Is the Northern Star (ASX:NST) share price trading at attractive levels?

The company’s shares had a year to forget in 2021.

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A woman in a business suit sits at her desk with gold bars in each hand while she kisses one bar with her eyes closed. Her desk has another three gold bars stacked in front of her. symbolising the rising Northern Star share price

Image source: Getty Images

Key Points

  • The Northern Star share price is down 28% since this time last year
  • Price of gold has failed to ascend
  • Northern Star head honcho bought more shares

The Northern Star Resources Ltd (ASX: NST) share price has had a disappointing 12 months for its shareholders, losing 28%.

The stuttering price of gold continued to weigh down on investor sentiment, causing a sell-off in the gold miner’s shares.

At yesterday’s market close, Northern Star shares finished the day 2.15% lower to $9.10 apiece.

Why is the Northern Star share price not going anywhere?

The Northern Star share price has failed to gain traction following the sideways movement of the price of gold.

Traditionally, investors flock to the precious metal as a safe-haven asset when there is uncertainty in the market. However, with the world moving past COVID-19, among renewed investor confidence across the US dollar, gold has lost its value.

In 2021, the price of gold soared close to the US$2,000 barrier but has since fallen wayside. At current, one ounce of gold is fetching for US$1,818.49.

When compared against this time last year, the price of gold is down 0.54%.

The United States Federal Reserve advised that its stimulus program will be coming to an end as inflation begins to rise. As such, the central bank will be buying $60 billion of bonds each month starting this month. In contrast, this is about half of the amount it bought before November and $30 billion less than in December.

In addition, the Federal Reserve also signalled as many as three rate hikes in 2022 to limit the increase in inflation. Supply and demand imbalances due to COVID-19 along with the reopening of the economy have led inflation to spike.

As such, the Reserves Bank of Australia is expected to follow suit, with two rate hikes for the current 2022 year.

Are Northern Star shares a buy?

A number of brokers believe that the Northern Star share price is currently trading at a bargain price.

Last month, multinational investment firm Macquarie improved its outlook on Northern Star shares by 15% to $15 per share. Based on Monday’s closing price, this implies an upside of a sizeable 65% for investors.

On the other hand, Swiss investment firm, UBS lowered its outlook on the company’s shares by 23% to $11.20. While the broker reduced its assessment on Northern Star, it still sees value in the gold miner. The price target represents a potential upside of 22% from where it trades today.

Furthermore, Northern Star managing director and CEO, Stuart Tonkin recently made an on-market transaction buying more of the company’s shares.

He picked up 50,000 Northern Star shares that were purchased at an average price of $8.86 per share or $443,000 worth. The sale increases Mr Tonkin’s existing holding by 4.2%, taking advantage of the recent share price weakness.

Should you invest $1,000 in Northern Star right now?

Before you consider Northern Star, you'll want to hear this.

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*Returns as of January 13th 2022

Motley Fool contributor Aaron Teboneras owns Northern Star Resources Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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