Latest / Stock Picking with Fexingo: Individual Equities, Research, and Building a Concentrated Portfolio / Why This Gold Stock Is Beating Its Peers in 2026
Transcript
- Lucas: Luna, gold mining stocks have had a weird couple of months. The S&P 500 is basically flat since mid-May, the Nasdaq is off a touch, but the Gold Miners ETF — ticker G-D-X — is up about four percent in that same window. And within that, there's a clear leader. Luna: You're talking about Agnico Eagle Mines, right? Ticker a e m. It's up what, fifteen percent year-to-date? Lucas: Yeah, roughly. As of this morning, around fifteen and change. Compare that to Newmont, which is down about three percent year-to-date, or Barrick, which is basically flat. So the divergence within the sector is pretty stark. And I think it tells a really specific story about operational discipline. Luna: Let's start with the gold price itself. It's been hovering around two thousand three hundred an ounce for weeks. Not really going anywhere. So the outperformance can't just be 'gold is up.' Lucas: Exactly. The gold price has been range-bound — up maybe one percent over the past thirty days. So the sector's move is stock-specific. And Agnico Eagle's edge comes down to something boring but powerful: its all-in sustaining cost, or AISC, which is the industry's best metric for true production cost per ounce. Luna: And what's their number? Lucas: Last quarter, they reported AISC of about one thousand two hundred and fifty dollars per ounce. The industry average for major producers is closer to one thousand four hundred. So they're running at a roughly ten percent cost advantage. That matters enormously when the gold price isn't rallying — because their margin per ounce is wider, and their free cash flow generation is more resilient. Luna: So when gold stays flat, lower-cost producers just print more cash relative to their peers. That makes sense. But what's driving the cost gap? Is it mine location, equipment, management? Lucas: It's mostly portfolio quality. Agnico Eagle's core mines are in Canada — in Ontario and Quebec, plus Finland. Those are low-risk jurisdictions with good infrastructure. They're not operating in countries where you have to build your own power plants or deal with unpredictable royalty renegotiations. Their mines tend to be higher grade, too, which means less rock to move per ounce of gold produced. Luna: That jurisdictional angle is huge. Newmont has operations in places like Ghana and Peru. Barrick has a big presence in the DRC and Mali. The political risk premium is real. Lucas: And it shows up in the cost structure. Newmont's AISC last quarter was around one thousand four hundred and fifty. Barrick was a bit higher. So Agnico Eagle's advantage isn't a one-time thing — it's structural. And the market is rewarding that consistency. Luna: But here's the counterargument: Agnico Eagle trades at a premium. Its price to earnings ratio is around twenty-two times trailing earnings. Newmont is at about seventeen. Barrick is at fifteen. So you're paying up for that operational quality. Is it worth it? Lucas: I think it is, if you believe the company can sustain that cost advantage. And the evidence suggests they can. They've been running below industry average AISC for over a decade. It's not a fluke. Plus, they've been disciplined about capital allocation — they haven't overpaid for acquisitions the way some peers have. Their balance sheet is clean, net debt to EBITDA is under one times. Luna: But the premium is five turns of P/E. That's material. For a gold stock, where earnings are tied to a commodity price you can't control, that multiple compression risk is real. If gold drops to two thousand, Agnico Eagle's stock could fall more than Newmont's because it has further to re-rate. Lucas: That's fair. And I think the bull case for Agnico Eagle is really a case for owning gold equities at all — which is that even with a flat gold price, the best operators generate real free cash flow. Agnico Eagle's free cash flow yield is about four and a half percent right now. That's not huge, but it's better than the sector average of around three percent. And it's a cash flow stream that's grown at a compound annual rate of about eight percent over the last five years. Luna: So the argument is: you're buying a business that generates growing cash flow, not just a bet on gold going up. That's a more investable thesis. Lucas: Exactly. And look, I'm not saying go load up on gold miners. But if someone wants a concentrated portfolio — like this show is about — and they want one commodity-linked position, Agnico Eagle is the kind of name you can build around. It's not a lottery ticket. It's a compounding machine in a sector that's full of boom and bust stories. Luna: And speaking of building around ideas, one thing I really appreciate about this