Goldcorp Stock - GG Stock - Learn About Goldcorp Stock Price

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Let me be clear about this up front: I am not an expert on gold companies. I’ve enough research on them to know that, generally, what makes one gold company perform better than another gold company deals with one of three factors: how much gold is in the ground, how easy is it to get the gold out of the ground and what the firm’s capital structure is like. Of course, then we have to deal with the price of the underlying commodity itself. I will try to briefly touch on each of these areas in my case for Goldcorp.

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Now I’m not going to get into specific amounts of proven and probable reserves here, but Goldcorp is in a good position when it comes to future production. Companies like Barrick and Newmont will most likely need to acquire junior and intermediate gold plays to maintain their reserves, but Goldcorp is set up well in this regard for the coming few years. In addition, Goldcorp’s mines are located in some of the most politically stable areas in the world (Canada, Us and Mexico). I don’t know about you, but I don’t want to own equity in a gold company whose assets could be seized by a crazed politician at any time. Goldcorp mines its gold at a cost of approximately $350 per ounce, which is comparable to slightly smaller, more risky firms such as Agnico-Eagle (which I am also a fan of) and Yamana. Probably my favorite part of Goldcorp’s strategy is that it doesn’t hedge its gold exposure. Why would you buy a gold company that hedges a significant portion of its production? Aren’t you owning a gold company to get significant upside when the price of gold rises? I’m also pleased with Goldcorp’s balance sheet – lots of cash and minimal debt make for an agile company with limited downside risk.

Speaking of the price of gold, I’m not nearly as bullish as some of the “gold bugs” out there. My opinion is that if the vast amounts of money being printed by the US Fed were really going to cause exceedingly high rates of inflation, gold would already be at $1500+ per ounce. In addition, because the price of gold dropped off sharply during Lehman’s demise last fall (just the time gold should have been skyrocketing), I’m a little weary of its value as insurance against a financial apocalypse.

That being said, I do see gold at around $1200 an ounce by late next year, caused partly by moderate inflation and partly by further weakening in the US dollar. This makes Goldcorp an intriguing play as it is my favorite large cap gold company at this point. You can certainly play a junior gold company instead (which will provide greater upside exposure to gold), but this is one case where I like a large cap, slower growth story over smaller cap firms. Keep in mind that these gold companies all have a fair bit of week to week volatility, so I recommend that you carefully consider purchasing Goldcorp on weakness and be prepared to hold the stock for the long term.

The Stock Guy’s Official Ranking: 8 out of 10