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Why Goldcorp Inc.'s Stock Rose 21.8% in February

By Reuben Gregg Brewer – Mar 14, 2016 at 1:46PM

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Goldcorp rallied along with gold prices, but there was a blip in the month that investors need to understand.


Image source: Goldcorp.

What: Goldcorp's (GG) shares rose nearly 22% last month. That was a continuation of an advance that started in mid-January, when gold prices started to move higher. But a dip toward the end of February is worth highlighting.

So what: Goldcorp is, well, a gold miner. And that means the price of gold will have a disproportionate impact on the company's results and investor sentiment on the shares. So when gold started to move higher on global economic and geopolitical concerns, Goldcorp went along for the ride. You'd expect that.

However, the company released quarterly earnings on Feb. 25 that contained some good news, such as reduced costs and a stronger balance sheet, and a couple of negatives, including an over-$4.50-per-share impairment charge in the fourth quarter and a reduction in the company's dividend. The stock fell sharply on the news. With rising gold prices, that may have come as a bit of a surprise.

Now what: The takeaway from Goldcorp's February price moves is that gold prices are important for gold stocks. In fact, the shares have resumed their upward climb along with gold. But there are other things to think about, too. And they can cause equally sharp price movements. A big gold rally will, indeed, lift all boats. However, most investors should make sure they're comfortable with the businesses they're buying and not just looking for a lottery ticket in the gold sector.

Reuben Brewer has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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