Risk/Reward Rating: Positive
B2Gold stock has been ravaged over the past year, falling 50% from its all-time high in August 2020. The move lower is in line with the gold mining sector which has been out of favor throughout the past year. Over the same period the price of gold has fallen just 13% from the all-time high reached in August 2020. The amplitude of the fall in B2Gold’s share price compared to that of the gold price is what is known as beta and gets to the crux of the investment case for B2Gold and other gold miners.
High Beta Gold Investment
If one expects the price of gold to trend higher, gold miners are a high beta or levered way to invest in this expectation. For example, if gold makes a move to the all-time high of last year, the price gain will be 15%. On the other hand, if B2Gold follows suit and reaches its high of last year, an investor would achieve a return of 100%. The extraordinary difference in return potential is worthy of consideration, especially following a large price decline in gold miners.
In a bullish gold price scenario, the return potential can become quite impressive.
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