The Newcrest Mining Ltd (ASX: NCM) share price has had a good run as of late. The S&P/ASX 200 Index (ASX: XJO) gold share has leapt 30.8% since the end of September to trade at $22.29 at the time of writing.
But its surge still hasn't seen the stock trading for higher than its true value, according to contrarian investing gurus at Allan Gray. It still commands the top spot in the Allan Gray Australia Equity Fund, with fundies still labelling it "seemingly cheap".
Let's take a look at why Allan Gray is among the experts bullish on the ASX 200 gold share in 2023.
ASX 200 gold share Newcrest still trading cheap: fundie
There are positives and negatives to Newcrest shares, according to Allan Gray analyst and portfolio manager Dr Suhas Nayak. But ultimately, the fundie is optimistic on the stock.
In fact, it makes up around 9% of the fund manager's headline offering. It bolstered its position in Newcrest prior to the stock's recent surge and is still holding tight to its position.
Commenting on its expectations for the ASX 200 gold share, Nayak said:
Newcrest is … a very long reserve life company, very, very low on the cost curve. Based on the earnings that we think it currently makes … Newcrest is, to us, seemingly cheap.
The company released its report for the three months ended 31 December last week, detailing a 3% drop in gold production. Much of which was due to drought conditions at its Lihir mine.
Such operational issues at the mine, along with the company's capital expenditure, has led to "push back", Nayak said. But Newcrest isn't the only share capable of copping such criticism. The fundie continued:
I think the entire gold sector's being quite ill-disciplined with respect to the capital allocation.
If they could just pull back on that and do something like the energy sector is done over the last two or three years, I think that the gold sector should before very strongly in the next two, there, four years.
Allan Gray isn't alone in holding hope for the ASX 200 gold share.
Morgans has slapped Newcrest shares with an add rating and a $25.70 price target, my Fool colleague James reports. The broker is said to like the company's "dependable production and earnings base".
