In our new screening process to find recommendations, the vast majority of gold stocks don’t qualify because they aren’t making money or are too expensive, notes Mark Skousen, editor of Five Star Trader — and a participant in MoneyShow's upcoming live streaming event, Money, Metals & Mining Expo, on September 1-3.
AngloGold Ashanti (AU) is an exception. Based in Johannesburg, South Africa, the world’s #3 gold miner has more than one dozen properties in Africa, North and South America, and Australia.
It sold its last gold mine in South Africa to Harmony Gold earlier this year, and now has no operations in South Africa. Sadly, South Africa has been politically unstable.
In 1970, South Africa was the top gold producer in the world by a wide margin; now it is #8, behind Peru. AngloGold combined with Goldfields in 2004 and now is an international gold producer outside of South Africa.
With higher gold and silver, and improved ways to reduce costs, profit margins now exceed 10%. Revenues rose sharply in the past year, up 26% to $3.9 billion, and earnings skyrocketed 287% to $619 million. The company has $1.3 billion in cash, with only $2.9 billion in long-term debt.
Among major gold miners, it is selling much more cheaply than its rivals Barrick Gold (GOLD) and Newmont (NEM) due to its headquarters in South Africa. It is now selling for an estimated 12 times earnings for 2020 and has a price/earnings-to-growth (PEG) ratio of 0.54 (anything less than 1 is considered excellent).
AngloGold mines have weathered the Covid-19 crisis and are increasing profits and cash flow. On Sept. 1, CFO Christine Ramon will take over as the new CEO, replacing Kelvin Dushnisky. Let’s buy AngloGold Ashanti at market and set a protective stop of $23 a share.
