2 Gold Stocks Likely To Outperform

While the Nasdaq 100 (QQQ) has continued its outperformance on the back of a strong start to the Q1 Earnings Season for Big Tech, the real outperformer has been the Gold Miners Index (GDX).

Not only is the index outperforming the major market averages with a 17% return but it’s also outperforming the price of gold, a healthy sign that suggests a potential change in character after years of underperformance.

The recent strength can be attributed to the sharp rise in the gold price towards the psychological $2,000/oz level, resulting in significant margin recovery for gold producers after a tough year plagued with supply chain headwinds and inflationary pressures.

The good news regarding the recent rally in the Gold Miners Index is that momentum is to the upside and sharp pullbacks are likely to find buying support.

The bad news? With the index up over 50% from its Q3 2022 lows, some of the easy money has been made and a few miners are actually looking fully valued.

Fortunately, there are exceptions, and in this update we’ll look at two names that look reasonably valued and are likely to outperform given their relative value compared to peers.

Marathon Gold (MGDPF)

Marathon Gold (MGDPF) is a development-stage gold company based out of Newfoundland, Canada, with the company currently busy constructing its Valentine Gold Project.

The project is home to nearly 3.0 million ounces of gold reserves and the company plans to operate an open-pit mine consisting of three pits (Berry, Valentine, Leprechaun) with average annual production of 195,000 ounces of gold (first 12 years) at industry-leading all-in sustaining costs of $1,007/oz.

Based on the current schedule, Marathon is aiming to start producing gold by year-end 2024, and the project should boast ~48% margins and generate $120 million per annum in free cash flow at a $1,950/oz gold price. Continue reading "2 Gold Stocks Likely To Outperform"

These 2 Restaurant Stocks Could Be Outperformers

It’s been a mixed year thus far for the Restaurant industry group, with several quick-service names rallying near all-time highs while casual dining names have struggled to stay in positive territory for the year.

The underperformance of the latter group can be attributed to weaker traffic trends in the casual dining space relative to quick-service.

This is not surprising given that we are seeing a pullback in spending from some consumers and quick-service is a trade-down option relative to casual dining, with consumers able to treat themselves with convenience with pizzas, burgers, and fries without breaking the bank at a casual dining restaurant where average checks are closer to $20.00.

However, while we’ve seen Yum Brands (YUM) and McDonald’s (MCD) continue to make new highs with both up 15% and 25% from their pre-COVID-19 highs, a couple of names remain well below their all-time highs and continue to trade at attractive valuations.

This is despite these two companies having iconic brands similar to McDonald’s, and KFC, Taco Bell, and Pizza Hut (Yum Brands), and despite them having some of the better growth profiles sector-wide.

In this update, we’ll dig into these two companies and highlight why they could be outperformers after a period of underperformance in Dominos Pizza’s (DPZ) case, and years of underperformance in the case of Restaurant Brands International (QSR).

Restaurant Brands International (QSR)

Restaurant Brands International is a $21.2 billion franchisor in the Restaurant industry group with four iconic brands under its umbrella: Burger King, Popeye’s Chicken, Firehouse Subs, and Tim Hortons.

The three latter brands were acquired by Restaurant Brands International over the past decade and they currently make up roughly one-third of its system-wide stores which are spread across over 100 countries.

The largest of its brands is Burger King with ~19,000 restaurants, with Tim Hortons just behind at ~5,600 restaurants, Popeye’s Chicken having ~4,000 restaurants, and Firehouse Subs, the smallest brand, having roughly 1,200 restaurants and operating solely in North America. Continue reading "These 2 Restaurant Stocks Could Be Outperformers"

Buy-The-Dip Stocks For Silver Exposure

For the past two years, investors in the precious metals complex have watched nearly every commodity race higher, with oil, coffee, orange juice and copper up significantly from their 2021 lows.

Unfortunately, gold (GLD) and silver (SLV) were both left in the dust after topping in August 2020 and February 2021, respectively.

And for investors looking for leverage to the metals, the corrections were even more painful in the mining stocks, with the GDX sliding over 50% from its highs above $45.00 per share set in August 2020.

Fortunately, we’ve since seen a reversal to this trend. Not only is gold knocking on the door of a new all-time high, but silver is outperforming over the past month, up over 35% from its lows after making a new year-to-date high above $25.00/oz.

This has lit a fire under several silver miners, with their margins set to improve by over 50% based on AISC margins of ~$6.00/oz in FY2022, and the potential to enjoy margins closer to $9.00/oz if the silver price averages $25.00/oz this year.

In this update, we’ll look at two silver miners that are still trading well off their 2020/2021 highs and look to be solid buy-the-dip candidates:

Pan American Silver (PAAS)

Pan American Silver (PAAS) is a $7.0 billion gold and silver producer with a production profile of approximately ~1.5 million gold-equivalent ounces [GEOs] after acquiring Yamana’s South American assets last year.

This makes it one of the largest producers sector-wide and the acquisition solidifies its spot as a top silver producer, with the company expected to produce ~28 million ounces of silver in 2024, and this excludes the massive Escobal Mine which has the potential to produce ~20 million ounces of silver if it is restarted. Continue reading "Buy-The-Dip Stocks For Silver Exposure"

Buy Zones For These Two Small-Caps

It’s been a solid year so far for the major market averages, with the market up 7% year-to-date, a solid rebound after what was a brutal year in 2022.

However, the small-cap universe hasn’t fared nearly as well, with the Russell 2000 Index (IWM) barely in positive territory.

I attribute some of this underperformance to the relatively high weighting of regional banks in the index, which were hit hard following fears of bank runs.

Fortunately, this underperformance has left some small-cap names trading at deep discounts to fair value, and one has been stuck in the mud despite the significant metals price increases in the precious metals sector.

In this update, we’ll look at two small-cap names becoming more reasonably valued, and where I see their ideal buy zones.

Buckle Inc. (BKE)

Buckle Inc. (BKE) is a $1.7 billion company in the Retail-Apparel industry group that was one of the market’s best performers last year as it raced towards its multi-year highs near $50.00 per share.

However, the stock has since pulled back over 30% from its highs, and found itself back near key support at the $30.00 level.

For those unfamiliar, Buckle has over 440 stores in the United States and specializes in jeans, other apparel, footwear, and accessories.

The company released its Q4 2022 results (three months ended January 28th) last month and reported net sales up 5.5% year-over-year to $401.8 million. Meanwhile, quarterly earnings per share were up 3% to $1.78, while full-year EPS came in at $5.13, down just 1% from the year-ago period. Continue reading "Buy Zones For These Two Small-Caps"

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"