In today’s Daily Alert, we have an update from Adrian Day, editor of Adrian Day’s Global Analyst, on his Top Pick for 2012.
“Franco-Nevada Corp. (FNV) has performed well this year, with the stock up about 16%, well outperforming other senior gold stocks as well as the broad market. Franco-Nevada is a gold stock with a difference. Rather than mine rocks, it acquires royalties on existing mines, development projects and even exploration ground. This reduces or even eliminates most of the risks associated with mining. Its first capital expenditure is (usually) its last capital, while it retains upside both from the price of gold and from exploration success.
“Its results this year have been stunning, with net income in the latest quarter up over 120% year-on-year, on a revenue increase of 44%. About half of this is attributable to acquisitions, a quarter to higher metals prices, and the other quarter to old royalties beginning to earn as properties come into production or (on Net Profit royalties) finally become profitable.
“The modest dividend was boosted 25%. Net capital rose to just shy of $1 billion, putting Franco in an enviable position to make new acquisitions. Indeed, in the latest quarter alone, Franco has spent just over $100 million on additional royalties. For conservative investors wanting exposure to gold while minimizing the risk, Franco-Nevada is the choice. You might get a better opportunity to buy Franco in the coming weeks as gold stocks are normally soft over the summer months.”
- Adrian Day, Adrian Day’s Global Analyst, June 23, 2012