Canaccord Genuity Portfolio Strategist Martin Roberge believes the weakness in gold equities seems excessive and that we should be prepared for a bounce, writes Canaccord Wealth Management in its Morning Coffee newsletter. It's been a very frustrating six months for gold equity investors.
Despite bullion being up $24 since the October 4 lows, the S&P/TSX Gold Index is down 11% and significantly lagging the S&P/TSX Composite (+11%). While climbing costs and rising bond yields are often cited to explain gold equities’ underperformance, Roberge would add the apparent reluctance of companies to return more money to shareholders, especially to those aging investors and pension funds seeking higher income.
Roberge believes the gold sector is now deeply undervalued relative to the market. In fact, gold stocks (relative to the market) are now cheaper than they were at the 2008 bottom. Therefore, in a market that may trade sideways, he says the gold group could be a legitimate place to hide.
The newsletter remind its readers that B2Gold Corp. (TSX: T.BTO, Stock Forum) and Yamana Gold Inc. (TSX: T.YRI, Stock Forum) are Canaccord Genuity Canadian Focus List picks.
Down 1.3% to $15.32 on Thursday, Yamana has a market cap of $11.43 billion, based on 745.8 million shares outstanding. After falling 2% to $3.90, B2Gold has a market cap of $1.5 billion, based on 383.2 million shares outstanding.