08. September 2020 | 07:09 CET
Barrick Gold, Gazprom, Scottie Resources: Who convinces the market?
To be noticed by the market, it takes more than just a big name. Learn how investors can invest in a phase of global money flood.
Still completely on the low in March, commodity stocks have been developing a strong dynamic for months. The reason: despite the pandemic, demand for copper and even crude oil has not slumped significantly. In the case of gold, demand is even rising continuously. This is due to the measures taken by governments and central banks to combat the crisis. As was the case during the great financial crisis, state institutions are supporting the markets with liquidity. This drives not only gold and other precious metals but also other commodities. But how should investors invest in this market environment?
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ISIN: CA0679011084 , US3682872078 , CA81012R1064
Barrick Gold: Market ignores outstanding development
When it comes to gold mining, Barrick Gold has been the company first mentioned by many investors for years. In fact, Barrick is the market leader - no other company produces more gold than the Toronto-based group. To ensure that this remains the case, Barrick Gold has made repeated acquisitions in recent years: in 2006, it took over Placer Dome and in 2019 it acquired Randgold Resources. In the meantime, the gold giant has bought many other smaller exploration companies. Even before the start of the gold boom in the wake of the Corona Pandemic, Barrick's figures improved significantly and management proposed to increase the quarterly dividend by 40%.
Despite the positive business development, the company plans to divest several unprofitable projects by the end of the year. In view of the increased gold price, this step could even generate more funds in Barrick's coffers than expected. Despite the formidable outlook for the gold sector in the face of global money supply expansion, Barrick Gold's share price is not really getting off the ground and even when gold broke through the USD 2,000.00 mark, it did not mark new highs. The stock is still trading at the April level today. And this despite the fact that a price-earnings ratio of only 15 would leave room for improvement given the market environment.
General political weather conditions rather unfavorable for Gazprom
Gazprom shares also offer price potential - at least superficially. The Russian oil and gas company has been captivating for a long time with low valuations and is currently making a name for itself with a price-earnings ratio of just over two. On top of that, a double-digit dividend yield is also on the cards. The world's largest natural gas company controls around 7% of the world's reserves and sees potential in its business with China and in the production of liquefied gas.
In the wake of the incidents surrounding the Russian opposition activist Alexei Nawalny and the German discussion about ending the construction of the Nord Stream 2 gas pipeline between Russia and Germany, the share has come under pressure. This confirms Gazprom's share's longstanding status as a value trap. Value traps are shares that are considered to be favorably valued on the basis of fundamental ratios, but which nevertheless experience no demand on the market.
Scottie Resources also has good timing for acquisitions
A completely different case is the Canadian gold company Scottie Resources. Just yesterday the share price in Germany picked up dynamically again. The company operates in the so-called "Golden Triangle" of the Canadian province of British Columbia and owns the Scottie Gold Mine there. The mine produced more than 95,000 ounces of gold between 1981 and 1985 and impressed with high gold grades. The company is currently exploring adjacent regions and expanding the deposits on its property. The goal is to resume production at favorable conditions. Similar to Barrick Gold, Scottie was able to make additional purchases during a quiet market phase: In April 2019, Scottie Resources secured an adjacent property and expects this to provide additional potential. Scottie is also pleased to report that the company appears to be solidly financed with approximately CAD 5.0 million in cash.
Although Scottie Resources is a very small company with a market capitalization of approximately EUR 40 million, investors have already recognized the potential: Since mid-June alone, the share price has risen by more than 40%. While the gold boom is largely bypassing the market leader Barrick Gold and companies like Gazprom are suffering from the general political situation, shares of smaller companies that have already been recognized by the market as promising appear to be an exciting niche.