2. Marc Faber writer for the Gloom, Boom & Doom, is bearish on stock prices.
He thinks that the stock market is in a massive bubble that has been inflated
by the FED.
The S&P 500's has rallied 20% this year, investing in this index could be
compared to holding “dead money”. He pointed Gold is one asset that is
particularly undervalued and out of favor at the moment.
Marc Faber feels that the price of Gold is finally bottoming out.
China's demand for gold is growing at a steady rate and (which shall
surpass global supply in 2014) will sustain the price of gold it’s current level
of $1200. Besides, he sustains that many projects that were expected to
keep gold's supply going, but are no longer profitable and will find it hard to
survive in today’s current market.
3. Barrick Gold (ABX)
Barrick Gold Corporation is Faber’s favourite and largest gold producer.
Trades on the New York and Toronto stock exchange. The company is
involved in the production and sale of gold, as well as other related activities,
such as developing mines and exploration.
Barrick Gold has a higher debt leverage than the majority of it’s competitors of
the same size (2 times 2013 EBITDA). Management team is focusing on Free
Cash Flow and high-margin mining projects such as Pascua Lama which will be
operating by the middle or end of 2016.
Barrick is one of the lowest and most efficient cost producer in the mining sector
and has an amazing asset base to support their volume growth in the future.
4. The reason why Faber recommends to own shares of Barrick is because
of their market price.
The company trades at 2013 5.5 times Enterprise Value/EBITDA and 7.3
times its current earnings which in his opinion is very conservative given
that any small increase in price of gold could boost the company's bottomline and further reduce estimated valuation and net debt to EBITDA
multiples.
According to estimates by Credit Suisse's if the price of gold goes from
$1,200 an ounce to $1,500 per ounce, It’s 2015 net debt to EBITDA
multiple would fall from an estimated of 2.5 times down to an estimated
multiple of 1.6 times.
Barrick also intends to sell raise money by selling it’s higher cost mines.
