If you’re searching for a great income share that can thrive in current volatile times, then Highland Gold Mining (LSE: HGM) is one such entity.
Gold prices may have come off the boil recently but there’s enough macroeconomic and geopolitical intrigue to keep investors interested in the safe-haven asset. It’s why latest World Gold Council data showed holdings in global gold-backed exchange traded funds (ETFs) rising by three tonnes in March to 2,489 tonnes as inflows continued in North America and Europe.
It’s well known how tension surrounding Brexit keeps driving retail demand for the yellow metal, and with many in the European Union running out of patience with the UK and increasingly tipping a ‘no deal’ EU withdrawal, there’s plenty of scope to expect gold prices to spike again soon.
Other troubles for the global economy have emerged over the past month that could escalate and drive gold demand still further, like the currency crisis in Turkey, German factory orders hitting multi-year lows and slashed economic forecasts in Italy.
A bright future
Highland Gold was smacked by lower ore grades and recoveries last year, problems which caused total annual production to slip fractionally to 269,500 ounces.
But the company is confident that it can roar back from 2019 onwards. In recent weeks it upgraded its production forecasts for the current year to between 290,000 and 300,000 ounces because of the acquisition of the Valunisty complex in late 2018. And things look good further out too — on top of recent studies that extended the life of its other prestige mine, Mnogovershinnoye, to 2029, it’s set to embark on exploration work at around a dozen of its brightest assets across Russia in 2019 alone.
Given the quality of Highland Gold’s assets in Russia, its busy drive to bring these online, and therefore the company’s exceptional long-term outlook, I consider the firm to be a steal at its current valuation, a forward P/E ratio of 12.7 times.
This is in spite of the unpredictability that comes with the mining industry as we witnessed at the firm last year. In fact, an additional sweetener in the form of its prospective dividend yield of 3.8% goes some way to boosting its appeal too.
There are plenty of bigger yielders I’d happily ignore to buy Highland Gold instead, one of which is Marshall Motor Holdings (LSE: MMH), a stock that boasts a chubbier corresponding yield of 5.1% (and a cheaper earnings multiple of 7.3 times). In fact, I’d be happy to sell out of the car retailer in order to buy the precious metals digger given that news flow surrounding the auto market continues to go from bad to worse.
Latest figures from the Society of Motor Manufacturers and Traders, in fact, showed new car registrations in March at their lowest since 2013, and things are unlikely to get any better soon as Brexit-related fears crush car demand, as does ongoing uncertainty surrounding diesel.
Marshall Motors saw new car sales tip 8.2% lower last year on the back of those diesel troubles and stock shortages. I find it hard to envisage when things will start to pick up either, and for this reason I’m steering well clear of the retail giant.
Of course, picking the right shares and the strategy to be successful in the stock market isn't easy. But you can get ahead of the herd by reading the Motley Fool's FREE guide, "10 Steps To Making A Million In The Market".
The Motley Fool's experts show how a seven-figure-sum stock portfolio is within the reach of many ordinary investors in this straightforward step-by-step guide. Simply click here for your free copy.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.