Gold might be off its recent seven-year peaks of around $1,690 per ounce. But there are reams of data that suggest the safe-haven asset — and financial instruments linked to the price of the yellow metal — are some of the hottest games in town today.
The World Gold Council (WGC) is the latest to chip in on this front. According to the body, global gold-backed exchange-traded funds (ETFs) added 84.5 tonnes of material in February as fears over the coronavirus grew. Investment activity grew across all regions, the WGC said, and this drove total holdings in these assets to fresh record highs of 3,033 tonnes.
Demand for the yellow metal is still clearly strong. As I type it is up almost 20 bucks on the day to trade at around $1,655 per ounce. With COVID-19 cases still piling up around the globe, I reckon getting exposure to gold remains a very good idea. And I’d play this by buying shares in one of London’s quoted specialist miners (such as Shanta Gold, Highland Gold Mining or Condor Gold), or by buying into an ETF that contains shares of several gold producers (like the iShares MSCI Global Gold Miners ETF).
How about this turnaround titan?
I’d certainly rather buy into one of those gold-related investments than to load up on shares in Britain’s car retailers. It’s a sentiment you might find questionable given some of the compelling valuations on offer.
Take Pendragon (LSE: PDG) as an example. It’s a company that City analysts expect to bounce back into profit following a rare dip in 2019. As a consequence, it’s a stock that carries a rock-bottom forward P/E ratio of 10.8 times. It also carries an inflation-beating 2.5% dividend yield for this year.
I’m not so sure about the retailer’s ability to bounce into the black though. Concerns over the political and economic results of Brexit have caused new car sales in the UK to crash in recent times. And Thursday data from the Society of Motor Manufacturers and Traders (SMMT) shows that the market continues to weaken.
There were some 79,594 new units rolling off Britain’s forecourts in February, the body said, down 2.9% year-on-year. Uncertainty over emissions legislation is hampering demand from both private and commercial buyers, along with that aforementioned Brexit pressure.
Too much risk!
It’s not just SMMT data that potential investors should be perturbed by though, Pendragon’s financials of late January give investors more food for thought. On the plus side, it said that its trading performance had picked up “significantly” in the second half of 2019. Less promising was news that challenging conditions persisted at its core Franchised UK Motor division, and that underlying pre-tax profit would therefore be at the bottom end of expectations.
Pendragon has lost more than 55% of its value over the past 12 months as sales have dived. And the recent coronavirus outbreak has added another layer of risk to the retailer’s investment case and hopes of a terrific turnaround. It’s a share I plan to keep on avoiding.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Pendragon. 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.