Is it too late to buy Fresnillo plc (+165%), Randgold Resources Limited (+115%) and H&T Group plc (+44%)?

Are further gains on the cards for Fresnillo plc (LON:FRES), Randgold Resources Limited (LON:RRS) and H&T Group plc (LON:HAT)?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Precious metals prices, which had been seriously depressed for a number of years, have been on a bull run since the back end of last year, as fears about global economic growth, compounded by the shock Brexit vote, have increased demand for ‘safe-haven’ assets.

Silver surfer

Shares of FTSE 100 silver miner Fresnillo (LSE: FRES) have gained a whopping 165% so far this year, and edged higher in early trading following a Q2 production update this morning.

The company said silver production was up 14.5% on the same period last year, with gold production up 19.6%. Management has maintained its full-year silver guidance of 49m-51m ounces, but raised gold to 850,000-870,000 ounces from 775,000-790,000.

Analysts expect earnings this year to rocket from 2015’s depressed 4.7p a share to 30.5p, putting Fresnillo on a P/E of 62 at a share price of 1,890p. There’s a prospective 0.7% dividend yield.

The P/E is high even by the typically elevated standards of precious metals miners, but that may not stop the shares making further gains. Silver is currently trading at under $20 an ounce, but was as high as $50 back in 2011. With other flight-to-safety assets, such as cash and gilts, offering negligible or even negative returns in some cases, demand for precious metals could increase.

Golden goose

Randgold Resources (LSE: RRS) is another of this year’s big risers with a 115% gain to date. Of course, this FTSE 100 gold giant has enjoyed the same favourable backdrop as Fresnillo. And with gold at $1,325 an ounce, still well below its $1,900 peak, there’s considerable scope for jittery investors to push the metal price — and Randgold’s shares — higher.

Furthermore, Randgold’s P/E of 37.5, at a current share price of 8,950p, is considerably more attractive than Fresnillo’s. In addition, Randgold was rather more resilient through the metals depression of 2011-15. Its dividend record for these years reads $0.40, $0.50, $0.50, $0.60, $0.66, although the yield is low (a prospective 0.6%) and cash on the balance sheet fell from $488m to $213m over the period. Still, Randgold strikes me as a better-value proposition than Fresnillo at their current share price levels.

Attractive alternative

The shares of H&T Group (LSE: HAT) haven’t performed as spectacularly as those of the precious metals miners, having gained ‘only’ 44% since the start of the year. However, I believe this company is a highly attractive alternative, as its core business can make good money through thick and thin, with periods of increasing gold prices providing windfall profits.

H&T is in the ancient industry of pawnbroking (and associated services) and is valued at a bit over £100m at a current share price of 282p. Despite gold purchasing profits falling as the price of the metal went through its slump, H&T remained so cash-generative that between 2011 and 2015 it was able to reduce net debt from £29m to £2m and pay out £15m in dividends.

The stock trades on a forward P/E of 15 with a prospective 3.2% dividend yield. And with the potential for a perhaps extended period in which the price of gold bumps up profits, I reckon the current valuation makes H&T an attractive buy.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

G A Chester has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Should I sell my FTSE All-Share index fund and buy a S&P 500 tracker instead?

Harvey Jones is wondering whether now is a good time to invest more money in the S&P 500, after a…

Read more »

Investing Articles

Should I buy dirt-cheap BT shares after the recent pullback?

BT shares were on the up but now they're sliding again after the board trimmed full-year guidance. Now Harvey Jones…

Read more »

Investing Articles

Up 28%, can the easyJet share price keep rising?

The easyJet share price has gained altitude over one year but plunged over five. Is now an attractive time for…

Read more »

British Isles on nautical map
Investing Articles

Should I buy more BAE Systems shares at 1,350p?

BAE Systems shares have had a fantastic run since early 2022, yet still don't appear overvalued. Is it now time…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

7% yield and a cheap valuation! Is this one of the best shares to buy this month?

Christopher Ruane has been looking for cheap shares to buy. This one has a 7% dividend yield, so is it…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

Should I buy National Grid shares for the big dividend before it’s too late?

This year's price weakness has left National Grid shares on what looks like a tempting valuation. I hope it doesn't…

Read more »

Investing Articles

There are now 5,000 ISA millionaires! See the surprising UK dividend shares they’re buying

The number of ISA millionaires is growing all the time and guess what? They're really into blue-chip dividend shares listed…

Read more »

Blue NIO sports car in Oslo showroom
Investing Articles

Down 38% in weeks! Time to snap up NIO stock?

NIO stock's more than doubled in value over the past five years but has been on a wild ride lately.…

Read more »