© Reuters. 3 Gold Miners Trading at Dirt Cheap Valuations
Kirkland Lake Gold (NYSE:), Pretium Resources (NYSE:), and Integra Resources (ITRG) are 3 gold miners that are trading at very cheap valuations. Taylor Dart breaks down why you should consider taking advantage of these prices.It’s been a rough couple of months for the Gold Miners Index (GDX (NYSE:)), with the ETF giving up most of its Q2 gains and sliding back towards support near the $31.00 – $32.00 level. While this has been quite disappointing for fully committed investors that were hoping for a meaningful move higher, it’s a blessing for investors that have been sitting on an ample amount of cash, waiting for a chance to buy back their favorite names in the space. Currently, many names are trading at very reasonable valuations, but a select few are sitting at dirt-cheap valuations, with more than 40% upside to their conservative fair value. In this update, we’ll look at a few that look like compelling buys currently.
Some investors view the GDX as the preferred trading vehicle for gaining leverage to the gold (GLD (NYSE:)) price, but given that there are several poorly run companies in the ETF, the performance of the worst names can drag significantly on the GDX’s returns. This is why I believe the best way to get leverage to the gold price is by investing in some of the best-run companies trading at the deepest discounts to fair value. An investment in individual miners allows investors to get complete exposure to names with the most favorable reward/risk ratios without picking up unnecessary exposure to names that consistently under-deliver. Kirkland Lake Gold (KL), Pretium Resources (PVG), and Integra Resources (ITRG) are three of the most intriguing ideas in the large-cap, mid-cap, and micro-cap space as of this week. All of them should perform quite well even if the gold price remains in a range between $1,725/oz and $1,925/oz over the next 12 months, given that a large margin of safety is baked in at current levels.
(Source: Company Filings, Author’s Chart)
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