ASX gold share prices have been going gangbusters as the price of the yellow metal hit new record highs in US dollars.
Gold started 2020 trading for US$1,517 (AU$2,085) per troy ounce. It peaked on August 6 at US$2,063 per ounce, before settling down to today's price of US$1,933.
Even with the past week's retracement, that's still a smashing 27% gain year-to-date gain for bullion. And those gains have been mirrored, and often magnified, by many ASX gold shares.
The Regis Resources Limited (ASX: RRL) share price is up 28% year-to-date, giving the Aussie gold miner a market cap of more than $2.8 billion.
Then there's Northern Star Resources Ltd (ASX: NST), one of the bigger players, with a market cap of $10.53 billion. The Northern Star share price has gained 25% since 2 January.
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Gold fever driving share price gains
In a tough year for shares, these are the kinds of share price gains that grab investors' interest. Though surely not Warren Buffett, right? After all, the Oracle of Omaha is well-known for his disdain for bullion.
Here's one of Buffett's many comments on gold:
[Gold] gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.
Well, the Martians must be doing some head scratching today.
A regulatory filing released on Friday revealed that Buffett's Berkshire Hathaway bought 20.9 million shares of Barrick Gold Corp (NYSE: GOLD), currently worth US$565 million (AU$785 million), in the second quarter.
The news saw a surge of interest in Barrick shares. Barrick's share price is up 8.2% in after-hours trading. Year-to-date Barrick's share price is up 46%.
Moving on from gold…
Top fundies analyse ASX share price moves, post-profit reports
I hope you managed to unplug over the weekend. And if you're a Queenslander that should have been a long weekend with the Friday People's Day holiday.
Last week was a big one in the financial world, ushering in the first full week of company profit reports.
To date, 60% (31 out of 52) of the ASX 300 companies that have released their results saw their share prices rise following the announcement. That's not to say they all posted strong results in the current COVID-19 environment. Far from it.
But as AMP Capital portfolio manager Dermot Ryan notes, many of these companies have been remarkably adaptable.
Ophir Asset Management senior portfolio manager Andrew Mitchell adds that share prices received a welcome lift due to investors' low expectations.
Here's their take in more detail, as quoted by the Australian Financial Review:
AMP Capital portfolio manager Dermot Ryan:
Some companies have been able to get through this pretty well, and it's still quite early days with the bulk of the earnings ahead. But in general, this just shows how adaptable these companies have been.
Coming through with higher dividends is pretty important given it's a difficult income backdrop. The companies that have the balance sheet flexibility can give some dividend guidance and that will provide some strong support on the bumpy path to recovery. … There's been a move online, a surge in spending, and it's accelerated some trends.
Ophir Asset Management senior portfolio manager Andrew Mitchell said:
One big theme we have seen is a number of companies getting a share price boost after beating low expectations. It just goes to show how much pessimism was baked in by the market…
Surprise, surprise, but there's been a real lack of guidance by companies and if they do it has been super conservative. Many will no doubt be hoping to under-promise and over-deliver in this next financial year.
With a lack of forward guidance and increased investor interest in reliable dividends, the Motley Fool's own Edward Vesely's advice comes to mind.
Here's what he wrote to members of his Dividend Investor service:
It's not a good idea to come under the spell of fluctuating share prices in the short term. A good way to distract your attention from share prices, in my opinion, is to focus more on dividends, and a company's earnings from which these are derived.
It's this investing dogma that saw Edward recommend Sonic Healthcare Limited (ASX: SHL) to his members on 17 March. Sonic pays a 2.5% dividend yield that's 26% franked. Sonic's share price is up 28% since Edward's recommendation.
