Barrick Gold (NYSE: ABX) is the world's No. 1 gold producer, including 2006 production of 8 million ounces, and 120 million ounces in proved and probable reserves. Analysts see a 14-17% revenue gain in 2008, following a solid performance in 2007, with a higher average gold price.
What's driving the gold bull market? Three factors: increased use of gold in industrial and commercial applications, impressive jewelry demand, and increased reliance on gold and gold shares as an alternative investment. All three trends are global in scope and show little signs of abating in 2008. Asia-based jewelry demand looks especially promising in the immediate years ahead. The Reuters F2007/F2008 EPS consensus estimates for ABX are $1.51/$2.17.
The risks? Obviously, an end to the cyclical bull market in gold would hurt Barrick's results substantially. In particular, a cyclical downtrend in inflation would make some who buy gold as an inflation hedge to reconsider their purchase; but developed world inflation trends do not suggest that inflation is moderating.
Stock Analysis: Barrick Gold is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than two years should be rewarded from ABX's shares. Consider a stop loss of $23.
Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.
