Analysis: Royal Gold (RGLD)

While the price of gold—and this stock—are down, this miner has a long history of shareholder rewards, including a small dividend.

Royal Gold (RGLD)

Royal Gold (RGLD) is a precious metals miner with plenty of exposure in Top Ten (17 previous appearances dating back to 2002). While we’re not enthusiastic advocates for investing in gold, Royal Gold has a long history of profits as a royalty investor, with 37 producing and 24 development-stage royalties or similar interests that have cranked out huge profit margins for years.

The company has interests in 198 properties on six continents, with the bulk in Canada, Chile, Mexico and the U.S. The persistent decline in the price of gold, from over $1,800 an ounce in late 2011 to $1,236 in recent trading, certainly undercut Royal Gold’s stock price, which fell from over 100 in September 2012 to 39 in June 2013. But while the price of gold has continued to fall, investors have returned to Royal Gold as a profitable company that pays a dividend (annual yield is 1.2%) with a big upside if the price of gold rebounds.

With a 92 P/E ratio, the stock isn’t exactly cheap, but investors clearly believe that gold isn’t going to fade away as an attractive investment, and Royal Gold is a trusted name in mining.

RGLD rebounded from its June 2013 low at 39 by soaring to 67 in August 2014, then making new highs at 72 in March 2014 and 82 in August. Since that high, RGLD has slipped below 60 in October and recovered to 73 in November. RGLD booked five consecutive weeks of advances, but has recently dipped down a bit.

If you’re seeking exposure to gold, RGLD looks like a reasonable way to get it. There’s plenty of volatility, so you should be able to get in a pullback of at least a point. Keep any buys small this close to earnings and use a protective stop at 67, which is where its 25-and 50-day moving averages have converged.

Suggested Buy Range 72-74

Suggested Loss Limit 65-67

Michael Cintolo, Cabot Top Ten Trader,, 978-745-5532, January 26, 2015


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