LLC, and IGY Marinas.

Understandably, many investors might not be that interested in owning a business that derives its revenue from recreational boat and yacht sales during a period where consumers are pulling on their spending and in what appears to be a recessionary environment with increasing layoffs. Continue reading "2 Small-Caps For Your Watchlist"

2 Gold Miners With Long-Term Potential

While the major market averages have taken a beating over the last week, gold (GLD) has been one of the few asset classes to stage a sharp rally, with the metal up 2.5% for the week and over 5% since Thursday’s close.

The outperformance can be partially attributed to the belief that the Federal Reserve may have to rethink its rate-hike plans because of the fragility of the Financial Sector (XLF) with two banks already failing and several other regional banks down over 50% from their highs in a one-week span.

The sharp move higher in gold has fueled a major rally in the Gold Miners Index (GDX) which has soared 11% off its lows with the gold producers providing leverage to the metal, especially costs for the group rose materially last year.

In fact, the $110/oz move in gold has led to a temporary ~20% increase in margins for the producers, partially explaining the powerful performance of the group.

However, a couple of names were left in the dust during this rally, providing the opportunity to add exposure to miners without paying up for names that have already headed into overbought territory.

In this update, we’ll look at two names that have lagged their peers, and why they look like long-term outperformers vs. the index.

I-80 Gold (IAUX)

I-80 Gold (IAUX) was one of the best-performing gold developers in 2022, putting together a 15% return vs. 20-30% declines for many of its gold developer peers.

Unfortunately, the stock has since given up considerable ground to start 2023, down 26% for the year which has placed it near the bottom of the pack among its peers.

The disappointing performance for this junior producer with a ~$700 million market cap (assumes 350 million fully diluted shares) is partially attributed to a ~$65 million financing earlier in the year that led to an increase in its fully diluted share count and the announcement of a bought deal secondary offering by its largest shareholder because of a funding gap as it builds a massive mine in Canada, Greenstone. Continue reading "2 Gold Miners With Long-Term Potential"

Silver Lining For These Two Stocks

While the price of gold (GLD) has been pummeled over the past month, it’s the silver price (SLV) that has taken the real beating.

This is evidenced by the industrial metal finding itself more than 18% off its recent highs, more than double the ~7% correction of gold in the same period.

The violent decline has pushed the price of silver back near $20.00/oz, which is only marginally above the average all-in cost to produce silver for primary producers, with this cost being all-in-sustaining costs plus growth capital and corporate G&A.

This is not ideal for the silver miners group, and especially not high-cost miners with $25.00/oz plus all-in costs that are now seeing negative margins for every ounce pulled out of the ground and processed on site.

The silver lining, though, is that if the silver price has declined to a point where growth is no longer incentivized, suggesting a steady decline in silver production if prices remain at or near these levels.

This obviously isn’t great for high-cost producers, but it is positive for those producers that will survive the short-term margin compression and are being thrown out with the bathwater.

In this update, we’ll look at two names that are trading at deep discounts to their historical multiples, and dig into their respective low-risk buy zones.

Avino Silver & Gold Mines (ASM)

Avino Silver & Gold Mines (ASM) is a ~$90 million silver producer that operates the Avino Mine in Durango, Mexico, which has more than a dozen named veins on the property and sits on the edge of a caldera.

The mine is unique given that it has silver, gold, and copper instead of just silver and gold like many primary silver mines, and it’s also unique in the sense that it is profitable despite a very small footprint, operating at a rate of barely 700,000 tonnes per annum, translating to production of 3.0 million ounces of silver per year dependent on grades. Continue reading "Silver Lining For These Two Stocks"

Growth At A Reasonable Price

It’s been a much better year thus far for the major market averages, and several tech names have soared more than 30% off their lows just seven weeks into the year after coming into 2023 at deeply oversold levels.

Although this has been a nice move for those quick enough to establish positions, there are far less attractive setups out there currently, and one must be rigid with their stock selection.

In this update, we’ll look at one semi recession resistant growth story and another company that continues to gobble up market share that are both worth keeping at the top of one’s watchlist if we see a deeper market correction.

Visteon Corporation (VC)

Visteon Corporation (VC) is a $4.6 billion company in the Auto-Truck and Original Equipment industry group and is a global automotive electronics supplier that was spun out from Ford Motor Company (F) in April 2000.

Visteon Corporation differentiates itself from its auto parts peers given that it is the only pure-play supplier of automotive cockpit electronics, the fastest-growth segment within the industry.

For those unfamiliar, the segment is forecasted to grow from $36 billion to $60 billion in 2027, and this incredible growth showed up in Visteon’s most recent Q4 results, with revenue up 35% to $1.06 billion, well above the low double-digit sales growth reported by peers in the same period.

On a full-year basis, Visteon had an incredible year, launching 45 new products (13 in Q4 alone), nailing down $6.0 billion in new contracts, and ending the year with a strong balance sheet, evidenced by $174 million in net cash.

This certainly showed up in its financial results, with record revenue of $3.76 billion (40% growth year-over-year) and 153% annual EPS growth ($5.33 vs. $2.11), a new record for the company.

However, while this is incredible growth relative to FY2020 levels ($2.77) the forward outlook is just as impressive, with annual EPS expected to increase to $9.98 in FY2024, pointing to nearly 90% growth over the next two years. Continue reading "Growth At A Reasonable Price"