In less than two days, we'll officially close the book on 2019 and usher in both a new year and decade in the process. It's a decade that investors are bound to remember, as the U.S. economy has been recession-free, and the broad-based S&P 500 didn't enter a bear market.
But I'll certainly be sad to see the 2010s come to a close, as my portfolio has significantly outperformed the benchmark S&P 500 in four of the past five years.
As we motor ahead into 2020, I'll be looking to make it five out of six years, and the following four companies are poised to do most of the heavy lifting.
I originally purchased shares of junior Canadian gold miner Claude Resources on more than two dozen separate occasions between 2012 and 2014. With SSR Mining acquiring Claude in 2016, I then became a shareholder of SSR. Over this seven-plus year span, I've only sold off 9.1% of my original stake, which is up a cool 1,225% from my initial cost basis.
There are a lot of reasons to be excited about SSR Mining in 2020 (and moving forward). The company's flagship Marigold mine in Nevada looks to be on track to see a 30% increase in production by 2021/2022, which should put it on pace for up to 265,000 ounces in annual output. Meanwhile, the Seabee mine, acquired via the Claude acquisition, has produced record output with each subsequent year of ownership.
SSR Mining also acquired a full stake in the Chinchillas silver mine in Argentina. Developed in partnership with Golden Arrow, SSR acquired the 25% stake in Chinchillas that it didn't already own from Golden Arrow in late September, giving the company access to a full stream of silver resources for what should be at least a decade.
I view SSR Mining as a rarity among miners given that it has $242 million in net cash. Most of its peers are either well underwater in the debt department or still tightening their belts. When combined with a stellar year from gold and a persistent low-yield environment, I continue to expect good things from SSR Mining in 2020.
First Majestic Silver
I swear I'm not predicting an economic doomsday, but my second-largest holding is once again First Majestic Silver (NYSE:AG). In similar fashion to SSR Mining, I came into ownership of First Majestic Silver after it acquired Primero Mining, a company I'd held in my portfolio, in 2018. Since building my initial stake in the company, I wound up reducing my holdings by 10% in 2019.
One of the things that attracts me to First Majestic is the company's exposure to silver. Traditional silver miners have predominantly skewed more toward gold in recent years (including SSR Mining), leaving First Majestic Silver as the most silver-levered publicly traded mining company. In a typical year, around 65% of total revenue will be derived from silver sales, with the rest mostly coming from gold.
Silver is a particularly attractive metal considering its numerous practical uses. But I'm more intrigued by the gold-to-silver ratio currently sitting at 84.5. The gold-to-silver ratio describes how many ounces of silver it would take to equal one ounce of gold. Historically, this ratio has been closer to 60 in recent decades. When the ratio gets as high as it is now, it typically means that silver (the physical metal) outperforms gold.
Beyond just spot prices, First Majestic is making nice headway with a number of projects and existing mines. Production improvements at La Encantada, for example, should boost output by a minimum of 1.5 million ounces of silver per year, while the Santa Elena mine is due for a conversion from diesel fuel to liquefied natural gas in the upcoming year, which will lower operating costs. It's quite possible that First Majestic's silver equivalent ounce production essentially doubles between 2017 and 2022, which is great news in a low-yield environment with climbing precious metal prices.
Teva Pharmaceutical Industries
To be blunt, 2019 wasn't much better for Teva Pharmaceutical Industries (NYSE:TEVA) shareholders than 2018, but I remain steadfast in my view that this is a long-term turnaround story that's worth buying into.
For those of you who may not be closely following generic and branded drug developer Teva, it's had the kitchen sink thrown its way over the past two-plus years. The company's faced executive turnover, settled a bribery case, contended with generic competition for its top-selling branded drug (Copaxone), dealt with generic-drug price weakness, and was hit with opioid lawsuits from 44 states this year. As a result, Teva's profit projections have tumbled, its dividend was completely shelved, and its large debt load has stood out like a sore thumb.
But as turnaround specialist CEO Kare Schultz has noted, 2019 was Teva's trough year. The company should begin seeing better pricing power with generic medicines, while Copaxone's sales slide should abate. Newly launched brand-name therapies are also expected to help offset the near-term losses from Copaxone to generic competition.
Most importantly, in my view, is the fact that Schultz will have trimmed $3 billion in annual operating expenses from Teva's annual budget, and has reduced the company's net debt by $8 billion from its peak. There's no question that Teva has a hill to climb, but the ascent begins again in 2020.
Bank of America
I'll also be counting on my fourth-largest holding, Bank of America (NYSE:BAC), to pull my portfolio higher. As of this coming February, I'll have owned a stake in BofA for nine years.
Bank of America has done a really impressive job of transforming itself over the past decade. In the early portion of the 2010s, BofA was buried under lawsuits and allegations stemming from its mortgage practices during the Great Recession. However, the latter half of the decade has been spent reducing operating expenses by closing physical branches and emphasizing digital banking.
This is a company that's also benefited from the move off of the record-low federal funds rate between Dec. 2008 and Dec. 2015. Even though the Federal Reserve wound up reducing the fed funds rate by a quarter of a point (i.e., 25 basis points) three times in 2019, the previous hikes built in since Dec. 2015 have led to a lot more net interest income for BofA.
What's most telling about Bank of America's progress is that it's been kicking its shareholder return program into high gear of late. After reducing its quarterly dividend to $0.01 following the Great Recession, BofA recently announced a payout increase to $0.18 per quarter, and offered up plans to repurchase about $31 billion worth of its own stock. These share repurchases should improve the company's earnings per share, helping to mitigate modest declines in net interest income caused by the recent Fed rate cuts.
In short, I see no reason to part ways with Bank of America's stock anytime soon.