DO YOU STILL HAVE POSITIVE FEELING ABOUT AGI AND THE GOLD MARKET IN GENERAL

I presently own smallish holdings of AGI, KL and EDV, the largest holding being KL. You addressed the KL/AGI question in November and I realize that AGI is a somewhat higher risk growth play and KL is a safer dividend play with some upside. Right now, I have small holdings of AGI, KL and EDV I purchased AGI for $14.50 . Right now, it is trading around $10. I feel I either go for a bit more AGI to bring my average cost down or sell it and buy KL which is receiving very favourable reviews. I still want the gold exposure but am starting to feel that three gold producers is too much and the money tied up in AGI and EDV might be better placed elsewhere. I purchased the three to take advantage of the very positive outlook on gold at the time. I realize fully that you cannot make such decisions for me but would like to know whether you still see a long term benefit to owning AGI. I would like to emphasize that I am not overly concerned with this drop. However, at 79 years of age, a long long term outlook is not really in the cards.

I have committed to your system and advice and am very pleased with the results after 6 months.

Gordon Bruce Richardson

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Asked on January 19, 2021 6:06 pm

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Thanks Gordon,

These companies are generating tons of cash at these levels, have little debt, and will likely be returning a good chunk of cash to shareholders via dividend increases. The fundamentals that support a strong gold price haven't gone anywhere. In fact, gold has been holding up well and it is only down 3% over the past quarter. In comparison, EDV and KL are down by about 23% while AGI is down by about 10%.

We fully expect that when the price of gold drops, producers tend to lose more and the vice versa is also true. However, a 23% loss for KL and EDV as a result of a 3% drop in the price of gold is overdone. Of note, I own both AGI and KL - have a full gold position so have no intention of going overweight (although at these prices it is certainly tempting) - have to stick to my plan! lol

Given your situation, I'd go with the stock that is in the best financial position - and that comes down to KL and AGI. Given they have no debt, they are better situated to withstand a drop in gold prices. It also means, they can return a greater percentage of cash to shareholders in the event the price of gold rises again. EDV has a D/E ratio of 0.34 - not terrible, but when there are so many that are debt free, it does carry additional risk.

Does this help?

Mat

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Posted by Mathieu Litalien

Answered on January 19, 2021 6:29 pm

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