5 Stocks to Grab as Gold Prices Surge on Coronavirus Fears

With coronavirus on the verge of becoming a global pandemic, investors went into overdrive scurrying for safe-haven assets to counter the uncertainty. This, in turn, sent gold prices soaring to seven-year highs on Feb 24.

Coronavirus Spreads Beyond China

Per the World Health Organization’s report as of Feb 24, 2020, there have been 77,262 confirmed cases of coronavirus in China.  In fact, 415 new cases have been reported in the past 24 hours, per the report. The current death toll in China is at 2,595.

However, the outbreak is now not only confined to China but also across 29 other countries with 2,069 confirmed cases. Notably, 300 new cases were reported in a day. The disease has claimed 23 lives so far outside China. Three countries in particular have been impacted severely — South Korea with 763 cases, Japan with 144 cases and Italy with 124 cases.

Fear Grips the Markets

This scenario has sent global stock markets tumbling. The Dow Jones Industrial Average fell 1,032 points to close at 27,960.80, marking a decline of 3.6% — its worst day in two years. Further, it was only the third time in history that the index lost more than 1,000 points. The S&P 500 lost 111.86 points or 3.35% to close at 3225.89. The Nasdaq Composite lost 3.71% to close at 9,221.28.

The latest spike in cases in South Korea and Italy primarily triggered the downslide. The uncertainty regarding the situation, primarily the scale and magnitude of its impact, is the chief reason behind the concern. Factory closures in China, reduced demand for goods and services, and disruption in global supply chains, among others, are expected to weigh on the global economy. Most of the companies have updated their first-quarter outlook while releasing their fourth quarter numbers, thanks to the coronavirus outbreak.

Gold Gaining from the Outbreak

This situation has played out in favor of gold. The bullion touched a high of $1,688.6 on Feb 24, the highest since January 2013. So far in 2020, gold has gained around 10%.

Notably, this follows an impressive 2019, wherein gold gained about 19% — its strongest annual increase since 2010. Uncertainty in the U.S-China trade front, geopolitical concerns, the Brexit mayhem, a weak manufacturing sector and apprehensions over the global economic outlook compelled investors to seek safe-haven investment options like gold in 2019. Further, three rate cuts by the Fed only added to the rally.

In tandem with gold prices, the Gold Mining industry rallied 46.4% over the past year,  compared with the S&P 500’s growth of 18.6%. The industry falls under the broader Basic Material sector, which declined 9.1%. The industry currently carries a Zacks Industry Rank #77, which places it at the top 30% of 256 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.

We thus believe that this is a good time for investors to add some gold stocks to their portfolio.  We have employed our Zacks Screener to pick five top-ranked gold stocks as they have potential to outperform the broader market.

Kirkland Lake Gold Ltd. KL: This Toronto, Canada-based company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for 2020 earnings has moved up 7% in the past 60 days, . This suggestings year-over-year growth of 21.9%. The company has a trailing four-quarter positive earnings surprise of 3.34%, on average.

Franco-Nevada Corporation FNV: This Toronto, Canada-based company currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for 2020 earnings has moved up 4% in the past 60 days. This indicates year-over-year rise of 27.7%. It has a trailing four-quarter positive earnings surprise of 11.8%, on average.

Alamos Gold Inc. AGI: Based in Toronto, Canada, this company carries a Zacks Rank #2. It has an estimated long-term earnings growth rate of 59.1%. The Zacks Consensus Estimate for 2020 earnings indicates year-over-year growth of 10%. The company has a trailing four-quarter positive earnings surprise of 9.82%, on average.

Equinox Gold Corp. EQX: The Zacks Consensus Estimate for earnings for 2020 indicates year-over-year growth of 141.53%. The estimate has also moved up 11% over the past 60 days. This Zacks Ranked #2 stock has a trailing four-quarter positive earnings surprise of 16.7%, on average. The company is based in Vancouver, Canada.

Innoviva, Inc. INVA: This Burlingame, CA-based company carries a Zacks Rank #2.  The Zacks Consensus Estimate for earnings for 2020 suggests year-over-year growth of 9%. The Zacks Consensus Estimate for 2020 earnings has moved up 16% in the past 60 days.

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Franco-Nevada Corporation (FNV) : Free Stock Analysis Report
 
Alamos Gold Inc. (AGI) : Free Stock Analysis Report
 
Innoviva, Inc. (INVA) : Free Stock Analysis Report
 
Kirkland Lake Gold Ltd. (KL) : Free Stock Analysis Report
 
Equinox Gold Corp. (EQX) : Free Stock Analysis Report
 
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