GoodHaven Capital: “Barrick (GOLD) Now Stand More Attractively Priced”

GoodHaven Capital Management, a concentrated portfolio investment management firm, published its fourth quarter 2020 investor letter – a copy of which can be downloaded here. A return of 7.93% was recorded by the fund at year end of 2020, below its S&P 500 benchmark that delivered a 17.46% return in the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

GoodHaven Capital Management, in their Q4 2020 investor letter, mentioned Barrick Gold Corporation (NYSE: GOLD) and emphasized their views on the company. Barrick Gold Corporation is a Toronto, Canada-based mining company that currently has a $35.09 billion market capitalization. Since the beginning of the year, GOLD delivered a -13.32% return, while its 12-month gains are still up by 2.62%. As of March 25, 2021, the stock closed at $19.73 per share.

Here is what GoodHaven Capital Management has to say about Barrick Gold Corporation in their Q4 2020 investor letter:

“Barrick’s recent results have been consistent with our expectations. Barrick has begun inching up the dividend as planned, which should continue increasing absent them finding a large acquisition (they want more copper assets) or a materially lower price of gold. We’d also expect periodic special dividends during stronger gold price environments. At current gold prices we estimate normalized free cash flow at Barrick of over $1.60/share. The company is now about net-debt free. We see plenty of upside and absent a collapse in gold not too much downside. Missing from much of the public discussions about gold, but potentially interesting, is the supply/demand backdrop. As the Wall Street Journal (8/16/20) recently said “gold is amongst the rarest metals in the earth’s crust and much of the easier to get to ore has already been mined. What is left is harder to find and more expensive to extract…” According to the World Platinum Council, it was forecasted that there will be a supply and demand imbalance of 1.2 million ounces globally. The potential macro tailwinds that could add value to an alternate currency like gold including currency concerns, excessive debt and continuing negative real interest rates are still out there. While the shares performed well for the year they were weak in the second half and now stand more attractively priced.”

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Our calculations show that Barrick Gold Corporation (NYSE: GOLD) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, Barrick Gold Corporation was in 53 hedge fund portfolios, compared to 52 funds in the third quarter. GOLD delivered a -13.80% return in the past 3 months.