With precious metals prices continuing to move inversely to interest rates, some investors would say that the best precious metals stocks to own right now are none of them. If you view precious metals strictly through the lens of gold and silver, I can’t blame you. As inflation soared, gold and silver did not hold up their end of the bargain. And with interest rates rising, a stronger dollar is taking out another reason to own precious metals.
But the precious metals sector is broader than gold and silver. And that’s where the opportunity comes in. Many of these metals are essential to manufacturing the products that will transform our economy. These sectors haven’t been immune from supply chain difficulties, and that has made it a choppy year for precious metals stocks.
But according to 360 Research Reports, the demand for precious metals is expected to grow at a compound annual growth rate (CAGR) of 2.5% between now and 2028. And I don’t want to forget about gold. According to ResearchandMarkets.com, the global gold mining market is forecast to grow at a compound annual growth rate (CAGR) of 3.1% from now through 2026.
Still, at their core, precious metals are commodities, and that makes investing in them a volatile proposition. Here, however, are seven of the best precious metals stocks to buy now.
Source: Piotr Swat/Shutterstock
Leading off this list of the best precious metals stocks is NEM). The stock of the largest miner in the world soared to an all-time high in March 2022. But NEM stock is down 34% since that time as mining stocks have struggled to grab the attention of investors.(NYSE:
Newmont is in a cycle in which its revenue continues to grow but its earnings drop versus the prior year. Rising capital costs are largely to blame for the declines in the miner’s profits. The company says, however, that it’s still on track to extract 6 million ounces of gold this year.
NEM stock provides investors with a good buying opportunity because it is prioritizing shareholder value in the midst of this market volatility.
Due to Newmont’s rising capital costs, the company probably will not be able to sustain its current $2.20 per share dividend . But the company has a long history of paying a dividend. And with analysts’ median price target standing at over $63 per share, the owners of NEM stock may get the profits they expect when they invest in mining stocks.
Source: rafapress / Shutterstock.com
Sticking with gold stocks, I will take a look at the Canadian multinational miner, Barrick Gold (NYSE:GOLD). Like Newmont, Barrick is an established mining company with a high-yield dividend.
After soaring to over $25 per share earlier this year, GOLD stock fell 44% and is trading near its 52-week low. But analysts are largely still bullish about the stock, and their average price target suggests the shares could make it back to their 52-week high.
One reason to believe that may happen is the company’s geographical reach. In a sector whose underlying economics can be challenging, having exposure to different countries may turn out to be a winning strategy.
In the meantime, GOLD stock pays a nice dividend yield of 2.83% and has a payout ratio of around 35% that looks sustainable.
Royal Gold Inc. (RGLD)
The last gold-related stock on this list is Royal Gold Inc. (NYSE:RGLD), and I included it specifically because it’s not a mining stock. The company essentially profits from the royalties generated by its acquisitions and its investments. Although some of its businesses are still in the exploratory phase, many are established companies that are generating reliable revenue and profits.
RGLD stock is well off its 52-week high set in April 2022. However, the stock is down 18% for the year, slightly outpacing the performance of the S&P 500. And although analysts have lowered their price targets for the stock, their median target suggests it will make back most of its losses for the year.
While investors wait, they can count on an attractive dividend that has been growing for the last 20 years. and equates to a dividend yield of 1.62%.
Source: MICHAEL A JACKSON FILMS / Shutterstock.com
Freeport-McMoRan (NYSE:FCX) is another mining stock. However, rather than being exclusively engaged in gold mining, the company has an extensive footprint in copper mining.
FCX stock rose as the infrastructure bill made its way through the U.S. Congress. The rally indicated that the price of copper would climb after the bill was passed. But macroeconomic challenges have blunted the demand for copper, hurting the short-term outlook of FCX stock.
The company’s second-quarter revenue and earnings fell versus the previous quarter. That broke a streak of eight consecutive quarters of sequential gains, suggesting that the demand for copper is slowing.
This may well be a case, however, of demand delayed rather than demand denied. If the United States remains committed to an electric-vehicle future, the demand for copper will have to rise.
Southern Copper (SCCO)
Source: Coldmoon Photoproject/Shutterstock.com
Another company that will benefit from rising copper demand is Southern Copper (NYSE:SCCO). The Phoenix, Arizona-based mining company produces refined gold, silver, and other precious metals, including copper. The company’s primary operations are in South America.
SCCO stock is down 28% for the year, and the company’s current quarterly dividend of 75 cents per share is likely to come down. Still, the company has offered a dividend for many years, and it was upgraded by Morgan Stanley (NYSE:MS).
It really comes down to timing for investors. The commodities market isn’t going to tell them exactly when demand will increase. So if you have speculative cash to put into this sector, Southern Copper could be an attractive choice because it pays you a dividend while you’re waiting for commodities to rebound.
BHP Group (BHP)
So far, we’ve looked at companies that offer investors solid balance sheets, but ones that may be currently overvalued. BHP Group (NYSE:BHP) offers investors the benefit of a solid balance sheet. But it does appear to be undervalued in the current market. The company has a price–earnings ratio of 5.7 times which is below its historical average of 7.25 times.
The Australian mining company extracts and sells a range of metals including copper, silver, zinc nickel, uranium, iron ore, gold and molybdenum. Copper and nickel will likely be in high demand as the world pivots toward clean energy.
And another InvestorPlace columnist, Josh Enomoto, recently reminded investors that BHP Group is a major producer of potash. The latter commodity has been in short supply since the Russian invasion of Ukraine. That hasn’t been enough to keep BHP stock from turning negative for the year. But with the stock down “only” 8% in 2022, investors could do worse.
The last company on this list of the best precious metals stocks is Vale (NYSE:VALE) – the world’s leading producer of iron ore and nickel. At first glance, its story seems the same as every stock on this list because, like the other names, it is down for the year and pays a dividend.
That’s the nature of this sector in 2022. And I can’t say for sure when the sector is going to turn around. But if you’re considering investing in Vale, you should do so because it provides a commodity that will be in high demand. Specifically, nickel is a key component of lithium-ion batteries.
That will be a long-term catalyst for VALE stock which, trading at three times its earnings, looks significantly undervalued compared to the forward P/E ratio of the mining industry which stands at 9.6 times.
On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019.
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