Top stock ideas in soaring gold sector from RBC analyst

Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow

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RBC Dominion Securities analyst Josh Wolfson published his top stock ideas in the soaring gold sector,

“Valuations have compressed recently, but are in line with 1-year trailing averages. At spot gold prices, our royalty coverage trades at 1.75 times P/NAV (down 10 per cent vs . last published on Sept 25), compared to 1.85/1.87 times on a 1-year/3-year basis. Our senior producer coverage trades at 1.10 times P/NAV (down 7 per cent vs . last published), compared to 1.04/1.26 times on a 1Y/3Y basis … RGLD: Again in this edition, we note that RGLD is one of the only companies trading well below its historical valuation. Shares have come under pressure following RGLD’s SAND -HCU acquisition (closing Oct 20), although while we highlight positive recent updates at Kansanshi, Mt. Milligan, and the Fourmile discovery as larger offsets. ... [Barrick]: Following the news of B’s CEO departure, a larger overhang on shares has developed and the company’s relative valuation has contracted again . Barrick shares still trade at a steep discount vs . peers, but a modest premium to 12-month trailing valuation. In our view, prior valuation for B is less relevant, given historical execution uncertainties and Mali risks were a larger overhang ... [Agnico Eagle Mines/Wheaton Precious Metals]: Both companies have underperformed peers in recent months and are now trading slightly below historical 1-year trading ranges . Shares are now also trading at a slight discount to historical relative valuations vs . peers ... [Newmont] : Shares have started to revalue higher in recent weeks/months . Valuation still does not screen expensive on either an absolute or relative basis. We refer readers to our prior note published early September”

A warning

BMO senior economist Robert Kavcic warned clients of mediocre domestic GDP growth for the third quarter,

“Manufacturing and wholesale volumes both fell in Canada in August, down 1.5 per cent and 1.3 per cent, respectively, in the month. While wholesale is still up a sturdy 2.9 per cent from a year ago, manufacturing volumes are now down 4.3 per cent with declines across nondurables and autos. With hours worked little changed, home sales modestly positive and retail sales volumes still pending, August GDP is tracking roughly flat. But, given an expected rebound in net exports after a nasty Q2, the economy is still on pace to claw out modest growth for all of Q3. But growth is clearly still struggling… “

A reminder

Abnormal Returns’ Tadas Viskanta offered a useful reminder to investors,

“So much is written about how to be a superior investor. For the vast majority of people, their efforts would be better spent avoiding big mistakes, i.e. not being stupid. This is easier said than done when the modus operandi of the financial services industry is to drive people into higher fee, higher complexity investment vehicles. Eric Markowitz recently interviewed Alex Morris, author of Buffett and Munger Unscripted: Three Decades of Investment and Business Insights from the Berkshire Hathaway Shareholder Meetings. Their interaction spoke to this very issue.

Eric Markowitz: If you had to distill one lesson from Buffett and Munger to pass along to your own children, what would it be?

Alex Morris: Avoid stupidity. Avoid the first step on a bad path. It applies to life — steering clear of destructive habits like gambling or addiction. It applies to business — avoiding bad deals, bad leverage, bad incentives.

So much of success isn’t about brilliance. It’s about avoiding unforced errors. Buffett and Munger built careers on discipline and restraint—waiting for the fat pitch, resisting fads, preserving optionality. That mindset is immensely powerful.”

“The upside to not being stupid” – Abnormal Returns

Bluesky post of the day

Diversion

“So much for Ford and GM’s scheme to extend the EV tax credit” – The Verge