Start the conversation
An unloved investment is one that's been beaten down - but is actually a great value. Investors then get an amazing entry point into a good long-term investment.
Money Morning Global Resource Specialist Peter Krauth recommended Goldcorp back in April when GG stock was trading at about $24.50. Goldcorp was trading this week at around $21, which means it's become an even better bargain.
Goldcorp Inc. (NYSE: GG): About the Company
Founded in 1954, Goldcorp is one of the world's top precious metal miners. It's involved in the operation, exploration, development and acquisition of precious metal properties in Canada, the United States, Mexico, and Central and South America. The Vancouver, British Columbia-based company produced 2.67 million ounces of the yellow metal in 2013, the fourth-highest amount of all the gold miners in the world. Goldcorp employs about 19,000 people and has a market cap of $17.4 billion. The CEO is Charles A. Jeannes.
Goldcorp Inc. (NYSE: GG) Stock: Why It's Unloved Right Now
Gold mining stocks trade at the mercy of gold prices, and it's no secret gold prices have struggled in recent years. Since peaking at $1,921 an ounce in 2011, gold prices have dropped almost as much as 40%, dipping below $1,150 earlier this month. Gold has come back a little, but is still hovering around $1,200 an ounce. Adding to the company's woes were lousy third-quarter earnings. Earlier this month GG reported a 63.2% plunge in earnings per share (EPS) from the same period a year ago. Goldcorp's EPS of $0.09 was just half of the $0.18 Wall Street had expected. Goldcorp stock touched a 52-week low of $17.01 on Oct. 31.
But GG stock is about to get a massive tailwind...
Goldcorp Inc. (NYSE: GG): Why It's a Stock to Buy
While lower gold prices are undeniably bad for Goldcorp stock, investors have overreacted. The company is one of the best-run gold miners in the world.
"Goldcorp is a company that I like a lot. It's well run, innovative, and forward thinking. And there's lots of upside for investors," Krauth said.
One of the keys here is that the company's executives have responded to the challenge of lower gold prices.
"Management's focus on cost controls has this year's estimated all-in cash costs lower by $30 to $80 per ounce," Krauth said. That means Goldcorp can still turn a profit even with gold prices down.
And unlike many of its peers, GG has a lot of new production in the pipeline.
"Over the next three years, gold-equivalent production for the company is expected to grow by 44% through organic growth and the startup of two new mines, Cerro Negro in Argentina and Eleonore in Quebec, Canada," Krauth said.
That's going to matter more and more in the years to come, because exploration for new gold has hit a wall in the past few years.
But the biggest factor in getting the GG stock price to rise is the fate of gold itself. And here Krauth is especially optimistic.
The exploration problems will start to shrink the gold supply, he said. Plus, to cope with lower gold prices, gold miners have closed some mines and focused on pulling out higher-grade ore over lower-grade ore. Both moves also serve to constrain supply.
Meanwhile, gold demand will continue to rise, driven partly by central bank buying as well as rising demand for gold jewelry. Krauth believes the disconnect between gold supply and gold demand eventually will push gold prices to $5,000 an ounce.
That would push Goldcorp stock some four times higher than it is today. Even gold at $2,000 would likely double GG stock.
Investing in Goldcorp Inc. (NYSE: GG)
The best approach is to invest in Goldcorp stock in stages. Gold prices could still falter in the short term. This is where a strategy like dollar cost averaging can be effective. You simply invest the same amount of money at regular intervals, buying more shares when prices are lower and fewer when prices are higher. The one-year target is $27.90 - a 33% gain from the current price. Goldcorp has a dividend yield of 2.9%.
More Gold Investing Tips: Love it or hate it, gold is no longer an optional investment. You need gold - in some form - in your portfolio. But there are some rules about why you want to own it and how to sort through the options for owning gold. This is a gold investing strategy that any investor can use...
Follow me on Twitter @DavidGZeiler.
About the Author
David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.