June 21, 2019

Gold from Mexico with good Value: Fresnillo



The dollar is weakening, the next recession is around the corner, many central banks (especially Russia) are buying gold. It is gold season! That's why I started looking for these stocks. But unfortunately, there are no more bargains to be found. All Value Ranks of gold companies are below 50. That means you have to buy at a high price.

An alternative would be to switch from gold to silver. But here the prices are even higher:

The next option is for companies that focus on minerals and all precious metals. There, I found what I was looking for. In Mexico. A company called Peñoles.

But wait! I have to check whether such an exotic stock like Peñoles is even traded by my broker. Unfortunately not.

One can learn from such mistakes: First check which stock exchanges your broker lists and which shares you can even buy. After additional research, I came across two more companies. Polymetal and Fresnillo. Both are listed on the London Stock Exchange. ...with the difference: Polymetal is Russian and has a low Safety Rank, Fresnillo is Mexican with a high Safety Rank. I focus on Fresnillo.

I really like what I discovered in my web research. Even at first glance, Fresnillo makes it easy for potential investors to understand the company and its basic idea: "We produce gold and silver at six locations in Mexico. From projects with high potential, we develop world-class, cost-effective mines."

Gold, silver, low cost and a good Obermatt Value Rank: Promising! Now you need to do what you should always do - check. I took a look at the people behind the company, the news, and the analyst recommendations.

a) the people

There are three women on the board. That's not much, but it could be worse. The majority of the company is held by Peñoles. The chairman is Alberto Baillères whose family owns Peñoles and other companies. He is a rich Mexican. That's reassuring because he has a lot to lose if his reputation is damaged. The managing director of Fresnillo is Octavio Alvídrez, an industry veteran who has managed mines himself. A professional man and a financier at the same time. Educated in the US at the renowned Business School in Wharton.

Bottom line: These are respected people in a country that I respect for its degree of social development. Also, according to the World Bank, Mexico is in the top third when it comes to how easy it is to trade and do business with. The Economist also argues that Mexico is a democracy, albeit a weak one.

b) the news

Mexican companies could lose mining rights because the indigenous people will have a greater say in the future. I kind of like that. This fact is known and therefore already included in the share price. No reason to worry.

c) the analysts' recommendations

14 out of 15 analysts recommend to buy or hold the stock. This means that analysts are very impressed by Fresnillo. For me, it's clear: I'm buying! There are enough favorable indicators for Fresnillo and only a few against.



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