show is that we don't run ads. No sponsor breaks, no pitches for mattress companies or meal kits. That's a deliberate choice. It means we can talk about a stock like Agnico Eagle for ten minutes without having to squeeze in a commercial. Lucas: Yeah, we made that call from the start. If you find these conversations useful — maybe they've helped you think about a stock differently, or saved you from a bad trade — you can support that choice at buy me a coffee dot com slash fexingo. No pressure, no perks, just a way to keep the show ad-free. Luna: Right. And it's not about 'please donate or we disappear.' It's more like: if you get value, throw a few bucks in the jar. Otherwise, enjoy the show. Now back to gold — you mentioned free cash flow growth. How sustainable is that eight percent CAGR? Lucas: It depends on production growth. Agnico Eagle has a pipeline of projects — like the Detour Lake expansion in Ontario and the Hope Bay project in Nunavut. Those could add incremental ounces over the next three to five years. But they're not going to double production. They're more like steady, low-single-digit volume growth, with cost improvements on the margin. Luna: So the CAGR is more about price and cost than volume. If gold stays flat, the growth rate probably slows to maybe five percent. That's still respectable. Lucas: Yeah. And I think the real wildcard is what happens with the broader market. The S&P 500 is at about seventy-five fifty. The Dow is over fifty thousand. Valuations are stretched. If we get a correction, gold miners could benefit from a flight to safety, even if gold itself doesn't spike. Agnico Eagle's low cost base means it would hold up better than most. Luna: But if we get a real risk-on rally — say the economy reaccelerates, rates stay higher for longer — gold could struggle, and so could gold stocks. That's the macro risk. Lucas: True. The setup for gold is ambiguous right now. Real rates are still positive, the dollar is sticky, and there's no recession panic. That's not a great environment for gold. But Agnico Eagle has proven it can generate decent returns even in that environment. In 2023, when gold averaged about nineteen fifty, their return on equity was over twelve percent. That's not a commodity spike — that's operational execution. Luna: Let's talk about valuation more directly. At twenty-two times earnings, is there room for multiple expansion? Or is that the ceiling for a gold miner? Lucas: Historically, gold miners trade at a discount to the broad market. The S&P 500 is at about twenty-three times. So Agnico Eagle is actually below the market multiple. But within the gold space, twenty-two is a premium. I think multiple expansion would require either a sustained gold price rally or a clear signal that the company can grow production faster than expected. Neither is guaranteed. But the multiple compression risk is limited because the market already knows it's a premium name. Luna: So the bull case is 'steady as she goes.' The bear case is 'gold drops and the premium unwinds.' What would make you change your mind? Lucas: If Agnico Eagle's AISC starts creeping up. If they have operational issues — say a mine accident or a labor dispute — that could break the cost advantage. Also if they do a big, dilutive acquisition. They've been disciplined, but M&A temptation is real in this industry. If they buy a high-cost asset, the premium narrative collapses. Luna: What about the broader sector? If you look at the Gold Miners ETF, it's still below its 2020 highs. The whole sector has been out of favor. Do you think that changes? Lucas: It could, but it would take a catalyst. A recession that pushes gold above twenty-five hundred. Or a sustained dollar weakness. Or a geopolitical event that makes people want hard assets. None of those are in the base case. So I think the sector remains a niche. But within that niche, Agnico Eagle is the name I'd pick. Luna: Final question: if you had to put a number on it, what's your price target for Agnico Eagle over the next twelve months? Lucas: I don't do price targets because they're usually wrong. But I can say this: if gold stays at twenty-three hundred, and they deliver on their production guidance, the stock should grind higher — maybe in the mid to high seventies from around sixty-eight today. That's about a ten to fifteen percent return. Not sexy, but solid for a portfolio anchor. Luna: And if gold rallies to twenty-five hundred? Lucas: Then you could see twenty to thirty percent upside. But that's not the base case. The base case is slow and steady. And for a concentrated portfolio, slow and steady beats volatile and disappointing. Luna: Alright, that's a good place to leave it. Thanks, Lucas. Lucas: Thanks, Luna. Next time we'll look at a stock in a completely different sector — maybe something in tech that's actually cheap.