With shares of Sandstorm Gold (NYSE:SAND) now trading at around $13.50, is SAND a BUY, a WAIT and SEE, or a STAY AWAY?
Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
A = A-Level Management Runs the Company
One of the youngest and most successful CEOs in the mining business, Nolan Watson is the former CFO of NYSE-listed Silver Wheaton (NYSE:SLW), the $14B precious metals streaming juggernaut. He knows the precious metals industry and knows what it takes to build a dominant streamer. Since becoming CFO at SLW at age 26, Watson has put together an impressive track record of creating billions in stockholder wealth, and appears to be at it again with Sandstorm Gold.
E = Earnings Are Increasing Quarter-Over-Quarter
SAND gives gold bulls the best of all worlds: highly leveraged exposure to the price of gold, earnings growth through increased production, and risk mitigation due to smartly constructed streaming agreements with miners.
Sandstorm’s earnings have mostly held steady over the last four quarters, and the most recent quarterly number of 6 cents per share showed a slight increase from the previous quarter’s 5 cents per share and doubled the year over year EPS of 3 cents per share. Since earnings are increasing quarter-over-quarter, the stock is within our risk portfolio.
T = Trends Support the Industry in which the Company Operates
Two letters: Q.E.
U.S. quantitative easing plus equivalent money-printing initiatives undertaken by Europe and Asia mean that it’s likely a matter of time when, not if, gold skyrockets. Euro Pacific Capital Chief Executive Peter Schiff said in September that the ceiling on the price of gold has essentially been blown off the hinges as a result of the Fed’s latest spending initiatives. Particularly because the quantitative easing plan is open-ended, and there is no real limit on how much money could be printed, there is also no limit on how high the price of gold could reach.
And because higher prices for gold typically spell good fortune for gold stocks, as long as Ben Bernanke is running the Federal Reserve the future outlook for gold should be sparkling. Since Bernanke became Chairman in 2006, the price of gold has soared from about $570 per ounce to almost $1,700 per ounce.
SAND has been one of the top ways to play the rise of gold to date and will continue to produce outsized returns if gold hits new highs.
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