Does MM like Gold Stocks For Income?

Hi Karl,

We always preach that investors must remain open minded hence when we say MM doesn’t often invest in resource stocks for yield because earnings are largely determined by cyclical commodity prices, we are cognisant that the last few years have delivered stellar capital gains and yield for investors in the likes of coal, iron ore and oil. Hence, we hold the likes of BHP Group (BHP) and New Hope (NHC) in our MM Active Income Portfolio – but no Gold!

From a purely income perspective, we don’t think Gold is the place to be, Gold companies have a history of putting more money to work in the ground than through dividends.

In terms of Gold being broken as a defensive asset class, many have questioned this over recent times, however we don’t hold that view. Higher interest rates have increased the cost of carry which has been a negative in the shorter term, but in the longer term, we do think Gold itself is defensive and non-correlated to other parts of the market, Gold companies on the other hand have has issues with cost inflation and other things, which has a bearing on actual earnings and therefore share prices. The purest way to play Gold is buying Gold itself, but again, this is not an income play, and we think that as cost inflation is contained, and gold prices rally, the best leverage will be through Gold companies themselves.

Moving onto RRL, we are bullish gold so RRL should eventually become a beneficiary but its lagging in 2023 having already declined – we prefer Newcrest (NCM), St Barbara (SBM) and Evolution (EVN) in the local sector for various reasons.

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Regis Resources Ltd (RRL)

LAST UPDATED 07/02/2023 08:54

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Regis Resources Ltd (RRL)

LAST UPDATED 07/02/2023 08:54