Gold stocks belong in your portfolio in 2019 if you're particularly jittery about the stock markets. Gold prices have ticked higher in recent months thanks to global geopolitical and economic concerns, with some even predicting prices to cross $1,400 an ounce if tensions continue to prevail this year.
To be clear, no one can say for sure where gold is headed, but owning some gold stocks during uncertain times is also a good diversification strategy. I believe the three best gold stocks you could buy now for 2019 are Yamana Gold (NYSE:AUY), Barrick Gold (NYSE:GOLD) and Franco-Nevada (NYSE:FNV).
This gold stock is trading cheap
Check out the latest Yamana Gold earnings call transcript.
In October, Yamana Gold upgraded its fiscal 2018 gold equivalent ounce (GEO) production guidance to 1.013 million ounces. The gold miner's just-released preliminary report for the full year pegs the actual number at 1.041 million ounces, which means Yamana exceeded its own estimate and grew GEOs by roughly 6.5% over fiscal 2017, thanks primarily to its seventh mine, Cerro Moro.
Cerro Moro started operations last year and pretty much holds the key to Yamana's growth, which is why the production numbers coming in so far from the mine look encouraging: It produced 38,083 and 45,100 ounces of gold in Q3 and Q4, respectively.
Also, Cerro Moro is one of Yamana's lowest-cost mines, so overall costs for the company should come down as the mine scales up. Last quarter, Yamana projected its full-year all-in-sustaining cost (AISC) for gold on a co-product basis (Yamana gets nearly 30% revenue from silver and copper) to be $850 to $870 per ounce versus $888 per ounce in 2017. Note that this year's projection excludes the recently disposed Gaulcamayo mine.
Yamana looks set to deliver strong numbers for FY 2018 mid-February, which should set the ball rolling for 2019, provided it can steadily ramp up Cerro Moro. Higher taxes in Argentina could be a chink in the armor, and that's one number investors should watch out for in the company's upcoming earnings release. Nonetheless, Yamana stock's steep fall in 2018 suggests much of the pessimism may have already been baked into its share price. If gold prices continue to rise, Yamana stock might not be available for below five times price-to-operating cash flow for long.
A bigger and stronger gold miner in the making
Check out the latest Barrick Gold earnings call transcript.
Barrick Gold is in a major transformational phase, having just acquired Randgold Resources. The merged company is currently the world's largest gold producer, owning five out of the world's top 10 tier one gold assets. A tier one asset is a mine that produced at least 500,000 ounces of gold in 2017 at total cash costs toward the lower end of a range specified by research firm Wood Mackenzie.
Barrick's new CEO, Mark Bristow -- also the founder of Randgold Resources -- has some big plans up his sleeve. Barrick is already cutting down its workforce as it prioritizes growth at five key mines while drawing up a list of noncore assets to dispose. Kalgoorlie mine in Australia and Lumwana copper mine in Zimbabwe are immediate potential sell-out assets. Bristow is also considering options for Acacia mine in Tanzania that's been embroiled in a tax dispute for a couple of years now.
In short, there's a lot happening at Barrick Gold, and its upcoming Q4 and fiscal 2018 earnings release in February should have a lot of new information for investors related to growth plans. 2019 should be a big year as Barrick integrates Randgold's operations, further cleans up its balance sheet, and strives to remain a low-cost gold producer. Now, Newmont Mining's impending acquisition of Goldcorp might displace Barrick as the largest gold producer, but Barrick's proven cost-efficiency, focus on cash flows, and renewed commitment to grow dividends with cash flows makes it a compelling gold stock to own at this point.
The only gold dividend stock you'd want
Yamana Gold and Barrick Gold are pure-play gold miners, but there's one company that also makes money from selling gold yet earns stronger margins than mining companies. That's because Franco-Nevada doesn't operate mines to extract gold, but buys the precious metal from miners for a discount in return for funding them under an arrangement known as a streaming.
Simply put, Franco-Nevada doesn't have to incur any of the costs associated with mining but can still source precious metals at a low price. That's a win-win, which is what makes this such an attractive stock to own in the gold industry. One factor, in particular, makes Franco-Nevada a great gold stock for 2019: cash flow growth potential.
One of Franco-Nevada's key streaming assets, Cobre Panama mine owned by First Quantum Minerals, is on track to start production this year. Another mine, Candelaria owned by Lundin Mining, should hit full capacity this year after a pit slide hurt operations in 2018. Candelaria is among Franco-Nevada's largest revenue generators. Together, if the two mines ramp up as planned, Franco-Nevada foresees its gold equivalent ounce production growing 17% between 2017 and 2022. Meanwhile, Franco-Nevada's recent investments in oil and gas royalties should start paying off as well -- revenue from oil and gas could nearly triple through 2022.
Higher revenue from both precious metals and oil and gas should boost Franco-Nevada's cash flows and ensure a dividend increase for shareholders in 2019. Franco-Nevada has raised its dividend every year for 11 consecutive years now, also making it one of the top gold dividend stocks you'd want to own in 2019 and beyond.