Why this gold stock rose 10% in July while others fell
Actions of Franco-Nevada (NYSE: FNV) rose 10.2% in July, according to data from S&P Global Market Intelligence. It lasted a month for the title, given the wave of upgrades and downgrades it has received – it usually doesn’t generate such interest from the analyst community all at once. Those ratings included multiple downgrades, but they failed to dampen investor interest in the flow of gold and royalty stocks.
July was a hectic month for Franco-Nevada until the last week of the month, when it recovered. In between, here are some of the analyst ratings the stock received.
- National Bank Financial: Price target raised to C $ 200 per share, compared to C $ 200.
- Stifel: Price target raised to CA $ 195 per share.
- Barclays: Demoted with a target price of $ 107 per share.
- Canaccord Genuity: Downgraded with a target price of C $ 200 per share.
- JP Morgan: Rating downgraded with a target price of $ 159 per share.
Views on Franco-Nevada are clearly divided, and some analysts who downgraded the stock have done so by citing its high valuation – the stock had gained 16% in the first half of the year even as most stocks did. gold mining was declining.
Still, Franco-Nevada stocks surged in the last week of July, alongside the price of gold, backed by the statement from the Federal Reserve’s Open Market Committee (FOMC). Gold, as an asset, is sensitive to changes in interest rates because higher interest rates make gold a less attractive investment than instruments like bonds.
Gold investors were nervous before the FOMC’s statement in late July, but the FOMC kept interest rates unchanged. Gold prices strengthened somewhat shortly thereafter, as did Franco-Nevada stocks. Franco-Nevada has proven to be an extremely resilient gold stock, which is why investors don’t seem to waste an opportunity to buy the stock when its price drops.
Gold prices are bound to be volatile, and while some analysts may find Franco-Nevada’s valuation high, I still think it’s one of the best and cheapest gold stocks you can buy in this country. moment, given the company’s high-margin business model and strong growth profile. With Franco-Nevada also having a record year in 2020, investors should keep an eye on the release of its second quarter results on August 11, after the market closes.
This article represents the opinion of the author, who may disagree with the âofficialâ recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.